Topic 2-Legal Issues with Insurance Contracts, reading an insurance policy

Self Contained Policy

● Single, stand alone document● Appropriate for insuring similar loss exposures

● Personal auto● Life Insurance

Modular Policy

● Mix and match set of components● Designed around one basic policy component-aka “policy jacket” or “common conditions form”● Example-property coverage-with components such as a declarations page, special coverage

form, etc.● Can create a monocline policy (one line of coverage)● Can also create a package policy (multiple lines)

Pre-Printed Policy

● Readymade-off the shelf policies● Usually don’t need to keep duplications of all policies for records-just declaration page.● Policy holder still receives complete policy

Standard Insurance Form

● Pre-printed form● Developed by an insurance service or advisory organization● ISO is most well known

Non-Standard Insurance Form

● Pre-printed form● Developed in house or modification of a form developed by an insurance service or advisory

organizationManuscript Policy

● Custom contract● Very specialized for specific risks● Generally a one of a king policy (terrorism coverage, etc)

Endorsements

● Used to modify a more basic policy● Takes precedence over any conflicting terms in the policy attached● Handwritten endorsements supersede printed ones

Definitions

● Technical words provided meaning● Deductible● Co-insurance

● Legal terms defined

Insuring Agreement

● Spells out what occurs in the contract● Insurer pays for losses that occur● Insured pays premium

Exclusions

● Clarifies what the insurer will cover● Specifies what is not covered● Why???● 1-Eliminate coverage for uninsurable losses

● War● Intentional acts of insured● Catastrophic-nuclear hazard

● 2-Manage moral hazard● Intentional acts● Cover only certain items if you take certain care-penalize carelessness

■ Ex.-freezing of pipes in a homeowners policy