Property and Casualty Basics

What term includes damage where the insured peril was the proximate cause of loss? A. Negligence Loss B. Direct Loss C. Indirect Loss D. Consequential Loss

B. Direct Loss - Direct, physical damage to buildings and/or personal property. Direct Loss also includes other damages where the insured peril was the proximate cause of loss.

The estimated amount there an insurer would have to pay on a claim is called the A. Loss cost rating B. Loss quotient C. Loss estimate D. Loss reserve

D. Loss Reserve - The loss reserve indicates an estimate of what would ultimately be paid on a claim

Which of the following produces evaluations of insurers' financial status often used by state departments of insurance? A. AM Best B. NAIC C. Consumer's Guide D. SEC

A. AM Best & Company assigns ratings to life, property and casualty insurance companies based upon the financial stability of the insurer.

Using an air cooled engine, a proposed insured has developed a gnu, experimental aircraft. If the inventor applies for liability insurance, what rating type with the insurer most likely use? A. Judgement B. Class C. Schedule D. Merit

A> Judgement - Because there are a few similar aircraft, it is not possible to rate the risk based upon history or experience. For those reasons, a judgment rating is the most likely system.

Val-U insurance company main goal is to collect sufficient premiums to pay for the insured losses, to cover the cost of expenses and to make a reasonable profit. Val-U predicts the incurred expenses while still allowing for a margin of error. The ultimate premium charged will be reduced by which of the following? A. Earned premiums B. Return of unearned premium C. Dividends D. Investment income

D. Investment Income - The additional charge added to the premium is reduced by any investment income earned on the funds being held for future claim payments.

When a disagreement occurs as to how to settle a loss in a fender bender between two cars, what procedure is followed? A. Arbitration through the court B. The lawsuit is filed C. Appeal to DOI D. The adjuster's first opinion must be excepted

A. Arbitration through the court - Arbitration is a low-cost alternative to a full-blown lawsuit.

The reduction, decreased, or disappearance of value of the person or property insured in a policy by a peril insured against is known as A. Loss B. Exposure C. Hazard D. Risk

A. Loss - Loss is the reduction, decrease, or disappearance of value of the person or property insured in a policy by a peril insured against.

Which of the following is a method of claim settlement used in casualty insurance when the insured and insurer cannot agree on how to settle a claim? A. Appraisal B. Arbitration C. Proof of Loss D. Restoration

B. Arbitration - Arbitration is a method of casualty claims settlement used when the insured and insured cannot agree on how to settle a claim. The arbitrator's decision is binding to both parties.

Which of the following organizations has the primary responsibility forms for the standard market? A. Governors office B. Insurance services office C. Office of financial services D. National Association of insurance commissioners

B. Insurance service office - The insurance services office (ISO) Creates forms for the standard market

In many circumstances, the action of more than one cause Produces a particular harm or loss to an insured. The predominant legal rule is that if a loss is caused by both an insured peril and an uninsured peril, coverage is deemed to apply. This rule of law is called A. Dual Causation B. Concurrent causation C. Primary and excess causation D. Simultaneous conversation

B. Concurrent causation - In many circumstances, the action of more than one cause produces a particular harm or loss to an insured. The predominant legal rule is that if a loss is caused by both insured peril and an uninsured peril, coverage is deemed to apply. This rule of law is called "concurrent causation"

An insured's business is damaged because of a fire, and he is forced to close the business temporarily for repairs. As a result, the insured lost income. What type of loss is this? A. Special B. Additional C. Consequential D. Direct

C. Consequential Loss - Also known as Indirect Loss, is a second financial loss caused by a covered direct loss

What type of insurance policy ensures against all risks of laws that are not specifically excluded by the policy? A. Open Peril B. Specified Peril policy C. Binder Policy D. Named Peril Policy

A. Open Peril - Open peril (Special) Policies cover everything except what they say they don't. Named peril policies cover only perils named in them.

An incorporated, nonprofit association representing all insurance companies in the State of California licensed to transact workers compensation insurance is known as A. Rating Bureau of California B. California Workers Compensation Inspection Rating Bureau (WCIRB) C. Inspection Bureau of California Workers Compensation (IBCWC) D. California Workers Compensation Rating Association (WCRA)

B. California Workers Comp Inspection Rating Bureau (WCIRB) is an incorporated, nonprofit association comprised of all companies licensed to transact workers compensation insurance in California and has over 400 member companies.

Adam is injured in a car accident caused by John. What kind of insurance would cover John's obligation to pay for Adam's injuries? A. Health Insurance B. Liability Insurance C. Property Insurance D. Life Insurance

B. Liability Insurance - Provides compensation for harm or damage to a third party that the insured is obligated to pay.

Which of the following is a cancellation procedure in which the premium returned to the insured is not in direct proportion to the number of days remaining in the policy period? A. Proportional B. Short Rate C. Pro Rata D. Flat Rate

B. Short rate - Short rate cancellation is a cancellation procedure in which the premium returned to the insured is not in direct proportion to the number of days remaining in the policy period.

The policy provision found in property insurance policies that prevents the insured from collecting twice for the same loss is called A. Appraisal B. Subrogation C. Consent to settle loss D. Right of salvage.

B. Subrogation - When insurance except last payment from the insurance company, they must transfer their rights to recovery to the insurer. This prevents the insured from collecting twice for the same loss and allows the insurer to indemnify the insurance company.

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

C. A sudden, unplanned and unexpected event, not under the control of the insured, resulting in injury or damage neither expected nor intended - Accident is best defined as a sudden, unplanned or unexpected event, not under the control of the insured, resulting in injury or damage neither expected nor intended.

Which of the following terms describes the ratio that is the percentage of each premium dollar a property casualty insurance spends on claims and expenses? A. expense B. Loss C. Combined D. Profitability

C. Combined - Combined ratio is defined as the percentage of each premium dollar property and casualty insurance spends on claims and expenses. A decrease in the combined ratio means financial profit ability is improving; an increase means that profitability is decreasing. When the ratio is over 100, the insurer has an underwriting loss

A contractor who builds homes has never made a claim on his business insurance policy. His agent discovers that his policy is written on a scheduled rating. If the contractor changes to an experience rating policy, which is most likely? A. Premiums will be unchanged B. Coinsurance would be necessary C. Premiums will go down D. Premiums would go up

C. Premiums would go down - In an experience rating, the insured's past experience helps determine the premium. Because it is unlikely that the rest of the industry would have zero claims, a contractor with no claims is likely to pay a lower premium than a company that is on a scheduled rating.

Which services are associated with Standard & Poor's and AM Best? A. Providing employment history's for investigative consumer reports B. Storing medical information collected by insurance companies C. Rating the financial strength of insurance companies D. Investigating violation of the Fair Credit Reporting Act.

C. Rating the financial strength of insurance companies - Report generated by Standard & Poors and AM Best help prospective consumers to judge the financial security of various insurance companies

An individual purchased her own personal property insurance policy on her newly purchased dream home. This type of insurance coverage that applies to the insured's own property is known as A. Commercial Risk Protection B. Third Party Coverage Protection C. First Party Risk Protection D. Personal Lines Coverage

C. First Party Risk Protection - insurance coverage that applies to the insured's own property or person. In contrast, Third party coverage protection is defined as insurance coverage that applies to the property or person of one other than the insured.

What insurance concept is associated with the names Weiss and Fitch? A. Types of mutual companies B. Index used by stock companies C. Guides describing company financial integrity D. Policy dividends.

C. Guides describing company financial integrity - Because an insurance company's strength and stability are two very crucial factors in its sustainability, independent rating services Have formed to publish regular updates on the financial integrity of different insurance companies. Weiss and Fitch are two of the services, although there are more.

Which of the following coverages in dwelling and homeowners policies is for indirect losses? A. Structures B. Contents C. Loss of Use D. Dwelling

C. Loss of Use - coverages applies only after a direct loss caused by a covered peril has occurred.

Rates that are established based on the similarities of the risk with other risks are known as A. "A" Rates B. Merit Rates C. Manual rates D. Experience Rates

C. Manual Rates - Rates that are established by similarity of risks or manual rating or class rates

Which of the following is the basis for a claim against an insurance policy? A. Material Change B. Hazard C. Misrepresentation D. Loss

D. Loss - Claims Result from losses by a peril insured against in an insurance policy

The estimated amount that I need sure would have to pay on a claim is called the A. Loss cost rating B. Loss quotient C. Loss estimate D. Loss Reserve

D. Loss Reserve - The last reserve indicates an estimate of what would ultimately be paid on a claim.