Risk and Insurance Chap 13&14

If you were involved in a multicar accident where tort law applied, a lawsuit between the parties likely would result. The suit would be an attempt to place blame for the accident, thereby also placing financial responsibility for the losses incurred. Under the no-fault concept: A: each injured party would receive compensation from his or her own insurance company. B: the insurance company of the party at fault would have to compensate for all injured parties. C: each injured party would receive compensation from the insurance company of the party who cause the injury. D: the party who is driving under influence would have to bear all damages. E: each injured party would bear their injury costs, since the insurance company would not get involved to avoid legal battles.

A

Which of the following identifies you by name and address and shows the term of the policy, the premiums charged, the coverages provided, and the limits of liability of the coverages? A: Declarations B: Definitions C: Conditions D: Defenses E: Exclusions

A

Which of the following is covered by umbrella policies? A: Personal injury liability B: Obligations under workers' compensation C: Owned or rented aircraft without underlying coverage D: Property damage to any property in the care, custody, or control of the insured E: Any act committed by or at the direction of the insured with intent to cause personal injury or property damage

A

Which of the following is covered under 'Additional Coverages' of a homeowners policy? A: Loss caused to or by glass or safety glazing material B: Detached garage C: The neighbor's lawnmower that you have borrowed D: Attached garage E: Homes plagued with toxic mold which needs lengthy remediation

A

arrangement in which drivers who cannot buy auto liability insurance through the usual channels can apply to be assigned to an insurer who must sell them coverage that meets the requirements of the financial responsibility law.

Auto insurance plans

Flood insurance can be purchased through any licensed property or casualty insurance agent or from some direct writing insurers. Some insurers actually issue the flood insurance policies, in partnership with the federal government, as a service and convenience for their policyholders. In those instances, the insurer handles the premium billing and collection, policy issuance, and loss adjustment on behalf of the federal government. Identify these insurers. A: Stock insurers B: Write Your Own insurers C: Mutual insurers D: High network insurers E: Subrogate insurers

B

Homeowners policies exclude loss caused by flood due to the problem of adverse selection because: A: only large insurers would be able to insure flood risk, creating unfair competition. B: only those living in flood-prone areas would buy the coverage. C: it encourages nonfortuitous events. D: only stock insurers would insure flood risk. E: only mutual insurers would insure flood risk.

B

If a person who receives payment from the insurer has the right to recover damages from another, the insurer has the right to: A: gentrification. B: subrogation. C: redlining. D: demutualization. E: blockbusting.

B

In an automobile insurance policy, if you choose this limit of liability, a set of two limits will be specifically applied to bodily injury, and a single, aggregate limit will be applied to property damage. For the bodily injury limits, one limit applies per person, per accident, and a second limit is the total the insurer will pay for your liability to all persons injured in an accident. The limit for property damage is shown separately. Identify this limit of liability. A: Double limit of liability B: Split limit of liability C: Tort limit of liability D: Multiple limit of liability E: Single limit of liability

B

In states that have _____, every auto insurer is required to issue auto insurance to any licensed driver who applies and can pay the premium; in return, insurers can transfer the burden of bad risks to a pool to which all auto insurers belong. A: unsatisfied judgment plans B: reinsurance facility C: auto insurance plans D: joint underwriting association E: modified no-fault laws

B

Russell meets with an accident while driving under intoxication and injures Nolan. Nolan obtains a judgment against Russell but cannot collect because Russell has neither insurance nor resources. As a result, Nolan is compensated from unsatisfied judgment fund. Identify Russell's punishment. A: Russell has to spend 5 years in county prison. B: Russell's driving privileges is suspended until the fund is reimbursed. C: Russell has to work for the fund until the fund is reimbursed. D: Russell will not be able to find a white-collar job till the fund is reimbursed. E: Russell cannot receive auto insurance till the fund is reimbursed.

B

Under this category of no-fault laws, rights to litigate are limited but not eliminated; generally, suit can be brought against an automobile driver only when serious injury has resulted from the accident or special damages exceed a given dollar amount, called a threshold. For nonserious injuries and those resulting in losses below the threshold, only no-fault benefits are available. Serious injuries, or those resulting in losses in excess of the dollar-value threshold, permit the injured party to take legal action, including claims for general damages (such as pain and suffering). Identify this category of no-fault law. A: Add-on no-fault B: Modified no-fault C: Threshold no-fault D: Pure no-fault E: Tort no-fault

B

Which of the following is covered under 'Coverage A—Dwelling' of the homeowners policy? A: A friend's property that you have stored in your residence premises B: Attached garage C: The neighbor's lawnmower that you have borrowed D: Detached garage E: Homes plagued with toxic mold which needs lengthy remediation

B

A typical law requires evidence of this responsibility when a driver is involved in an accident or is convicted of a specified offense, such as driving while intoxicated. The simplest way to prove such responsibility is to have an auto liability insurance policy with specified limits that meet or exceed the minimum limits set by various state legislatures. Identify this responsibility. A: Add-on responsibility B: Tort responsibility C: Financial responsibility D: Modified no-fault responsibility E: Pure no-fault responsibility

C

Anything permanently attached to a building is considered to be part of the building. But the phrase "whether or not attached to buildings" makes carpeting, domestic appliances, awnings, outdoor antennas, and outdoor equipment _____ losses. Coverage A—Dwelling Coverage B—Other Structures Coverage C—Personal Property Coverage D—Loss of Use Coverage E—Additional Coverages

C

Identify the correct statement about 'Coverage D—Loss of Use' in a homeowners policy. A: It covers dwelling on the residence premises plus structures attached to the dwelling. B: It covers structures on the residence premises that are separated from the dwelling. C: It covers losses sustained if the premises cannot be lived in as a result of a direct loss to either the premises or neighboring premises. D: It covers personal property owned by others while it is "on the part of the residence premises occupied by an insured." E: It covers property of guests and residence employees while at any residence occupied by an insured.

C

In a homeowners policy, this coverage applies to personal property owned by others while it is "on the part of the residence premises occupied by an insured" and to property of guests and residence employees while at any residence occupied by an insured. Identify this coverage. A: Coverage A B: Coverage B C: Coverage C D: Coverage D E: Coverage E

C

In states that adopted modified no-fault laws, there are two types of modification. This modification has a financial limit under which no fault is assigned. When the claim is over this amount, the at-fault system kicks in. Identify this type of modified no-fault. A: Pure threshold B: Affirmative threshold C: Monetary threshold D: Add-on threshold E: Verbal threshold

C

In this process, the insured is required to transfer to the insurer any rights to recovery available from a third party. The transfer is made only to the extent of payment made by the insurer. Identify this process. A:Demutualization B: Gentrification C: Subrogation D: Redlining E: Blockbusting

C

Some special limits that apply to personal property may be too low. Your jewelry or may be worth far more than the $1,000 limit of a homeowners policy. Such property can be listed and specifically insured to provide adequate coverage against all risks by adding the: A: business pursuits endorsement. B: inflation guard endorsement. C: scheduled personal property endorsement. D: equipment breakdown endorsement E: personal property replacement cost endorsement.

C

Under these plans, drivers who cannot buy auto liability insurance through the usual channels can apply to be assigned to an insurer who must sell them coverage that meets the requirements of the financial responsibility law. Identify these plans. A: Add-on plans B: Affirmative plans C: Auto insurance plans D: Unsatisfied judgment plans E: Financial responsibility plans

C

Which of the following statements is true about exclusions in an automobile insurance policy? A: Unlike in the homeowner's policy, nonfortuitous harm is always included in auto insurance policies. B: Property damage to owned or used property is included in the PAP. C: Bodily injury to an employee of the covered person who is eligible for workers' compensation benefits is excluded. D: Auto Insurers excludes all business uses of motor vehicles. E: The auto insurer prefers to provide coverage to the mechanic while he or she is test-driving your car because the automobile business is expected to have its own automobile policy.

C

Law that requires automobile registrants to have specified liability insurance in effect at all times.

Compulsory auto liability insurance law

Dwelling on the residence premises plus structures attached, i.e. ATTACHED garages. also covered are materials and supplies on or adjacent to the home. Land NOT included

Coverage A

Other structures on the residence premises separated from the dwelling, such as detached garages.

Coverage B

Personal property and other personal property by others while it is on the part of the residence premises occupied by an insured

Coverage C

Loss of use. coverage that protects a policyholder from losses sustained if the premises cannot be lived in as a result of a direct loss to either the premises or neighboring premises. IT ONLY COVERS ADDITIONAL EXPENSES.

Coverage D

personal liability. Pays for damages for which the insured is legally liable and to "provide a defense at our expense by counsel of our choice, even if the suit is groundless, false, or fraudulent". Damages must be bodily injury or property damage, not nonphysical such as libel.

Coverage E

Medical payments to others

Coverage F

Part D of PAP. pays for direct or accidental loss to covered autos on open perils basis through collision and comprehensive options, subject to exclusions and other provisions.

Coverage for damage to your auto

According to this doctrine, when a loss is caused simultaneously by two or more perils, and at least one is not excluded, the loss is covered. Identify this doctrine. A: Doctrine of stare decisis B: Privity doctrine C: Doctrine of ratio decidendi D: Concurrent causation doctrine E: Doctrine of uberrimae fidei

D

Identify the homeowners Section II condition that clarifies that the maximum coverage available is the amount shown in the declarations. A: "Severability of insurance" B: "Suit against us" C: "Bankruptcy of an insured" D: "Limit of liability" E: "Duties after loss"

D

Interest in no-fault grew from the belief that: A: rights to litigate should be limited but not eliminated. B: there should be a monetary limit under which no-fault should be assigned. C: legal battles regarding compensation for accident injuries should be encouraged. D: the tort system is slow and erratic in its results. E: insurance companies should not get involved in legal battles between parties involved in accidents.

D

Some drivers cannot buy insurance through the usual channels because, as a group, their losses are excessive. This problem can be solved by charging higher premium rates for such drivers, as is the case of insurers providing coverage to this market, in which some companies offer limited auto coverage to high-risk drivers at high premium rates. Identify the market. A: Residual market B: Shared market C: Reinsurance market D: Substandard market E: Voluntary market

D

Which of the following occurs when a single auto policy covers two vehicles, and the court interprets this situation to yield a limit of liability equal to double the amount shown in the policy declarations? A: Indemnification B: Redlining C: Gentrifying D: Stacking E: Demutualization

D

Which of the following statements is true about homeowners policy? A: They differ from automobile policies because they combine several types of coverage into one policy. B: They do not provide health insurance for guests and residence employees. C: The persons insured are similar from coverage to coverage and place to place. D: They are a combination of property and liability insurance. E: They provide narrower coverage in comparison to policies bought individually.

D

identifies you by name and address, shows the term of the policy, premiums charged, coverages provided, and the limits of liability of the coverages

Declaration

Part E of PAP. must notify insurer immediately and meet other conditions

Duties after accident or loss

Assume that the law in your city provides that a building that does not comply with the building code is permitted to stand, but if it is damaged by fire or other peril to the extent of 50 percent of its value, it must be demolished. Now, your garage does not meet building code requirements and is damaged by fire to such an extent that it must be razed. Identify the situation that follows. A: The insurer will cover either the fire damage or the loss caused by the demolition of the garage, but not both. B: The insurer will cover both losses—the fire damage loss and the loss by demolition. C: The insurer will not cover any loss—the fire damage loss or the loss by demolition. D: The insurer will not cover the loss caused by the fire, but will cover the loss caused by demolition. E: The insurer will cover the loss caused by the fire, but will not cover the loss caused by demolition.

E

Identify the coverage that pays for bodily injuries caused by an accident with another vehicle whose driver is negligent and has no liability insurance or less than that required by law. A:Stacking coverage B: Supplementary motorist coverage C: Nonfortuitous coverage D: Underinsured motorist coverage E: Uninsured motorist coverage

E

Identify the endorsement that increases the amount of insurance automatically every year, or increases the amount of insurance to between 90 and 100 percent of replacement value and keeps the amount up to date every time the policyholder pays the premium. A: Property protector endorsement B: Equipment breakdown endorsement C: Bond endorsement D: Replacement cost guarantee endorsement E: Inflation guard endorsement

E

This part of the homeowners policy includes general, universal provisions, such as the title of the coverage, and acts to bind together the remaining policy parts. Identify it. A: Endorsements B: Estoppel C: Declarations page D: Policy form E: Homeowners policy jacket

E

'Coverage E—Personal Liability' covers nonphysical personal injury such libel.

False

A passenger in your car who is injured can recover under both liability and medical payments coverages for the same losses.

False

Bankruptcy or insolvency of a covered person shall relieve the insurer of any obligations under the policy.

False

Coverage applies for accidents arising out of ownership, maintenance, or use of a motor vehicle you own or have available for regular use even if it is not a declared auto in the declarations section of the policy.

False

Family health insurance company is broader than medical payments coverage of PAP.

False

Homeowners policies differ from automobile policies in that they combine several types of coverage into one policy.

False

In a homeowners policy, 'Coverage B—Other Structures' insures any structure used for business purposes or rented to any person not a tenant of the dwelling.

False

In add-on plans, auto plans do not limit rights to litigate and do not require that insurers offer first-party coverage similar to what is available in no-fault states.

False

Paying an extra premium amount to have the main policy's limit for a particular category of personal property increased leaves your coverage on an open perils basis rather than changing it to named-perils.

False

Personal liability coverage in a homeowners policy is on a named perils basis.

False

The basic amount for Section II (coverages E and F) is the same for all forms and cannot be increased with the payment of additional premium.

False

The insurer does not have the right to settle claims without the insured's approval even if it finds this expedient.

False

The substandard market is created by state law.

False

Under the no-fault concept, first-party benefits such as PIP are provided with regard to fault as a way to encourage legal battles.

False

law that acts to induce motorists to buy auto liability insurance so victims of their negligence will receive compensation.

Financial responsibility law

Part F of PAP. general conditions applying to entire contract.

General provisions

State plan in which all automobile insurers are members and the association is, in effect, an insurance industry company.

Joint underwriting association

Part A of PAP. Pays for bodily injury and property damage for which insured is responsible at single or split limits, provides legal defense, and makes supplementary payments.

Liability Coverage

Part B of PAP. pays necessary medical or funeral expenses because of bodily injuries to a covered person, subject to exclusion, limits of liability and other insurance.

Medical payments coverage

insurance plan in which rights to litigate are limited but not eliminated. generally, suit can be brought against an automobile driver only when serious injury has resulted from the accident or special damages exceed a given dollar amount.

Modified no fault

benefits are provided by insurers without regard to who caused the accident

No fault

another name for homeowners policies, so called because they combine different types of coverage that were previously provided by several policies and a number of endorsements.

Package policies

Liability coverage for false arrest, false detention, false imprisonment, malicious prosecution, libel, slander, defamation of character and the like

Personal Injury Endorsement

The automobile insurance contract purchased by most individuals

Personal automobile policy

Compensation paid to insureds for medical expenses, lost wages, replacement service costs, and funeral expenses incurred as a result of an automobile accident.

Personal injury protection and med pay

substance of the contract, spells out the specific coverage provisions. The insured can pick from several types that are available.

Policy form

includes general, universal provisions, such as the title of the coverage, and acts to bind together the remaining policy parts.

Policy jacket

Redlining

Practice of discrimination against inner-city residents by insurers

Coverage for the first payee in situation where two or more coverages apply.

Primary coverage

used to determine how much of a loss wil be compensated

Provisions of loss settlement clause

Theoretical insurance laws that would pay only specific damages (I.E. medical expenses and lost wages) but these would be unlimited. Abolishes opportunity to litigate

Pure no fault

state plan in which every auto insurer is required to issue auto insurance to any licensed driver who applies and can pay the premium; in return, insurers can transfer the burden of bad risks to a pool to which all auto insurers belong

Reinsurance facility

insurance market created by state law that exists to provide insurance to people who cannot buy it through the usual channels

Residual market

situation in which dollar limits are placed on some property for loss caused by any peril and on other property for loss caused by theft

Special limit of liability

Situation that arises when a single auto policy covers two vehicles, and the court interprets this situation to yield a limit of liability equal to double the amount shown in the policy declaration

Stacking

insurance market in which some companies offer limited auto coverage to high risk drivers at high premium rates

Substandard market

Business pursuits and professional services are excluded in umbrella policies unless there is underlying coverage.

True

Flood insurance under the regular program is available only to communities that have passed required ordinances and have undergone studies by the Army Corps of Engineers.

True

In a homeowners policy, the policy form is the substance of the contract, spelling out the specific coverage provisions.

True

Opponents of no-fault assert that many people who favor no-fault do so primarily because they expect it will be cheaper than the present system.

True

Proposition 103 requires insurers to set prices primarily based on driving record, years of driving experience, and annual miles driven.

True

The JUA differs from an auto insurance plan in that only designated servicing carriers can issue coverage to participants.

True

Umbrella policies pay only after the limits of underlying coverage, such as auto or homeowners policy, have been exhausted.

True

Unlike the open perils protection for the dwelling and other structures, personal property is covered against direct loss on a named perils basis.

True

When a negligent driver meets the legal insurance requirements but is legally responsible for additional amounts, the driver is not an uninsured motorist.

True

Part C of PAP. pays for bodily injuries caused by another vehicle whose driver has no or inadequate insurance or was a hit and run. subject to exclusions and other provisions

Uninsured motorist coverage

state organizations that provide compensation in situations when an injured motorist obtains a judgment against the party at fault but cannot collect because the party has neither insurance nor resources.

Unsatisfied judgment funds

auto isurance plans that offer compensation to an injured motorist through the individuals own insurre

add on plans

part of a policy that identifies the specifics that are unique to the insured, such as the covered location, and also lists policy limits, period of coverage, the name of the insurer, and similar information

declarations page

cash value basis

replacement cost minus depreciation