Insurance Concepts Flashcard

Front

Anika owns two insurance policies that both cover her home. She wants to know what happens if she files a claim and both policies could pay for the same damage. What is the primary purpose of an other insurance provision in this situation?

Back

To specify how coverage is apportioned if multiple policies cover the same risk

Answer explanation

The primary purpose of an other insurance provision is to specify how coverage is apportioned if multiple policies cover the same risk, ensuring fair distribution of claims between insurers.

Front

Process where an insurance company takes legal action against an at-fault driver to recover repair costs paid.

Back

A legal right for insurers to pursue a third party responsible for a loss

Answer explanation

The correct choice describes the insurer's legal right to seek compensation from the at-fault driver after covering the repair costs. This process is known as subrogation, allowing insurers to recover losses from third parties.

Front

Emma has two insurance policies covering the same property. What does the other insurance clause in her policies protect against?

Back

Overinsurance

Answer explanation

The other insurance clause protects against overinsurance, which occurs when the total coverage exceeds the property's value. This clause ensures that the insured amount does not exceed the actual value of the property.

Front

What does 'primary insurance' refer to when Michael has two policies covering the same type of loss?

Back

The first coverage that comes into effect when a loss occurs

Answer explanation

'Primary insurance' refers to the first coverage that comes into effect when a loss occurs, meaning it is responsible for paying the claim before any other policies contribute.

Front

What is the document called that prevents an insurer from seeking compensation from a third party after paying for damages?

Back

A provision where an insured waives the insurer's right to seek compensation from a third party

Answer explanation

The document Noah signed is a provision where he waives the insurer's right to seek compensation from the neighbor. This prevents the insurer from pursuing a third party for recovery of costs related to the fire.

Front

How does subrogation benefit Mia when her insurance company pays for repairs and seeks reimbursement from the at-fault driver's insurer?

Back

It allows the insured to receive payments more quickly.

Answer explanation

Subrogation allows Mia's insurance to quickly recover costs from the at-fault driver's insurer, enabling her to receive payments for repairs faster without waiting for the other party's insurance to settle.

Front

What happens when subrogation is waived in Harper's car insurance policy after an accident caused by another driver?

Back

The insurer cannot pursue the third party for compensation.

Answer explanation

Since subrogation is waived in Harper's policy, the insurer cannot pursue the third party for compensation. This means the insurance company absorbs the loss without seeking reimbursement from the at-fault driver.

Front

In which type of insurance policy is subrogation most common?

Back

Auto insurance

Answer explanation

Subrogation is most common in auto insurance, where an insurer seeks to recover costs from the at-fault party's insurer after paying for damages. This process helps insurers manage losses effectively.

Front

What is the role of the insurance company during subrogation after Mia's car is damaged in an accident caused by another driver?

Back

To pursue a third party for damages

Answer explanation

During subrogation, the insurance company seeks to recover costs from the third party responsible for the accident. This process allows the insurer to pursue damages after paying for Mia's car repairs.

Front

Effect of subrogation on insurance premiums after an accident.

Back

It helps keep premiums low

Answer explanation

Subrogation allows insurers to recover costs from the at-fault party, reducing their losses. This process helps keep overall insurance costs down, which in turn helps keep premiums low for policyholders like Scarlett.