Insurance Terms and Related Concepts

Which of the following definitions best defines the term "accident"? A. A sudden, unplanned and unexpected event, not under the control of the insured, resulting in injury or damage neither expected nor intended B. Injury to the character of another person caused by libel, slander, false arrest, invasion of privacy and other acts C. Physical damage to tangible property of others caused by the negligence of an insured D. The negligent or purposeful act or omission by an insured that results in physical trauma or death to a person

A. A sudden, unplanned and unexpected event, not under the control of the insured, resulting in injury or damage neither expected nor intended

The crime of forced entry into the premises of another by a person or persons with felonious intent is defined as a A. Burglary. B. Breaking and entering. C. Theft. D. Robbery.

A. Burglary

Replacement cost is defined as A. Full replacement of property at its current cost, new and without reduction for depreciation. B. The market value of property of like kind and quality. C. Full replacement of property with like kind and quality, less an allowance for physical deterioration and depreciation. D. Payment of the full policy limits in the event of a total loss. Id

A. Full replacement of property at its current cost, new and without reduction for depreciation

Payment for medical expenses, loss of wages, funeral expenses, or the cost to repair or replace damaged property are known as what type of compensatory damages A. Special B. Tort C. Normal D. general

A. Special

What are the two types of compensatory damages A. Special and general B. Pure and speculative C. Tort and general D. Normal and punitive

A. Special and general

Negligence is defined as A. The failure to do what a reasonable prudent person would do under given circumstances. B. An unbroken chain of events that results in bodily injury or property damage to another person. C. Conduct that is so hazardous that the individual engaging in it will be held fully responsible for any resulting injury or damage. D. An intentional act that results in bodily injury or property damage to another person.

A. The failure to do what a reasonable prudent person would do under given circumstances

An insured's building has an actual cash value of $200,000, and he has insured the property for $120,000 with an 80% coinsurance clause. A $40,000 loss occurs. How much will the policy pay? A. $0 B. $30,000 C. $32,000 D. $40,000

B. $30,000

Which of the following types of valuation works bets for property whose value does not fluctuate much A. Inflation guard B. Agreed value C. market value D. States amount

B. Agreed value

A beauty parlor burns to the ground. What type of loss is this to the owner? A. Specific B. Consecutive C. Direct D. Consequential

B. Direct

Which of the following does the term proximate cause refer to? A. Reason for filing a lawsuit B. Negligence that leads to an injury C. Injury that leads to monetary compensation D. Duty of the defendant to act

B. Negligence that leads to an injury

Which method of loss valuation is contrary to the basic concept of indemnity A. Agreed value B. Replacement cost C. Functional replacement cost D. Market value

B. Replacement cost

For insurance purposes, when an insured loses property to another because the person used violence or threat of violence to gain the property, this is defined as A. False pretense B. Robbery C. A theft D. A burglary

B. Robbery

When the amount of insurance written in a property policy is not subject to any coinsurance provision and that amount is paid in the event of a covered loss, the coverage is said to be written as A. Specific insurance. B. Stated amount. C. Replacement cost. D. Actual cash value.

B. Stated amount

The transfer of an insured's right to seek damages from a negligent party to the insurer is found in which of the following clauses? A. Appraisal B. Subrogation C. Arbitration D. Salvage

B. Subrogation

Which of the following is most likely to occur if it is determined by the audit that the deposit premium was too high? A. Nothing; the premium cannot be adjusted. B. The insured will receive a return premium. C. Additional benefits will be added. D. The insurer will have to pay a fine.

B. The insured will receive a return premium

An insured's roof cost $4,000 when installed 5 years ago. It has been damaged by hail and must be replaced. The new roof will cost $6,000 at today's prices. If the roof has been depreciating at $200 per year and the insured's policy is written on the actual cash value(ACV), how much will the policy pay toward the insured's new roof? A. $1,000 B. $4,000 C. $5,000 D. $6,000

C. $5,000

A tornado that destroys property would be an example of which if the following? A. A loss B. A physical hazard C. A peril D. A pure risk

C. A peril

All of the following are true regarding deposit premium EXCEPT A. It must be paid in advance B. It is an estimated premium paid at the policy issue C. It is 50% of the actual premium D. It could be adjusted by the audit

C. It is 50% of the actual premium

Most insurance policies exclude losses by. A. Burglary B. Robbery C. Mysterious disappearance D. Theft

C. Mysterious disappearance

A situation in which a person can only lose or have no change represents A. Adverse selection. B. Hazard. C. Pure risk. D. Speculative risk.

C. Pure risk

The risk of loss may be classified as A. Named risk and un-named risk. B. High risk and low risk. C. Pure risk and speculative risk. D. Certain risk and uncertain risk.

C. Pure risk and speculative risk

Property insurance that provides $100,000 coverage for a building and $50,000 coverage for personal property at a single location is called A. Blanket coverage. B. Described coverage. C. Specific coverage. D. Schedule coverage.

C. Specific coverage

A property insurance policy that is not subject to any coinsurance requirements but has a set amount of insurance scheduled for the property would use what loss valuation method? A. Replacement cost B. Reproduction cost C. Stated amount D. Actual cash value

C. Stated amount

A building is insured, but no one has lived or worked in it for 10 years. The building is completely empty of any furniture or personal belongings. From an insurance standpoint, the building is considered A. Condemned. B. Closed. C. Vacant. D. Unoccupied.

C. Vacant

An insured owns a building that is valued at $400,000. To comply with the 80% coinsurance provision of his insurance policy, how much should he insure the property for? A. 100% of the market value B. $400,000 C. $32,000 D. 80% of the property's replacement cost or more

D. 80% of the property's replacement cost or more

An insured is driving her car through a residential area when she loses control and crashes into a neighbor's front porch. The neighbor, who was sitting on the porch, is injured. The insured's liability policy has a limit of $500,000. This amount applies to the total of damages for any bodily injury and property damage resulting from one accident. Which type of limit of liability does the insured have? A. Split B. Aggregate C. Per occurrence D. Combined single

D. Combined single

An insured is applying for a casualty insurance policy. One of the conditions of the policy allows the insurance company to inspect the insured's books at the end of the policy term to make sure sufficient premium has been collected for the exposure she plans to insure. Which condition is part of the insured's policy? A. Excess liability coverage B. Contract Bond C. Errors and Omissions insurance D. Deposit premium audit

D. Deposit premium audit

Events or conditions that increase the chances of an insured loss occurring are referred to as A. Exposures. B. Risks. C. Perils. D. Hazards.

D. Hazards

To purchase insurance, the policyowner must have financial interest in the property being insured. This is known as A. Pure loss. B. Loss valuation. C. Indemnity. D. Insurable interest.

D. Insurable interest

All of the following are factors in the determination of actual cash Value EXCEPT A. Type and quality of property B. Age of the property C. Replacement cost. D. Insurance premium paid

D. Insurance premium paid

For the reported losses of an insured group to become more likely to equal the statistical probability of loss for that particular class, the insured group must become A. Smaller. B. Older. C. More active. D. Larger.

D. Larger

What type of insurance policy insures against all risks of loss that are not specifically excluded by the policy? A. Specified peril policy B. Binder policy C. Named peril policy D. Open peril policy

D. Open peril policy

The causes of loss insured against in an insurance policy are known as A. Losses B. Risks C. Hazards D. Perils

D. Perils

What type of damages may be awarded by the court to create disincentives that discourage behavior that is deemed highly undesirable by society? A. General B. Compensatory C. Specific D. Punitive

D. Punitive

Which of the following is used in the formula for calculating the actual cash value of a property? A. Stated value B. Fair market value C. Agreed value D. Replacement cost

D. Replacement cost

In property insurance, actual cash value is defined as which of the following? A. Market value of the property at the time of the loss B. Stated value of the property as shown on the declaration C. The actual amount of a loss payable, less the policy deductible D. Replacement cost at the time of the loss, less depreciation

D. Replacement cost at the time of the loss, less depreciation

the reduction, decrease, or disappearance of value of the person or property insured in a policy by a peril insured against is known as.

Loss

In the case of a loss the indemnity provision in insurance policies.

Restores an insured person to the same financial state as before the loss

The policy provision found in property insurance policies that prevents the insured from collecting twice for the same loss is called

Subrogation

Burglary is defined as

Taking of property from within the premises leaving visible signs of forced entry.

Liability imposed on one party as a result of the actions of another person is known as

Vicarious liability