Louisiana Pre-Licensing for Property and Casualty Insurance Chapter 2 Property and Casualty Insurance Basics Notes (A+ GUARANTEED)

Depreciation correct answers reduction in value, particularly due to wear and tear Earned premium correct answers the portion of premium paid in advance that now belongs to the insurer because it applies to the elapsed part of the policy Exposure units correct answers used as a measure of the rating units or the premium base of a risk (exposure units multiplied by the rate results in the premium) Homogeneity correct answers the degree to which items are similar Implied warranty correct answers a legal term meaning that a product is suitable for its intended purpose and that it fits an ordinary buyer's expectations Inception correct answers the date at which the insurance policy goes into effect Negligence correct answers the failure to use the care that a reasonable prudent person would under the same or similar circumstances Most people behave in a manner that is reasonable and prudent- with exceptions for minors and incompetent individuals. Failure to behave in this manner constitutes this, and if it leads to injury to another or damage to property belonging to another, the negligent party may be held legally liable for the damage. Normally, the burden of proof is on the injured party to prove that the other party was negligent. However, there are also certain doctrines that impose liability by statute or that shift the burden of proof from the injured party to the defendant Obsolescence correct answers depreciation in value of a property due to becoming outdated Statute correct answers a written law passed by a legislative body Insurable interest correct answers The insured must have this in the person or property covered by an insurance policy In property insurance, the insured would incur a financial loss if the insured property was damaged. As a result, this may be created by the ownership, custody or control of a property For example: mortgagees and leaseholders may have this in their respective properties In property and casualty insurance, this must exist at the time of the loss