Insurance Docs & Processes #1
A: This document is a temporary agreement issued by the insurer to an agent or broker that confirms coverage is in place until the formal policy is written.
Q: What is a "binder"?
A binder acts as an interim receipt until the final policy is issued by the carrier. (See page 5-4 in the textbook | LO1).
A: This the contract of insurance between the insured policyholder and the insurance company.
Q: What is the "insurance policy"?
(See page 5-3 in the textbook | LO1).
A: This document is given to someone who needs proof that the insurance exists.
Q: What is a "Certificate of Insurance (COI)"?
E.g., a construction contractor might be asked to provide a certificate of insurance to the property owner or developer. (See page 5-3 in the textbook | LO1).
A: This section of the policy contains the subject matter of insurance, the perils insured against, exclusions and circumstances under which the insured may receive the proceeds of insurance.
Q: What are the "insuring agreements"?
(See page 5-8 in the textbook | LO2).
True or False: insurance contracts can be assigned by the insured to another party.
A: False
Insurance contracts are formed specifically between the insurer and the named individual or business, and that relationship cannot be transferred without the insurer’s explicit consent. Exceptions: bankruptcy & death. (See page 5-10 in the textbook | LO3)
A: When an insurer treats a contract as though it never existed and the entire premium is refunded.
Q: What is a "voided" policy? (void ab initio)
E.g., when an insured's misrep or non-disclosure is of a serious nature whereby it significantly affected the insurer's decision to UW the policy. (See page 5-12 in the textbook | LO3)
Q: What are:
1. Coverage Summary
2. Insuring Agreements
3. Stat Conditions
4. Policy Conditions
5. Signature Clause
(See pages 5-8 to 5-10 in the textbook | LO2)
A: These documents signify changes to the policy that alter its provisions.
Q: What are "endorsements"?
Endorsements can be standard (e.g., SEF 20, SEF 43R or manuscript (custom) for unique operations. (See page 5-4 in the textbook | LO1)
A: This type of policy is custom-built for specific situations.
Q: What is a "manuscript" policy?
Manuscript policies are usually used for bigger, more complex risks—like large commercial accounts—and while they don’t rely on prewritten templates, they still need to include all the usual parts of a regular policy. (See page 5-3 in the textbook | LO1).
A: This is when a refund the unused portion of the premium is issued on a pro rata basis.
Q: What is "termination by insurer"?
Per the Stat Conditions, the insurer must give written notice with a set number of days, using methods allowed by law. (See page 5-11 in the textbook | LO3).
A: This temporary document is issued by the broker or agent. It informs the insured that coverage has been arranged and outlines the type of insurance in effect, but it is not the policy.
Q: What is a "cover note"?
Cover notes are similar to binders but are typically issued by a broker or agent v. a binder, which is issued by the insurer. (See page 5-4 in the textbook | LO1).
A: In these cases, a refund is calculated on a short-rate basis.
Q: When an insured cancels a policy?
An insured can cancel a policy at any time, but any refund will be calculated on a short-rate basis, which includes a penalty. (See page 5-11 in the textbook | LO3).
A: These are some of the problems identified with issuing temporary coverages, especially oral binders.
Q: Was a contract actually made? (he said/she said). Does the intermediary have binding authority? (Were they careless or misleading in what was discussed?) What are the provisions of the contract? (What were terms, conditions, limitations, or exclusions in the interim coverage?)
(See page 5-6 in the textbook | LO1).
A: Renewals occur in one of two (2) ways, name them.
Q: What are:
1. By specific instruction - from the insured or intermediary and if no instructions are received, the policy is allowed to lapse.
2. By automatic renewal - docs prepared in advance
(See page 5-14 in the textbook | LO3).
A: These types of policies are commonly used for large or complex risks that exceed the capacity of a single insurer.
Q: What are "subscription" policies?
A lead insurer prepares and issues the policy; others subscribe to the policy and are only responsible for its own portion of the risk. (See page 5-10 in the textbook | LO2).