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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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Today’s Lecture

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Today s lecture

Today’s Lecture

Insurance Contracts

Applications and Binders

Parts of the Contract

Declarations

Insuring Clauses

Exclusions and Exceptions

Conditions

Endorsements and Riders


Application

Application

The potential insured offers to buy coverage by submitting an application.

The insurer decides whether to accept the offer.


Binders and receipts

Binders and Receipts

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


Receipts example

Receipts - Example

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?


Receipts example1

Receipts - Example

ANo, since coverage is retroactive only when issued

BNo, since the student lied on the application

CNo, since the rejection was related to the misrepresentation

DYes, since the claim was not related to past incidents of speeding

EYes, since the company had not yet rejected the application


Parts of an insurance contract

Parts of an Insurance Contract

Declarations

Identify insured

Describe coverage

Insuring Clause

Open-Perils - covers any loss not excluded

Named-Perils - covers specified losses


Insuring clause example

Insuring Clause - Example

Which of your State Farm Car coverages have a Named-Peril insuring clause?

AAll coverages

BComprehensive and Collision

CCollision and Emergency Road Service

DCollision only

ENone of the coverages


Exclusions and exceptions

Exclusions and Exceptions

Reasons for Exclusions

Ideal Requisites for Insurability

Possibility of catastrophe

Fortuitous

Definite

Standardize the Risk

Avoid Duplication of Coverage


Exclusions example

Exclusions – Example

Why does the State Farm Car policy exclude coverage when the vehicle is “used to carry persons for a charge”?

ATo avoid the possibility of a catastrophe

BTo avoid losses that are not fortuitous

CTo avoid losses that are not definite

DTo standardize the risk

ETo avoid duplication of coverage


Types of exclusions

Types of Exclusions

Excluded locations

Excluded perils

Excluded property

Excluded losses


Conditions

Conditions

Must be fulfilled by insured in order to obtain coverage

Examples

Notice and proof of loss

Cooperation of the insured

Protection of property after a loss

Examination


Endorsements and riders

Endorsements and Riders

Endorsements used in property-liability insurance

Riders used in life-health insurance

Both change the contract in some way


Parts of a contract example

Parts of a Contract - Example

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?


Parts of a contract example1

Parts of a Contract - Example

AExcluded peril

BExcluded loss

CCondition

DEndorsement

ERider


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