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Lecture Risk management and insurance - Lecture No 14: Financial operations of insurers

This chapter’s objectives are to: Identify and understand the basic parts of an insurance policy, explain the difference between named perils and open perils property insurance coverage, explain why exclusions are used in insurance contracts and identify the major types of exclusions, describe how the interests of mortgagees are protected in insurance policies and why the mortgagee clause gives the best protection to the mortgagee, | Financial Operations of Insurers Lecture No. 14 1 2 Objectives Identify and understand the basic parts of an insurance policy Explain the difference between named perils and open perils property insurance coverage Explain why exclusions are used in insurance contracts and identify the major types of exclusions Describe how the interests of mortgagees are protected in insurance policies and why the mortgagee clause gives the best protection to the mortgagee Distinguish between the actual cash value basis of recovery and replacement cost Describe the different types of deductibles and explain why deductibles are used in insurance policies Indicate why insurance companies use insurance to value provisions and explain how the coinsurance clause operates Explain what apportionment clauses are and how the prorated clause operates 3 Major Parts of a Policy Declaration Insuring agreement Exclusions Conditions Other important aspects of a policy Definitions Basis of recovery Clauses limiting . | Financial Operations of Insurers Lecture No. 14 1 2 Objectives Identify and understand the basic parts of an insurance policy Explain the difference between named perils and open perils property insurance coverage Explain why exclusions are used in insurance contracts and identify the major types of exclusions Describe how the interests of mortgagees are protected in insurance policies and why the mortgagee clause gives the best protection to the mortgagee Distinguish between the actual cash value basis of recovery and replacement cost Describe the different types of deductibles and explain why deductibles are used in insurance policies Indicate why insurance companies use insurance to value provisions and explain how the coinsurance clause operates Explain what apportionment clauses are and how the prorated clause operates 3 Major Parts of a Policy Declaration Insuring agreement Exclusions Conditions Other important aspects of a policy Definitions Basis of recovery Clauses limiting the amount of recovery 4 Declaration Usually on the first page and provides Policy number Address of the insured or insured property Insured’s name Agent’s name Premium amount May contain some underwriting information If policy contains options they will be listed 5 The Insuring Agreement Normally states what the insurer agrees to do and major conditions under which it so agrees Most crucial part of the agreement Statement of what the insurer promises May also find a list of the perils insured against and the definition of the insured Named perils vs open perils Named perils lists the perils that are covered Open perils states that it is the insurer’s intention to cover risks of accidental loss to the described property Except those perils specifically excluded 6 Defining the Insured Named insured Person or organization that is to receive the benefit of the coverage provided In life insurance that person may also be called the policyholder Additional insureds Normally receive coverage .