Personal Lines Insurance

In the Standard Fire Policy, the insurer must notify the insured that the settlement of a claim will be through the use of salvage value within what period of time?

60 days after the date of the receipt of the proof of loss

Normally the policy period in the Homeowner's policy is 1 year, however, the policy can be written for a policy period of how long?

7 years

One or more volcanic eruptions within what period of time are considered as one occurrence?

72 hours

Carrier

An insurance company that "carries" and/or issues the insurance

Boycott

An unfair trade practice that occurs when someone in the insurance business refuses to have business dealings with another until he or she complies with certain conditions or concessions.

A violation of a Cease and Desist order by the Commissioner under Article 39 carries a monetary penalty of what amount?

$10,000 per violation

What is the minimum amount per occurrence of Coverage E?

$100,000

The Personal Liability endorsement added to a Dwelling Form will provide what minimum amount of coverage for liability risks associated with the insured's property?

$100,000 is the minimum amount with larger amounts available

Non-admitted insurance company

An insurance company is not licensed to do business in a given state

Insurance Commissioner

The common title for the head of a State Department of Insurance

Liability

The legal obligation to perform or not perform specified acts

In the Supplementary Payments section of the Personal Auto Policy, coverage is provided for Bail Bonds. What is the standard amount of coverage?

$250 This amount is provided for an insured if arrested due to a motor vehicle related event.

What is the amount of coverage provided under a flood policy for a residential single family dwelling in the Regular Program (of the NFIP)?

$250,000 The Regular program (of the NFIP) expands the coverage from the Emergency Program that only provides $35,000

J has a house with a $300,000 replacement value. The Homeowner's policy requires the standard 80% coinsurance requirement. What is the amount that he must carry to receive full replacement if his home were totally destroyed?

$300,000 In order to fully replace the dwelling, it must be fully insured. Coinsurance only has to do with partial losses.

How much will the Homeowner's Policy pay for losses to grave markers and mausoleums, on or off the residence premises?

$5,000

The Dwelling Forms provide coverage for fire department service charges up to what amount?

$500

A licensee must change their address within how many days from the move or else face a fee of how much from the NCDOI?

10 days, $50

If a licensee is appointed to an authorized insurer operating in North Carolina, the insurer has how long to notify the NCDOI of the appointment and pay the appropriate fee?

15 days

The Standard Fire Policy, as originally written, had how many lines?

165

The North Carolina Rate Bureau (NCRB) is required to file proposed policy rates with the Commissioner. What period of time must elapse after filing before the rates may be used?

210 days

The Preferred Risk Policy in the National Flood Insurance Program is for moderate to low risk properties. These properties account for how much of the claims filed with the National Flood Insurance Program?

25% Every one in four claims are from moderate to low risk properties.

A surcharge may be applied to a driver with less than how much driving experience?

3 years

An insured may bring a lawsuit against his or her insurer within what period of time from the date of the insured loss?

3 years

If a North Carolina licensee has any administrative action taken by the state insurance regulatory authority (NCDOI) against him or her in another state while acting as a non resident licensee, the licensee is required to report to the North Carolina Commissioner what action was taken within what period of time?

30 days

If an insurer terminates the appointment of an agent, the insurer has how long to notify the NCDOI of the cancellation of the appointment and pay the cancellation fee?

30 days

North Carolina resident insurance agents that change their state of residence are required to return his or her North Carolina resident agent's license within how many days to the North Carolina Commissioner?

30 days

The North Carolina Post Assessment Guaranty Association will pay claims from losses that occur within what period of time after the determination that an insurer is insolvent?

30 days

A Class I Misdemeanor can have a monetary penalty and imprisonment for a period of time no less than _______ and no more than _______.

30 days, one year.

Other than Collision on the Personal Auto Policy will pay transportation or loss of use expenses related to a theft of a covered auto beginning how long after the theft?

48 hours

On the DP-2 and DP-3 Forms, coverage for lawns, plants, and trees is what percent of Coverage A?

5%

The Commissioner may give notice to the North Carolina Rate Bureau within how many days of the filing of automobile insurance rates if the Commissioner deems the rates are not within the regulations of the State?

50 days

The North Carolina Commissioner may deny a request for a rate increase within how many days after the rate filing?

50 days unless the filing is for Workers Compensation, then 60 days is allowed.

North Carolina regulations would require an insurance company to refund the overpaid premiums on a property policy plus how much interest?

6%

If an insurer wishes to terminate an entire line of business, the insurer must notify the North Carolina Commissioner at least how many days in advance of the termination?

60 days

The Commissioner may give notice to the NCRB within how many days of the filing of Workers Compensation insurance rates if the Commissioner deems the rates are not within the regulations of the state?

60 days

Fiduciary

A person who occupies a position of special trust and confidence in handling or supervising the affairs or funds of another.

Clause

A term used to identify a particular part of a policy or policy endorsement

The DP-1 is referred to as what?

Basic Form

Domestic Insurance Company

An insurance company formed under the laws of the state where the insurance is written

Foreign insurer

An insurer formed under the laws of another state

Retention of Risk

Assuming all or part of a risk instead of purchasing insurance of otherwise transferring the risk

Insurers are required to obtain insured's driving records how often to determine a driver's status under the Safe Driver Incentive Plan?

At least annually

The "Notice of Information Practices" under Article 39 must be provided to an applicant for insurance at what point?

At the time of the application.

The DP-2 is referred to as what?

Broad Form

Exclusions

Causes, conditions, or property listed in the policy which are not covered and for which no benefits are payable. Common exclusions include war, floods, earthquakes, and nuclear hazards.

When business is written through the "facility" it is referred to as having been ________.

Ceded

Temporary license

Commonly granted to allow someone to continue the business of an agent who has died, become disabled, or has entered active military service.

Licensees are required to complete 24 hours of continuing education credits by the end of his or her compliance period. Failure to do so may be result in cancellation of the license. The licensee can reinstate his or her license by doing what?

Completing the required continuing education within 120 days of the end of the compliance period and paying a $75 reinstatement fee.

The HO-4 is referred to as what?

Contents Form

Which geographic area is excluded from coverage by the Personal Auto Policy?

Coverage under the PAP ends when crossing into Mexico.

When an insured covered by a Personal Auto Policy is driving a non owned automobile on which there is other valid auto insurance, the coverage carried by the insured driving the non-owned vehicle is considered what type of insurance?

Excess The insurance written on the auto is the primary coverage that will pay first. If the losses exceed the liability limits of the policy, the Personal Auto Policy of the driver may pay. This is NOT a case of pro rata liability.

T has inherited an old Victorian house that he has converted into apartments. To be eligible for a dwelling policy, the house cannot have more than how many apartments?

Four apartments is the maximum allowed along with no more than 4 families or 5 roomers or boarders. If the property exceeded these limits, a commercial policy would be the appropriate policy

Monoline policy

Insurance that provides protection on a single line

J is considering purchasing a small sailboat. He remembers that he read something in his Homeowner's policy about the coverage for sail boats. The coverage is limited to sail boats not exceeding what length?

If the sailboat is owned by the insured, the limit is 26 feet. If the sailing vessel exceeds this limit, the proper insurance to purchase would be Yacht policy.

Express authority

The authority of an agent that is specifically granted by the insurer in the agency contract or agreement

Twisting

Inducing a policyholder by misrepresentation to terminate an existing policy and take a new policy.

All Risk

Insurance against loss or damage to property arising from any fortuitous cause except those specifically excluded. This may also be referred to as "special."

Non-participating

Insurance that does not pay policy dividends

J borrows M's auto for the day. Both J and M have identical coverage limits on their respective auto insurance policies. If J is involved in an at fault accident while driving M's auto, whose insurance is primary?

M's insurance is primary.

The DP-3 is referred to as what?

Special Form

If an insured purchases a new auto that is not replacing an existing auto, what must the insured do to acquire coverage for the new auto?

Notify the insurance company within 30 days of the purchase.

"An act from which an injury results as a natural, direct, uninterrupted consequence and without which injury would not have occurred" is the definition for what?

Proximate cause is the term used to indicate that damage has occurred from a peril to property that was not initially the direct cause of the loss.

If an insurance agent knows that another insurance agent is guilty of embezzlement of insurance related funds and does not report the crime, he or she may be subject to what punishment?

Revocation or suspension of license

Avoidance of Risk

Taking steps to remove a hazard, engage in an alternative activity, or otherwise end a specific exposure.

Binder

Temporary evidence of insurance issued by Property or Casualty agents in lieu of the actual policy until the physical policy is issued. The maximum period that a binder is in effect is 60 days.

Unearned premium

That portion of an advance premium that has not yet been used for coverage

How long does an auto need to be leased for in order to be acceptable under the Personal Auto Policy?

The auto must be leased for at least a 6 month continuous period if the auto is to be insured under a personal auto policy.

When property coverage is purchased using the DP-1, the amount of coverage provided automatically for Coverage B Other Structures is what percentage of the limit for Coverage A?

The DP-1 will provide 10% of Coverage A for losses covered under Coverage B, but not as an additional amount.

Who is responsible for administering the "North Carolina Beach Plan"?

The North Carolina Insurance Underwriting Association

If the Personal Auto Policy insurance company requests the attendance of an insured at a hearing or trial, the insured may be reimbursed up to what amount per day from the Supplementary Payments?

The Personal Auto Policy will pay up to $200 a day for loss of earnings by the insured because of attendance at hearings or trials and for other reasonable expenses.

W is vacationing at the lake and decides to rent a motor boat. The boat he is interest in renting has an inboard motor. W remembers that his Homeowner's policy will cover his liability for operating the boat as long as the boat's horsepower does not exceed what horsepower?

The answer is 50 horsepower. If he wanted to rent an outboard motor, the limit would be 25 horsepower.

Renewal

The continuation in full force and effect of something that is about to expire. With an insurance policy, it is made either by the issuance of a new policy or renewal receipt or certificate. It takes effect upon the expiration of the old policy.

How much is the minimum standard deductible under the Regular Program (of the NFIP) for the dwelling?

The deductible is $500 for the dwelling and $500 for contents. Each deductible can be higher as chosen by the insured.

In uninsured motorists coverage in the Personal Auto Policy, the first how much of property loss is not covered?

The first $100 is not covered.

Face

The first page of a policy

How much will the Homeowner's policy pay for insured's liability assumed by contract or agreement for fire department charges incurred when the fire department is called to save or protect covered property from a Peril Insured Against in the policy?

The policy will pay up to $500. However, the insurer does not cover fire department service charges if the property is located within the limits of the city, municipality, or protection district furnishing the fire department response.

With regards to the Medical Payments section of the Personal Auto Policy, the insurer agrees to pay reasonable expenses for necessary medical and funeral services incurred within how long from the date of the accident without regard for fault?

Three years

The HO-6 is referred to as what?

Unit Owner's Form

Short rate

When a policy owner cancels a policy during the policy period. The insurance company must return any unearned premiums to the policy owner; however, the insurance company is allowed to deduct administrative costs from the premium refund.

Pro rata

When an insurance company cancels a policy during the policy period. The insurer is required to refund 100% of any unearned premiums to the policy owner.

Nonrenewal

When insurers reserve the right to cancel a policy at the time of policy renewal. Specific state regulations provide guidelines for both consumers and insurers under what circumstances a policy may be non-renewed by the insurance company.

Personal Injury (PI)

Wrongful conduct by an insured that results in one of the following: false arrests, invasion of privacy, libel, slander, or defamation of character. Some liability contracts cover personal injury; others do not.

Under the Homeowner's Policy forms, which of the following individuals is included as an insured? a. Spouse of the named insured who lives in an apartment several blocks away b. A 19 year old exchange student who resides temporarily with the insured c. Child of the insured who lives in an apartment on the other side of town d. 35 year old invalid who is cared for by the named insured

b. A 19 year old exchange student who resides temporarily with the insured To be an insured, the person must live in the insured dwelling or premises. The exception would be a student at school and temporarily away from the parent's home. The individual must also be a relative or an individual under the age of 21 in the "care, custody, and control" of the insured.

The National Flood Insurance Program (NFIP) provides contents coverage on _______ basis? a. Replacement Cost b. Actual Cash Value c. Salvage Value d. Estimated value

b. Actual Cash Value

Which of the following is not covered by a Mobile Homeowner's policy? a. Fire b. Scorching c. Flood d. Falling Objects

b. Scorching Scorching is a specific exclusion in the Mobile Homeowner's policy.

Which of the following would be covered by the original Standard Fire Policy? a. The roof of a dwelling damaged by wind b. Sofa and chair removed from the dwelling due to a fire in the dwelling c. Clothing damaged by water from a leak in the roof of the dwelling. d. Property damaged by an explosion of a boiler used to create steam heat for the dwelling

b. Sofa and chair removed from the dwelling due to a fire in the dwelling This question references the SFP as originally written and A, C, and D are not covered under the original perils.

Shortly after the inception date of a Homeowner's policy, the insured builds an addition to her residence premises (dwelling). Which of the following statements is correct about an addition to the residence premises? a. the materials used are covered but not the addition b. The addition is covered as part of the described premises c. The policy continues in force but covers only the original part of the premises d. There is no coverage for remodeling under a Homeowner's policy until the insurer is notified

b. The addition is covered as part of the described premises The addition will become part of the structure so it will be covered. The insured should contact his or her insurance company to increase the amount of coverage or risk having less than the amount necessary to fully replace the dwelling. Failure to increase the coverage could result in the coverage limits falling below the required 80% coinsurance. Increases in coverage are not automatic.

The Medical Payments section provides a minimum of ________ in coverage on the Personal Auto Policy? a. $5,000 b. $2,500 c. $1,000 d. $500

c. $1,000 Higher limits are available

Disclosure Authorization Forms under Article 39 are good for a period of ____ if the application for insurance pertains to property insurance or casualty insurance. a. 2 years b. 30 months c. 1 year d. 5 years

c. 1 year Insurance companies can only utilize the authorization form to gather information for the period of 1 year for property or casualty applications. After that, a new signed authorization must be obtained.

Medical Payments endorsed on to the Dwelling policy forms are designed to provide First Aid for persons injured on an insured's property on what basis? a. Coverage for both the injured insured and the injured non insured if caused by the same occurrence b. Coverage for the insured's medical expenses at a no fault basis c. Coverage for the non insured person on a no fault basis d. Medical payments is not available on Dwelling Policies

c. Coverage for the non insured person on a no fault basis Medical payments may be endorsed onto all Dwelling Forms. Medical payments is a form of liability coverage designed to pay for bodily injury to persons other than insured's that suffer bodily injuries due to some activity of the insured.

Homeowner's policies contain special limits on each of the following items of property EXCEPT: a. Theft of money and securities b. Theft of jewelry, watches, and furs c. Fire damage to guns and firearms d. Theft of silverware or goldware

c. Fire damage to guns and firearms Theft of guns and firearms is limited unless endorsed for more coverage. Fire losses are only restricted to the total of Coverage C. It is wise, if the collection is extensive or valuable, to schedule (endorse) the firearms collection.

Which of the following is not available for Motorcycle insurance? a. Physical Damage b. Liability c. Medical payments d. Underinsured Motorists

c. Medical payments

Coverage C-Personal Property in the Dwelling Forms can cover the property of all of the following EXCEPT: a. Insureds b. Guests of the insured c. Tenants of the dwelling d. Domestics employed by the insured

c. Tenants of the dwelling

Which of the following statements is NOT true concerning occupancy in the Dwelling Forms? a. The Dwelling policy will allow up to four families in a single dwelling b. The dwelling policy will allow four apartments in a single dwelling c. The dwelling policy will allow one farm operation d. The Dwelling policy will allow up to five roamers or boarders in a single dwelling

c. The dwelling policy will allow one farm operation Farms are not covered in the Dwelling Forms

In the HO-6, Coverage D-Loss of Use is what percentage of Coverage C? a. 10% b. 20% c. 30% d. 40%

d. 40%

Under the Standard Fire Policy, which of the following occurrences would be covered? a. Payment for an injured neighbor on the insured property b. Lost currency due to fire c. A dwelling destroyed by high winds d. A fire in a house that has been vacant for 30 days

d. A fire in a house that has been vacant for 30 days The building has to be vacant for 60 consecutive days before a loss will not be covered by the Standard Fire Policy.

In North Carolina, an uninsured motor vehicle does not include any of the following EXCEPT: a. A vehicle owned by the insured b. A vehicle owned or operated by a self-insurer under any applicable motor vehicle law except a self-insurer which is or becomes insolvent. c. A vehicle owned by the United States of America d. A vehicle operated by a foreign national

d. A vehicle operated by a foreign national The nationality of the driver is of no consequence.

All of the following would NOT be covered by a Homeowner's policy EXCEPT: a. A cracked foundation due to earth movement b. Damage from a flood c. Losses due to the insured's intentional actions d. Accidental discharge of water from a plumbing system

d. Accidental discharge of water from a plumbing system Accidental discharge or overflow of water or steam from plumbing, heating, air conditioning, or a sprinkler system is covered.

All of the following would be insured under Coverage B- Other/Appurtenant Structures EXCEPT: a. a gazebo b. a swimming pool c. a tree house d. a building used for business purposes

d. a building used for business purposes Coverage B-Other/Appurtenant Structures will not cover business pursuits.

Underwriter

(1) A person trained in evaluating risks and determining the rates and coverage that will be used for them. (2) An agent, especially, a Life Insurance Agent who might qualify as a "field underwriter"

Fair Credit Reporting Act

(Public Law 91-508) requires that an applicant be advised that a consumer report may be requested. If the request for insurance is declined because of the information contained in that report, the name and address of the reporting agency must be disclosed.

Premium Notice

A notice from the insurance company to the policyholder that a premium is (or will be) due on a given date.

Quota Share Reinsurance

An automatic reinsurance agreement that allows the original insurer to transfer a given percentage of every risk to a reinsurer within a defined category of business written by the original insurer.

Occurrence

An event that results in bodily injury and/or property damage. Most Property and Casualty (liability) contracts pay claims on each occurrence. For example, if an individual is involved in an at fault accident in the morning and in the afternoon is involved in another at fault accident, each accident would be an occurrence.

Stock insurance company

An incorporated insurance company with capital divided into shares and owned by the shareholders and is sometimes referred to as Capital Stock Company.

Consideration

The exchange of value on which a contract is based. In Property and Liability Insurance, the Consideration is usually the premium and the statements in the application

First Named Insured

The person, business, or organization specified first on the Declarations page in a Property and Liability Policy. Billing is important in the Property and Liability contract because the premium payments and renewals are sent to the last known address of the insured, to the primary insured, or to the address of the primary insured on the policy. In a Property contract such as a Homeowners Policy, this designation of "first named insured" becomes important because the person listed in this slot is the person whose spouse and relatives may also be covered under the policy. These may be relatives through blood or marriage.

Cancellation

The termination of a contract of insurance in force by a voluntary act of the insurance company or insured.

Commissioner

The title of the head of the Department of Insurance in most states

Agency

When one person acts on behalf of another person; an agency is created with the first person, being the agent, and the second person, being the principal. The principal generally can be held responsible for acts of its agents.

Vacancy

Where no people or contents occupy a premise. Most property contracts have restrictions on coverage for property that is vacant for a specified period of time.

The additional coverage that may be included under a Dwelling Form but is not automatically included is: a. Personal Liability b. Other Structures c. Fair Rental Value d. Loss of Use

a. Personal Liability Dwelling forms must be endorsed to have coverage for liability risks.

Insurable interest must exist when in the property insurance policy before a claim can be paid? a. At the time of application for the policy b. When the claims adjuster completes his or her report c. At the time of the loss d. Insurable interest is not part of the claims settlement process

c. At the time of the loss In property insurance, a person cannot file a claim for property that he or she does not have a financial interest.

The first number in a split limits policy indicates which of the following? a. The total amount that will be paid for the total of any one claim b. The total amount paid in the aggregate for the policy c. The amount paid for any one single bodily injury d. The amount paid for personal property losses

c. The amount paid for any one single bodily injury

Risk

(1) a chance of loss or (2) a person or thing insured. (Impaired or substandard risk is an applicant whose physical condition or moral habits do not meet the standard on which the rate is based).

Last Clear Chance

A "Common law" rule relating to negligence that imposes liability on an individual who has one last opportunity to avoid an accident but did not take it.

Package Policy

A combination of several basic Property and Liability Policies combined to form a single policy. An example is a Homeowners Policy that consists of both property coverages and liability/medical payments.

Over-insurance

A condition in which (1) more insurance is in force on the insured or the risk than the potential loss or (2) so much is in force as to constitute a morel or morale hazard (such as so much disability insurance in force that it becomes profitable to become disabled)

Cancelable

A contract of insurance that may be terminated by the insurance company or insured at any time. Most states require notification of cancellation within a specified number of days based on the reason for cancelation. For example, in North Carolina, a Personal Auto Policy cancelled for non-payment of premiums requires a written notice be mailed 15 days before the termination date.

Un-occupancy

A dwelling or other structure that is not occupied by people but is furnished with property. Most property contracts have restrictions on coverage for property that is unoccupied for a specified period of time.

Endorsement

A form attached to the policy bearing the language necessary to change the terms of the policy to fit special circumstances. Most endorsements are used to increase or alter the benefits.

Proof of loss

A formal statement made by the insured to the insurance company regarding a loss. The purpose of the proof of loss is to place before the company sufficient information concerning the loss to enable it to determine its liability under the policy or bond

Broker

A licensed insurance agent who represents an applicant or insured in the solicitation, negotiation, or procurement of contracts of insurance. An insurance broker is not appointed to an insurance company as an agent. Insurance brokers are independent of a company affiliation

Additional insured

A person, firm, or corporation other than the named insured on a policy and is protected against loss by the terms of the policy. This is often found in commercial tenant's coverage to indemnify the owner of the building under lease.

Limited Policy

A policy that pays only for specified contingencies (in contrast to one paying for all contingencies other than those excluded).

Investigative consumer report

A report ordered on an insured or applicant under which information about the person's character, reputation, or lifestyle is obtained through personal interviews with the person's neighbors, friends, associates, or acquaintances. This is in contrast with Consumer Report.

Consumer report

A report ordered on an insured or applicant under which information about the person's credit, character, reputation, personal characteristics or lifestyle is obtained primarily through institutional sources. This is in contrast with Investigative Consumer Report.

Coinsurance

A requirement typically found in Commercial Property insurance and may be required in Homeowners contracts. The intent is to require a minimum amount of insurance coverage in case of a partial loss to the insured property. The coinsurance amount is generally 80% but could be different.

Warranty

A statement made on an application for insurance that is warranted to be true in all respects. If untrue in any respect, even though the person giving the warranty may not have known the untruth, the contract may be voided whether or not the untruth is material to the risk.

Mutual Insurance Company

An incorporated insurance company without incorporated capital whose governing body is elected by the policyholders. The policyholders are the shareholders, and they share in the success and sometimes the failure of the company.

Agent

An individual appointed by an insurance company to solicit, negotiate, or countersign insurance contracts on its behalf.

Adjuster

An individual representing the insurance company and acting for the company in working on agreements and also determines the amount of a loss and the liability of the company in the claim

Admitted Company

An insurance company authorized and licensed to do business in a given state and has been issued a "certificate of authority"

Alien insurance company

An insurance company formed under laws of a country other than the United States

Fraternal

An insurance company organized under the state insurance code characterized by a lodge or social system and issues insurance only to its members

Named Peril Policy

An insurance contract that covers perils listed on the Declarations Page

Cease and Desist Order

An order of the State Insurance Commissioner or of a court requiring that a company or person stop engaging in a particular act or practice usually involving insurance trade practices.

Accident

An unforeseen, unknown, unintended event. All insurance contracts are based on the principle that any losses covered under the policy will be by accidental means.

Adverse underwriting decision

Any decision involving individually underwriting insurance coverage resulting in termination of existing insurance, declination of an application, or writing the coverage at higher rates.

Liability insurance

Coverage for all sums for which the insured becomes legally liable due to bodily injury, property damage, or other actions such as personal injury. Coverage is up to policy limits. Personal policies that cover such exposures include Auto, Homeowners, and Umbrella contracts. Commercial policies include Commercial General Liability and Professional Liability such as Errors and Omission insurance carried by insurance agents.

Multiple Line Insurance (multi-line)

Coverage on a combination of risks such as property and liability exposures.

Surplus line

Coverage procured in an unlicensed insurance company because of its unavailability in the licensed market.

In Force

Insurance on which the premiums are being paid or have been fully paid

Reciprocal Insurance

Insurance resulting from an interchange among persons known as subscribers of the reciprocal agreements of indemnity. The exchange is made through an attorney-in-fact common to all such persons. The group of such subscribers is a reciprocal insurance company.

J is in an at-fault auto accident. The injured party decides to sue J for damages. The case goes to court and the insurance company pays the damages ordered by the court and pays the lawyer representing J and the company. The lawyer costs are paid by what provision in the policy?

Payments for legal defense are additional payments made by the insurance company because the insurance company is the only party to the insurance contract that can decide to defend a claim in court. This additional policy benefit is known as Supplementary Payments.

Adverse selection

Selection against the insurance company or the tendency of more poor risks to buy and maintain insurance than good risks.

Transfer of risk

Shifting all or part of a risk to another party. Insurance is the most common method of risk transfer, but other devices such as "hold harmless" agreements also transfer risk.

Insurability

The acceptability of an applicant for insurance as far as the insurance company underwriting requirements are concerned

Stated amount

The amount agreed by the insurance company to pay if a specified loss occurs during the policy period.

Coinsurance formula

The amount carried divided by the amount required=%x loss= the amount paid on the claim minus any deductible. For example, if J has a building valued at $100,000, to meet the coinsurance requirement of 80%, J must carry at least $80,000 in coverage.

Apparent authority

The authority of an agent that is created when the agent oversteps actual authority and when inaction by the insurer does nothing to counter the public impression that such authority exists.

Hazard

The circumstances that will increase the likelihood or probability of a loss.

Insuring Clause

The clause in a policy that specifies, in brief, the contract's intent

Effective date

The date on which an insurance policy goes into effect and from which protection is furnished. Many policies are effective for either six months or one year.

Expiration Date

The date upon which a policy will cease to cover unless previously canceled

Claim

The demand for payment of benefits as provided by the policy

Insurable interest

The financial investment or financial dependency that an individual or business has in a person or property. From a Property and Casualty (liability) viewpoint, insurable interest is when an individual, business, or creditor has financial interest in a property or liability exposure because of the ownership or use of the property. In a property and casualty (liability) contract, insurable interest must exist at both the inception of the insurance policy and at the time of a loss.

Embezzlement

The fraudulent use of money or property that has been entrusted to one's care. In North Carolina, this is a Class H felony.

Malicious Mischief

The intentional damage or destruction of another person's property or business property.

Risk management

The management of the pure risks to which a company might be subject. It involves analyzing all exposures to the possibility of loss and determining how to handle these exposures through such practices as avoiding the risk or retaining the risk.

Physical hazard

The material, structural, or operational features of the risk itself apart from the morale or moral hazards of the persons owning or managing it.

Agent's appointment

The official authorization from an insurance company granting a licensed individual the authority to act as its agent. In North Carolina, insurers must notify the NCDOI of appointments and pay the appointment fee within 15 days of the appointment.

Policy Owner

The person named in the policy who exercises the rights and privileges in the policy contract. Such person may or may not be the insured depending on policy ownership and assignment if any.

Underwriting

The process of evaluating a risk for the purpose of issuing insurance coverage on it.

Assignment

The transfer of rights in a policy to someone other than the policyholder (absolute or collateral). Property and liability contracts do not allow assignment without the authorization from the insurer.

Accidental means

The unexpected or unintended cause of an accidental bodily injury. Insurers cannot create a different definition than the dictionary definition of an accident. In other words, no "means" test can be applied.

Misrepresentation

The use of written or oral statements of the insured or insurance company misrepresenting the risk, terms, coverage, benefits, privileges, or estimated future dividends of any policy.

Concealment

The withholding of facts by an applicant for insurance that affects an insurance risk or loss. Concealment is a form of attempting to practice adverse selection.

If the insured has not paid the required premium, the insurer may cancel the policy at any time by letting the insured know in writing at least ________ before the date the cancellation takes effect. a. 10 days b. 15 days c. 20 days d. 30 days

a. 10 days The cancellation must be in writing and mailed to the last known address of the insured.

All of the following are true concerning an insurance agent's authority EXCEPT: a. Express authority is derived from the written agency agreement with the company. b. Assumed authority occurs when an agent personally assumes authority to make a contract on behalf of the principal c. Apparent authority occurs when an agent exceeds express authority but the person dealing with the agent has a justifiable belief that the agent has the authority d. Implied authority occurs when an agent exceeds their express authority, but the company ratifies the act by acting as though the act was within the agents express authority.

b. Assumed authority occurs when an agent personally assumes authority to make a contract on behalf of the principal There is no such legal authority referred to as "assumed" in the agency relationship between the agent and insurance company.

D has a property contract that agrees to pay her the full value of damaged personal property at the current cost without depreciation. This type of property valuation is known as: a. Actual Cash Replacement b. Replacement Cost c. Actual Cash Value d. Cost differential

b. Replacement Cost Replacement cost will pay the full current cost to replace the item with the same or property of an equal value or function.

All of the following watercraft is excluded from coverage in the Dwelling Forms EXCEPT: a. Watercraft powered by a gasoline engine of no more than 25 horsepower b. Watercraft powered by wind c. Watercraft powered by manual paddles d. Watercraft powered by steam

c. Watercraft powered by manual paddles Only canoes and rowboats are covered in Dwelling Forms.