Lecture Risk management and insurance - Lecture No 19: Analysis of insurance contracts. This chapter’s objectives are to: Basic parts of an insurance contract, definition of the “insured”, endorsements and riders, deductibles, coinsurance, other-insurance provisions. | Analysis of Insurance Contracts Lecture No. 19 1 Agenda Basic parts of an insurance contract Definition of the “Insured” Endorsements and Riders Deductibles Coinsurance Other-insurance provisions 2 Basic Parts of an Insurance Contract Declarations are statements that provide information about the particular property or activity to be insured Usually the first page of the policy In property insurance, it contains name of the insured, location of property, period of protection, amount of insurance, premium and deductible information Insurance contracts typically contain a page or section of definitions For example, the insured is referred to as “you” 3 Transparency Master Basic Parts of an Insurance Contract The insuring agreement summarizes the major promises of the insurer The two basic forms of an insuring agreement in property insurance are: Named perils policy, where only those perils specifically named in the policy are covered “All-risks” policy, where all losses are covered | Analysis of Insurance Contracts Lecture No. 19 1 Agenda Basic parts of an insurance contract Definition of the “Insured” Endorsements and Riders Deductibles Coinsurance Other-insurance provisions 2 Basic Parts of an Insurance Contract Declarations are statements that provide information about the particular property or activity to be insured Usually the first page of the policy In property insurance, it contains name of the insured, location of property, period of protection, amount of insurance, premium and deductible information Insurance contracts typically contain a page or section of definitions For example, the insured is referred to as “you” 3 Transparency Master Basic Parts of an Insurance Contract The insuring agreement summarizes the major promises of the insurer The two basic forms of an insuring agreement in property insurance are: Named perils policy, where only those perils specifically named in the policy are covered “All-risks” policy, where all losses are covered except those losses specifically excluded May also be called an open-perils policy or special coverage policy Insurers have generally deleted the word “all” from policies “All-risks” coverage has fewer gaps, and the burden of proof is placed on the insurer to deny a claim 4 Basic Parts of an Insurance Contract Insurance contracts contain three major types of exclusions Excluded perils, ., flood, intentional act Excluded losses, ., a professional liability loss is excluded in the homeowners policy Excluded property, ., pets are not covered as personal property in the homeowners policy 5 Why are Exclusions Necessary? Some perils are not commercially insurable ., catastrophic losses due to war Extraordinary hazards are present ., using the automobile for a taxi Coverage is provided by other contracts ., use of auto excluded on homeowners policy Moral hazard problems ., coverage of money limited to $200 in homeowners policy Attitudinal hazard problems ., individuals
