Download Property and Casualty Insurance Exam Q&A: 100% Pass Guide and more Exams Insurance law in PDF only on Docsity!
Property and Casualty Insurance EXAM
Questions and Answers 100% Pass
Specific insurance ✔✔This type of insurance designates a particular item to be insured
Blanket insurance ✔✔This type of insurance covers more than one item of property at a single location or one more items of property at multiple locations.
Speculative ✔✔possibility of both gain and loss. Not insurable.
Pure ✔✔only the possibility of loss. Insurable.
What are the 5 methods of managing or handling risk? ✔✔avoid, control, retain, and transfer risk.
Hazard ✔✔A condition or situation which increases the chance for loss
Physical Hazards ✔✔a hazard that arises from the condition, occupancy, or use of the property itself.
ex: skateboard left on the steps
Moral Hazards ✔✔when an individual through carelessness or by irresponsible actions can increase the possibly for a loss.
ex: person who drives carelessly just because they know they are insured.
Morale Hazards ✔✔when a person might create a loss situation on purpose just to collect from the insurance company.
ex: Prearranged, faked theft of someone's old vehicle so they can get an insurance payout to buy a new vehicle.
Replacement Cost ✔✔The amount of money it would take to replace a damaged or destroyed item with one of like kind and quality AT THE TIME OF LOSS. No deduction for depreciation.
Actual Cash Value (ACV) ✔✔Replacement Cost, minus depreciation.
Pair and Set Clause ✔✔Loss to one item of a pair or set does not constitute loss to the entire pair or set.
Appraisal ✔✔A method of resolving disputes between insurers and insureds over the amount owed on a covered loss.
- both parties select an appraiser
Principal ✔✔Insurance Company
What is the ISO? ✔✔Insurance Services Office which is an organization established for the benefit of its member insurance companies. This organization gathers statistics, provides loss costs, drafts policy forms and coverage provisions and conducts inspections for rate making purposes.
Coinsurance Clause ✔✔Requires the insured to carry a minimum specified amount (generally 80%) of the replacement cost value of the insured property in order for partial losses to be paid in full.
Estoppel ✔✔A legal bar to changing or denying a fact because of one's own previous actions or words to the contrary.
ex: If an insurance company representative intentionally or unintentionally gives the impression that a specific fact exists when it does not and a client relies on that impression and is damaged a result.
Binder ✔✔A temporary contract of insurance, oral or written, offered by an insurer pending issuance of the policy. Usually written for a period of 30-60 days and remains in force for that period or until a permanent policy is either issued or denied by the insurer.
Warranty ✔✔A provision in a policy that pledges that a condition does exist or will exist at some time in the future.
Deposit Premium ✔✔Tentative charge made at the beginning of certain policies and reinsurance agreements to be adjusted when the actual earned charge has been later determined.
Audit ✔✔Verification of books or accounts to determine their accuracy.
Occurrence ✔✔An accident, including continuous or repeated exposure to the same harmful conditions, which result in bodily injury or property damage.
Special Damages ✔✔type of compensatory damages that reimburse the injured part for direct and specific expenses involved in the loss. Such as medical expenses, funeral expenses and loss wages.
General Damages ✔✔type of compensatory damages that reimburse the injured party for such things as pain and suffering and disfigurement.
Punitive Damages ✔✔type of damages intended to punish the defendant and make an example out of her to discourage others from behaving the same way.
Proximate Cause ✔✔An act, through an uniterrupted chain of events, that can be determined to be the immediate or actual cause of a loss.
4 elements of negligence ✔✔1. The existence of a DUTY to act in a certain way
- Operated by a hit and run driver
- Has invalid liability insurance at the time of the accident because the insurer is insolvent or denies coverage
Part C: Uninsured Motorist Coverage ✔✔this coverage compensates the insured for bodily injury ONLY as a result of an accident with an uninsured motorist.
Medical Payments ✔✔Insurance company agrees to pay for reasonable expenses incurred for necessary medical and funeral services because of bodily injury.
- Covers first party.
- "Stays in the car"
- 3 years is time limit for incurring medical expenses
Supplementary Payments ✔✔Payments made in addition to the Limits of Liability.
- Up to $200/day for loss of earnings
- Up to $250 for the cost of bail bonds required because of an accident.
Excess ✔✔Any insurance that is provided for a vehicle you do not own, shall be excess over any other collectible insurance.
Example:
If you borrowed your friend's car, your own liability coverage will act as excess to your friend's primary coverage.
Single Limit Basis ✔✔One amount representing the total (aggregate) limit for all claims arising from any one accident. (1 amount for Bodily Injury and Property Damage)
Split Limit Basis ✔✔This limit has separate limits for BI and PD.
For example: 20/50/10 - $20,000 for per person bodily injury, $50,000 total per accident bodily injury, $10,000 per accident for property damage.
Split/ Combined Single Limit ✔✔This limit has only one limit that applies to both BI and PD.
Part A - Liability Coverage ✔✔Provides payment for Bodily Injury (BI) & Property Damage (PD) damage resulting from the injured's use of an automobile for which the insured becomes legally liable.
- Covers Third Party Only
- Pays for both $pecial and General Damages
Loss of Use ✔✔The inconvenience caused to an individual for the inability to use property.
APIP ✔✔Additional Personal Injury Protection (optional)
OBEL ✔✔Optional Basic Economic Loss
Additional $25,000 to be assigned to any combination of Medical Expenses, Loss Wages, Rehab.
Red Lining ✔✔No insurer may refuse to issue or renew an auto policy because of age, sex, race, occupation or principal place of garaging of the named insured.
Stacking ✔✔The practice of adding (stacking) the limits of all applicable policies to address a given loss.
Flood ✔✔A general or temporary condition of partial or complete inundation of normally dry land areas.
Must affect:
- 2 or more acres or
- 2 or more properties
Vicarious Liability ✔✔liability situation where someone is held responsible for the actions or omissions of another person.
ex: an employer can be liable for the acts or omissions of its employees, provided it can be shown that they took place in the course of their employment.
Write Your Own (WYO) ✔✔Program instituted by the Federal Government which enables private insurers (Allstate, State Farm, etc) to write, service, bill and settle claims directly with insureds while being backed financially by the federal government.
Tort ✔✔Fault
A civil wrong that violates the rights of another person. Can be intentional or unintentional
Fair Credit Reporting Act ✔✔Mandates confidential, fair and accurate reporting of information on consumers by reporting organizations as well as organizations (such as insurers) which use the services of reporting organizations.
Consumers must be informed if a credit report is needed in order to underwrite a particular line of insurance.
Express Authority ✔✔Authority specifically given to an agent, either orally or in writing, by the principal
Consultant ✔✔Someone who, for a fee, offers advice on the benefits, advantages, and disadvantages of various insurance policies.
-They don't actually sell insurance, only advice.
Solicitor ✔✔like an agent, sells insurance and may even be authorized to collect premiums. However, they cannot issue or countersign policies, only agents can do this.
-they represent the insurance company
Excess or Surplus Lines ✔✔an agent licensed by the state to handle highly specialized insurance coverages such as auto racing liability and tuition refund insurance.
Non-Admitted Companies ✔✔are companies that are not authorized to conduct business in the state under ordinary circumstances.
Reinsurance ✔✔A contract under which one insurance company (the reinsurer) indemnifies (insures) another insurance company for part, or all its liabilities.
Contract of Adhesion ✔✔One party has greater power over the party in drafting the contract. The insurer has more power when it comes to preparing the contract even though the insured can request provisions or coverage.
Aleatory Contract ✔✔it is a contract that is contingent on an uncertain event (a loss) that provides for unequal transfer of value between the parties.
For example, people can pay insurance premiums for years without having a loss or on the other hand someone could experience a loss and be reimbursed a great deal more than they had paid in premiums.
Unilateral Contract ✔✔Only one of the parties in the contract is legally bound to do anything.
-Insurance policies are one sided because only the insurance company is legally bound to perform its part of the agreement.
Absolute Liability ✔✔Imposed on defendants engaged in hazardous activities, such as harboring wild animals, using explosives, etc. The injured party does not have to prove negligence.
Strict Liability ✔✔Commonly applied in product liability cases. A person or business that manufactures or sells a product makes an implied warranty that the product is safe.The business is then liable for defective products, regardless of fault or negligence.
Contract ✔✔a legal agreement between two competent parties that promises a certain performance in exchange for a certain consideration.
Doctrine of Reasonable Expectations ✔✔states that a policy includes coverage's that an average person would reasonably expect it to include, regardless of what the policy actually provides.
Contract of Utmost Good Faith ✔✔means that the insurer relies on the truthfulness and integrity of the applicant when issuing a policy and the insured relies on the company's promise to provide coverage and pay claims
Declaration ✔✔-Almost always are found on the first page -Contain information such as the name of the insured, the address, and the amount of coverage, a description of the property and the cost of the policy.
Insuring agreement ✔✔The heart of the policy which states in general what is to be covered or, in other words, the losses for which the insured will be indemnified. This section also describes the type of property covered and the perils against which it is insured.
Conditions ✔✔This section states the ground rules for the policy. They describe the responsibilities and the obligations of both the insurance company and the insured.
Exclusions ✔✔This section describes the losses for which the insured is not covered. If and excluded loss occurs, the insured will not be reimbursed.
Definitions ✔✔This section clarifies the meanings of certain terms used in the policy.
Endorsement ✔✔These are documents that modify or change the original policy in any way and are attached to the original policy.
These changes could be anything from broadening coverage, restricting coverage to changing the name of the insured.
Insurance from the federal government may include: ✔✔-War risk insurance -Nuclear energy liability insurance -Flood insurance -Federal crop insurance
Insurance from state government may include: ✔✔-Unemployment insurance -Workers compensation benefits
Residual Market Insurance ✔✔insurance provided by the government which is not typically available from private insurers.
Such war risk, flood, workers comp, etc.
Monoline companies ✔✔insurance companies that only write one type of insurance policy.
Multiline companies ✔✔insurance companies that write more than one type of insurance policy.
Countersigning ✔✔this is when the agent signs each new policy prepared by the company before delivering it to the insured.
Most states require this in order to validate the contract.
Responsibilities of an insurance agent: ✔✔-selling insurance -issuing and countersigning policies -collecting premiums -providing a link between the insured and the insurance company -field underwriting risks
Field underwriting ✔✔this is when an agent uses pre-established criteria to seek out the type of business that is likely to be acceptable to the company.
Errors and Omissions (E&O) insurance ✔✔Agents should purchase this type of insurance to protect themselves against legal liability arising from inadvertent (unintentional) errors or omissions.
Agency Relationship ✔✔exists when one party (an agent) is authorized to act on behalf of another (a principal- insurance company).
Exclusive (captive) Agency System ✔✔The insurance company contracts with agencies, which are independent businesses, to represent and sell insurance only for that insurance company.
Direct Writer System ✔✔The insurance company's agents are actually employees. They may receive a salary, be paid by commission or a combination of both.
Direct Response System ✔✔The insurance company where there are no agents. These companies sell through direct mail or over the phone.
Independent Agency System ✔✔Agencies that are independent contractors which contract with several different companies to represent and sell insurance for those companies.
Independent or Nonexclusive Agent. ✔✔An agent who represents more than one company.
Investigative Consumer Reports ✔✔This type of consumer report gathers data through personal interviews with friends, neighbors, and associates.
-Pre-notification is only required for this report
First Named Insured ✔✔This happens when there is more than one person listed as an insured. The first person listed will have more duties or rights in the policy.
Named Insured ✔✔the person, business, or other entity named in the declarations to whom the policy is issued.
