Business Insurance Flashcards

What is 'key person' (key man) life insurance purchased by a DC business designed to do?

Answer: Protect the business from financial loss due to the death or disability of a critical employee

Key person insurance protects the business by providing a death benefit to the company to offset losses from the death of an indispensable employee, executive, or owner.

A DC partnership wants insurance to fund a buy-sell agreement if a partner dies. What type of life insurance is typically used?

Answer: Cross-purchase or entity-purchase life insurance to fund a buy-sell agreement

Buy-sell agreements are funded by life insurance—either cross-purchase (each partner owns a policy on the other) or entity-purchase (the business owns policies on each partner) arrangements.

What does 'hired and non-owned auto liability' (HNOA) cover for a DC business?

Answer: Liability arising from employees using rented vehicles or personal vehicles for business purposes

HNOA covers the business's liability when employees drive rented (hired) vehicles or their own personal (non-owned) vehicles for company business.

A DC staffing agency provides temporary workers to client businesses. Which of the following insurance considerations is most critical?

Answer: Workers' compensation coverage for temporary workers while on assignment

Temporary workers are typically employees of the staffing agency, which must maintain workers' compensation coverage for them while on assignment.

What is the purpose of 'umbrella' versus 'excess' liability coverage for DC businesses?

Answer: Umbrella provides broader coverage (can 'drop down' to fill gaps in underlying policies); excess liability only adds limits above the underlying policy

An umbrella policy both extends the limits of underlying policies AND can drop down to cover claims the underlying policy doesn't (subject to a self-insured retention). Excess liability only adds limits over the underlying.

Under DC insurance law, what is an 'insuring agreement' in a commercial policy?

Answer: The core clause in which the insurer promises to pay for covered losses in exchange for premium

The insuring agreement is the heart of the policy—it states what the insurer agrees to cover in exchange for the premium paid.