Today’s Lecture. Insurance Contracts Applications and Binders Parts of the Contract Declarations Insuring Clauses Exclusions and Exceptions Conditions Endorsements and Riders. Application. The potential insured offers to buy coverage by submitting an application.
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Applications and Binders
Parts of the Contract
Exclusions and Exceptions
Endorsements and Riders
The potential insured offers to buy coverage by submitting an application.
The insurer decides whether to accept the offer.
Binder - temporary contract to provide coverage until the policy is issued
Conditional receipt - no coverage unless policy is issued, but coverage is retroactive
Binding receipt - coverage is in force while application is being processed
On September 20, 2006, a student applies for auto insurance with American Family. He does not list three speeding tickets he received on the application. The agent issues him a binding receipt. On September 23, 2006, the student is speeding again, and gets into an accident. On September 27, 2006, the underwriter rejects this application for coverage. Does American Family have to pay this claim?
A No, since coverage is retroactive only when issued
B No, since the student lied on the application
C No, since the rejection was related to the misrepresentation
D Yes, since the claim was not related to past incidents of speeding
E Yes, since the company had not yet rejected the application
Open-Perils - covers any loss not excluded
Named-Perils - covers specified losses
Which of your State Farm Car coverages have a Named-Peril insuring clause?
A All coverages
B Comprehensive and Collision
C Collision and Emergency Road Service
D Collision only
E None of the coverages
Reasons for Exclusions
Ideal Requisites for Insurability
Possibility of catastrophe
Standardize the Risk
Avoid Duplication of Coverage
Why does the State Farm Car policy exclude coverage when the vehicle is “used to carry persons for a charge”?
A To avoid the possibility of a catastrophe
B To avoid losses that are not fortuitous
C To avoid losses that are not definite
D To standardize the risk
E To avoid duplication of coverage
Must be fulfilled by insured in order to obtain coverage
Notice and proof of loss
Cooperation of the insured
Protection of property after a loss
Endorsements used in property-liability insurance
Riders used in life-health insurance
Both change the contract in some way
On page 26 of the State Farm Car Policy the policy reads, “There is no coverage under this policy if you or any other person insured under this policy has made false statements with the intent to conceal or misrepresent any material fact or circumstance in connection with any claim under this policy.” This is an example of which part of the contract?
A Excluded peril
B Excluded loss