Balfour Insurance Agency

Insurance:  the transfer of pure risk from one party to another for a price through a legal contract.

Risk:  the uncertainty of financial loss, we use insurance to transfer risk from the property owner to the insurance company.

Perils:  are the events or happenings that cause a loss. Insurance covers certain perils for example fire, lightning, windstorm, and hail, you must check your policy to see which specific perils are covered.

Hazards: are the things that increase the chance of loss:

• Physical Hazards are things such as: storing your gasoline in your basement next to your gas furnace.
• Moral hazards are people who will stage an accident for the insurance proceeds.
• Morale hazards these are derived from carelessness or indifference.

Loss:  for insurance purposes are, unforeseen/unintended damage to property, injury, or the amount of insurance company is obligated to pay for personal injury.

Indemnity: is placing an insured in the same financial position following a loss that he had before the loss occurred.

Insurable Interest: All insurance contracts are required to contain an element of insurable interest. To purchase a property policy, the insured usually possesses a financial (insurable) interest in the property to be covered.

Loss Valuation: the process of determining the value of the loss. Below are the four most common types of   valuation

• Replacement cost:  the amount necessary to replace damaged property at today's cost
• Guaranteed replacement cost:  a type of replacement cost clause that promises to replace property even if it costs more than the policy limit. This concept has been replaced under most policies by "additional dwelling coverage" which limits the additional amounts to a specific percentage (i.e. 20%, 25%, or 50%) that a company is willing to pay for a loss.
• Actual Cash Value: the cost to repair or replace minus depreciation. It is one of the most common ways automobile physical damage claims are paid out.
• Agreed Value: is the agreed value, or stated value, and represents the value of the described property agreed upon by both the insurer and the insured when the policy was written.  This is usually done through an appraisal and is most commonly used for jewelry, fine arts, and other high valued items.

Liability Insurance: coverage for the legal liability of a insured for bodily injury and property damage to others. This coverage includes the the legal defense.

Ways liability insurance is expressed:

• Single limits: are one amount covering all bodily injury and property damage for that occurrence (ex: $100,000 CSL*) Single limits are most commonly used in commercial property and homeowners insurance. 
• Split limits: are separate limits for different coverages available for one occurrence -for example 100/300/50 means $100,000 for bodily injury for any individual person, $300,000 maximum for all individuals with no one individual receiving more than the $100,000, and $50,000 in property damage liability.
• Aggregate limits: are the most an insurance company will pay during a policy period.

* Combined Single Limit

Deductible:  the portion of a loss considered to be the responsibility of the insured.

Accident: an unforeseen or unintended event

Subrogation: the act of assigning or substituting the rights of one party to another in collecting a debt or claim.

Cancellation: occurs when the insurance company or the insured terminates a contract before its normal expectation.

Binder: temporary proof of insurance until a policy is issued, and may be revoked. Valid only for 30 days in most states

Elements of Insurance Contracts you must know:

Who is an Insured: the person, business or other entity whose interest is protected in the policy.

Policy period: the date and time at which the coverage begins and ends.

Utmost good faith: a characteristic of insurance. It is demonstrated when an insurance company must rely on the honesty and cooperation of the insured and the insured must rely on the company to fulfill its obligations.

Representations: oral or written statements made by an individual seeking to enter into a contract. They are substantially true to the best knowledge of the party making them. Fraudulent or material, misrepresentations can void a contract.

Warranties: are statements made by the applicant regarding the nature of the risk to be insured. Answers to specific questions on an application are considered to be warranties. Unlike representations, if warranted statements are found to be false, they cause the policy to be voided by the insurer.

Concealment: neither party may conceal facts that would have affected the formation of the contract. The doctrine prohibiting concealment requires the insured to disclose to the insurer all materials facts pertaining to the risk.

Fraud: the intentional misrepresentation of a material fact that may void a contract.

What makes up an Insurance Policy?

Declarations:  includes all the descriptive info regarding the property insured. The who, what, where, when, and how of the insured property.

Insuring Agreement: specifies what the insurance company agrees to do and what it will not do.

Conditions: state the obligations of both the insured and the insurance company.

Exclusions: the section of the policy lists the perils not covered, property not covered, or both. Exclusions are necessary to eliminate duplicate coverage, eliminate unnecessary coverage, eliminate uninsurable perils; and manage physical and moral hazards.