Property and Casualty Insurance Basics

Which of the following would modify the original insurance contract by either adding or removing coverage? A Endorsements B Additional coverage form C Conditions D Flexible policy

A Endorsements

Which part of an insurance policy covers claims-related expenses, reasonable expenses incurred by an insured to protect damaged property from further loss, or defense expenses? A Additional coverage B Exclusions C Declarations D Insuring agreement

A Additional coverage

If an insurance company makes a statement that its policies are guaranteed by the existence of the Insurance Guaranty Association, that would be considered A An unfair trade practice. B A misrepresentation. C A required disclosure. D A legal representation of the Association.

A An unfair trade practice

In property and casualty insurance, what is the term for the amount of a loss that the insured must cover out of pocket, and the insurer will only pay for the additional amount of the loss above this limit? A Premium B Deductible C Self-insured retention D Coinsurance

B Deductible

With regard to fire insurance premiums, structures with which of the following type of construction would most likely have the most favorable premium rate for the peril of fire? A Noncombustible B Fire-resistive C Frame D Masonry

B Fire-resistive

Which of the following may NOT be included in an insurance company's advertisement? A An identification of a limited policy as a limited policy B That its policies are covered by a state Guaranty Association C The policies' limitations or exclusions D The name of a specific agent

B That its policies are covered by a state Guaranty Association

The section of an insurance policy that details what perils are not insured against and what persons are not insured is known as the A Exclusions. B Declarations. C Endorsements. D Conditions.

A Exclusions.

For the purpose of insurance, an owner-occupied residential dwelling is A A one or two family unit that is occupied solely by tenants. B A single family dwelling only. C A structure of not more than four units, one of which is occupied by the owner. D Any structure that includes at least one family unit.

C A structure of not more than four units, one of which is occupied by the owner.

All of the following are found in the declarations section of a policy EXCEPT the A Exclusions. B Policy premiums. C Name of the insured. D Limits of insurance.

A Exclusions.

Compared with other drivers in his age group, a driver has had more minor accidents and traffic violations. Which of the following rating types would most accurately reflect the driver's true insurance risk? A Experience B Class C Special D Schedule

A Experience

The policy conditions define A How parties to the contract must act following a loss. B The basic underwriting information. C The excluded perils. D The amount of coverage.

A How parties to the contract must act following a loss.

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

A Subrogation.

When a parent is required to pay for damages caused by his or her children, this is an example of A Vicarious liability. B Strict liability. C Intervening cause. D Assumption of risk.

A Vicarious liability.

The part of a policy that clarifies terms in the policy is the A Exclusions. B Definitions. C Insuring agreement. D Conditions.

B Definitions.

Persons covered under an insurance policy, whether named or not, are known as the A Additional insureds. B Insureds. C Named insureds. D First named insureds.

B Insureds.

All of the following are conditions commonly found in the insurance policy EXCEPT A Appraisal. B Insuring agreement. C Cancellation and nonrenewal. D Subrogation.

B Insuring agreement.

When an insurer cancels, midterm, a commercial property or casualty insurance policy for an allowable reason, they must A Send or deliver a "Notice of Nonrenewal" 30 days prior to the effective date of cancellation. B Send or deliver a "Notice of Cancellation" at least 60 days prior to the effective date of cancellation and state the reason for the cancellation. C Refund unearned premiums prior to the effective date of cancellation. D None of the above

B Send or deliver a "Notice of Cancellation" at least 60 days prior to the effective date of cancellation and state the reason for the cancellation

What is a binder? A A condition that allows the insurer to audit the insured's books or records at the end of the policy term to make sure adequate premium has been collected for the exposure B Written evidence showing the amounts and types of insurance provided by an insurance policy or policies that have been issued C A temporary contract of insurance issued by the insurer that places insurance in effect prior to the policy being issued D A contract for lease of premises

C A temporary contract of insurance issued by the insurer that places insurance in effect prior to the policy being issue

The part of a property policy that shows the amount of insurance, premium, and policy term is the A Conditions. B Endorsements. C Declarations. D Insuring clause.

C Declarations.

A deliberate act that causes harm to another person, regardless of whether the harm is intended is called a(n) A Tortfeasor. B Vicarious tort. C Intentional tort. D Absolute liability.

C Intentional tort.

What insurance policy provision defines how the policy will respond if there is more than one insurance policy written on the same risk? A Nonconcurrency B Primary and excess C Other insurance D Valid insurance

C Other insurance

Which of these is defined as the maximum limit of coverage available under a liability policy during a policy year, regardless of the number of claims that may be made or the number of accidents that may occur? A Per person limit B Per occurrence limit C Split limit D Aggregate limit

D Aggregate limit

Which of the following policies must contain, at a minimum, policy language equal to the Standard Fire Policy? A Homeowners policy B Dwelling policy C Commercial property policy D All of the above

D All of the above

Which of the following describes the transfer of a legal right or interest in an insurance policy? A Abandonment B Obligation C Legal purpose D Assignment

D Assignment

Which rating method provides an insurer with that portion of a rate that does not include provisions of expenses (other than adjusting expense) or profit and is based on historical aggregate loss and loss adjustment expenses projected through development to their ultimate value and through trending to a future point in time? A Provision rating B Profit rating C Components rating D Loss costs rating

D Loss costs rating

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 legal process that gives the insurer, after payment of a loss, the right to seek recovery from a third party that was responsible for the loss is known as A Adverse selection. B Right of rescission. C Principle of indemnity. D Subrogation.

D Subrogation.

A mortgage company is named as a loss payee on the insured's homeowners policy, under the standard mortgage clause. If the insured suffers a loss due to a fire, which of the following is true? A The mortgagee should submit a claim to its insurer, and the insured should submit a claim to the HO policy. B The entire loss is payable to the mortgagee. C The entire loss is payable to the insured. D The loss is payable to the insured and the mortgagee.

D The loss is payable to the insured and the mortgagee.

An insured relocated to another state for work. However, she still owns and insures a house in this state, but has had no one living in it for 3 months. She is also storing some furniture and clothes in the house. From an insurance standpoint, the insured's house is considered A Condemned. B Under repair. C Vacant. D Unoccupied.

D Unoccupied.