Basics of Property and Casualty Insurance Questions (Unit 3)
The federal government is not obligated under the TRIA to make payments for any portion of losses that exceed how much annually? - $5 million - $100 billion - $1 billion - $100 million
$100 Billion
Two insurance policies apply to Monica's home. The limit for Policy A is $100,000, and the limit for Policy B is $50,000. Both policies have a pro rata other insurance clause. If she suffers a $9,000 covered loss to her home, how much will Policy A pay? - $3,000 - $6,000 - $9,000 - $4,500
$6,000
The federal government's share of compensation will decrease by 2020 to - 70 % - 80 % - 75 % - 85 %
- 85%
Ace Insurance Company and Acme Insurance Company each insure the same building for the same amount. Both policies contain a pro rata other insurance clause. In the event of a partial loss, how much of the loss will Acme pay? - 50%—each insurer will pay half the amount of the loss. - )One-third—the insured is the third party to the contract and must bear a proportionate share of the loss. - None—second-named insurers always provide excess coverage. - 100%—although, Acme will have the right to subrogate the claim against Ace Insurance Company.
50%—each insurer will pay half the amount of the loss.
Which of the following is NOT an example of an insurable interest? - A man's interest in the improvements he has added to his leased apartment - A woman's interest in the home she owns - A woman's interest in property that she hopes her uncle will leave to her in his will - A dry cleaner's interest in his customers' clothing in his custody, care, or control
A woman's interest in property that she hopes her uncle will leave to her in his will
The TRIA removes the exclusion of coverage for which of the following causes of loss? - War - Damage caused in the act of committing a crime - Acts of terrorism - Intentional acts
Acts of terrorism
A policy may be amended only with - A condition - A declaration - An endorsement - A warranty
An endorsement
All of the following are basic ways in which underwriters assign rates EXCEPT - Application rating - Experience (Merit) Rating - Manual (Class) Rating - Judgement Rating
Application Rating
The liberalization provision will do which of the following? - Require the insurer to liberalize the conditions of the policies - Allow the insurer to set the property values - Automatically broaden coverage without additional premium if there is a revision to the policy - Protect the insured against a cancellation of the policy
Automatically broaden coverage without additional premium if there is a revision to the policy
For the loss to be covered under the TRIA, the cause of the loss must - Be certified as an act of terrorism - Result in losses in excess of $10 million - Be the result of criminal activity - Result in loss of life
Be certified as an act of terrorism
All of the following are basic parts of an insurance contract EXCEPT - Exclusions - Binders - Declarations - Conditions
Binders
What does the liberalization clause do to a property policy? - Broadens coverage - Eases the criteria for concealment or fraud - Waives the premium in some situations - Gives the insurer subrogation rights
Broadens coverage
In describing the concept of subrogation, the insurer claims the right to - Collect from a negligent third party - Collect damages from the insured - Sue a third party - Send the disputed claim into arbitration
Collect from a negligent third party
The provisions of the Terrorism Risk Insurance Act of 2002 apply to which line of insurance? - Automobile - Commercial property - Dwelling - Homeowners
Commercial property
The procedure for resolving a disagreement between an insured and an insurance company about a loss is described in which of the following parts of an insurance policy? - Insuring agreement - Exclusions - Declarations - Conditions
Conditions
The amounts of coverage and limits of liability are found in which section of a policy? - Insuring agreement - Conditions - Declarations - Definitions
Declarations
The insured is looking for the amount of coverage in a property and casualty policy. This information would be found in the - Endorsements - Declarations - Liberalization Clause - Conditions
Declarations
Which one of the following components of an insurance contract contains information about the risk, the effective date of coverage, deductible, premium amounts, coinsurance percentage, and location of the insured property? - Definitions - Conditions - Insuring agreement - Declarations page
Declarations page
Which of the following is NOT a source of information important to an underwriter? - Agent or producer comments - Government bureaus - Employer reference - Consumer reports
Employer reference
Which of the following policy provisions restricts certain risks from coverage? - Conditions - Declarations - Exclusions - Insuring agreements
Exclusions
Which of the following is NOT a basic way in which underwriters assign rates? - Judgement rating - Manual rating - Experience rating - Expense rating
Expense Rating
Which of the following requires that insurance applicants be advised that a consumer report may be requested on them and the scope of any investigation resulting from the application? - Financial Freedom Act - Freedom of Privacy Act - Fair Disclosure Act - Fair Credit Reporting Act
Fair Credit Reporting Act
An auto is sold for salvage value following payment of a loss. Who receives the proceeds? - Lein holder - Insured - Claimant - Insurance company
Insurance company
The coverages offered by an insurance policy are described in the - Definitions section - Insuring agreement - Conditions section - Declarations page
Insuring agreement
The list of perils covered under a policy is found in which part of the policy? - Insuring agreement - Declarations page - Exclusions section - Conditions section
Insuring agreement
If John's father transfers ownership of a house to John, which one of the following statements regarding insurance on the house is CORRECT? - John must purchase the house from his father to obtain an insurable interest in it. - John can buy insurance because he has an insurable interest. - John's father must assign his policy to John as well. - John's father must retain his policy on the house.
John can buy insurance because he has an insurable interest
The purpose of the conditions section of an insurance policy is to - Alter the general provisions of the insuring agreement - List the obligations of the insured and the insurance company - Eliminate uninsurable perils - Cover unique insurable exposures of the insured
List the obligations of the insured and the insurance company
An insurance company may measure its underwriting profitability by using which of the following ratios? - Loss ratio - Investment ratio - Return on equity ratio - Capacity ratio
Loss ratio
The insuring agreement section of a policy describes - Description of the property insured - Duties of the insured after a loss - Losses excluded - Perils insured against
Perils insured against
When an insurance company cancels a policy, what is the method used to determine the premium due? - Pro rata - Premature - Flat - Short Rate
Pro Rata
An insurance company takes possession of a damages auto it has covered. When the company becomes the legal owner of the auto, it is exercising the right of - Liability - Salvage - Leasing - Condemnation
Salvage
Which of the following methods of cancelling a policy is used when a policyholder cancels her policy before it reaches its natural expiration? - Short-rate - Pro rata - Flat - Long-rate
Short-rate
Which type of return premium computation is used when the policyholder cancels a policy? - Pro rata - Short-rate - Flat - Aggregate
Short-rate
Which of the following legal principles allows insurance companies to collect from a negligent third party damages it paid to an insured? - Assignment - Risk transfer - Indemnity - Subrogation
Subrogation
An insurance binder is best described as - A temporary agreement to pay a claim pending final settlement - A rate manual supplied by one of the rating organizations - A bound collection of rules, rates, and forms - Temporary , short-term evidence of coverage
Temporary, short-term evidence of coverage
All of the following statements about the notice to applicant in the Fair Credit Reporting Act are true EXCEPT - A notice to applicant must be issued to all applicants for life or health insurance coverage. - This notice must be given to the consumer no later than ten days after a report is requested - The agent must leave this notice with the applicant along with the receipt. - A consumer may make a written request for a complete disclosure of the nature and scope of the investigation underlying the report.
This notice must be given to the customer no later than 10 (ten) days after a report is requested.
Why do insurance polices usually define who is considered an insured under the policy? - To specify who is covered in addition to the named insured - To specify beneficiaries of the policy - To specify who is not insured - To specify the exclusions in a policy
To specify who is covered in addition to the named insured
Which of the following terms is the process of evaluating the risk and exposures to potential clients? - Underwriting - Applying - Researching - Interviewing
Underwriting
Which one of the following best describes a short-rate cancellation? - Upon cancellation, all earned premium is returned minus overhead expenses incurred. - Upon cancellation, 100% of the premium is returned. - Upon cancellation, the insurer keeps all earned premium plus overhead expenses incurred. - Upon cancellation, the insurer returns all unearned premium.
Upon cancellation, the insurer keeps all earned premium plus overhead expenses incurred.
All of the following are the insured's duties following a loss EXCEPT - assisting the investigator during the claim investigation procedure - giving prompt notice of claim to the agent or insurer - protecting the property from further damage - completing a detailed proof of loss
assisting the investigator during the claim investigation procedure
The Terrorism Risk Insurance Act of 2002 addresses only a defined category of terrorism losses. To come within the new federal program, an act of terrorism must be certified as such by the Secretary of the Treasury and must have all the following characteristics EXCEPT - it must have resulted in damage within the United States, to an air carrier as defined in the U.S. code, to a U.S. flag vessel or other vessel based principally in the United States and insured under U.S. regulation, or on the premises of any U.S. mission (e.g., an embassy or consulate) - it must produce property and casualty insurance losses in excess of $30 million - it must have been committed by someone acting on behalf of a foreign person or foreign interest, as part of an effort to coerce the civilian population of the United States or to influence the policy or affect the conduct of the U.S. government by coercion - it must be a violent act or an act that is dangerous to human life, property, or infrastructure
it must produce property and casualty insurance losses in excess of $30 million