Insurance Property and Causality

If a homeowner wants the maximum protection for a home ad its contents, which form should be purchased?

HO-5

Marking, publishing, or circulating any information or statement which is false or maliciously critical if designed to injure the reputation of business of any authorized insurance company (insurer) is known as...

Defamation.

Under the HO3 form, if the insured and the insurance company cannot agree on the amount of a loss, the company may take which of the following actions?

Demand an appraisal of the loss.

The commissioner may do all of the following, EXCEPT:

Demand an immediate hearing for a producer who violates the code. The commissioner must give the producer at least 15 days written notice before demanding a hearing.

A Basic Dwelling Policy automatically provides coverage against fire, lightning, and...

Internal Explosion.

Regarding the renewal of your license, if a request for the renewal of the received by the commissioner after its due date, you...

Must not transact under the license until the renewal or reinstatement of the license is completed. You may not transact insurance business without an in force license.

A home is properly insured for $100,000 and has a $1,000 deductible. While on vacation a slight earthquake damages the detached garage of the insured. How much could the insured expect to receive for this loss?

$0 Earthquakes are not an insured peril.

The Homeowners Association president is sued by a resident of the group and looses the suit. He assesses every homeowner in the association for $1,500 to pay the suit. What will your Homeowners Policy cover?

$1,000 Any Homeowner Policy covers up to $1,000 for assessments for both property and liability coverage.

Due to damage to the common ground and property by a hailstorm, the insured is assessed $2,000 by his community association for the damage. How much of this loss would be covered by a Homeowner policy?

$1,000. Loss assessment by the property owners association for $1,000 for repairs made necessary by a covered peril is covered as an additional coverage under a Homeowners Policy.

A new roof on a home will cost $25,000 to replace after it was destroyed in a hailstorm. The original roof cost was $15,000 ten years ago. The roof has depreciated $5000 per year. What is the ACV of the roof?

$20,000 Replacement Cost minus Depreciation= ACV $25,000 minus $5,000 [$500 X 10 years]= $20,000 ACV

A mobile home is insured for $100,000. If the mobile home is totaled by fire, what is the maximum payable for personal property, Coverage C?

$40,000 A mobile home policy extends 40% of coverage A to personal property coverage. 40% of $100,000 is $40,000.

In insurance, information that has a bearing on whether or not an insurance company will issue a policy or on how the policy will be issued is called...

A material fact.

An agent takes an application and premium from a client. The agent them hands the client a receipt and says thank you, you are covered effective now. This is an example of binding coverage. If the policy is a life or disability policy the client may be covered as well due to

Apparent powers If the agent does something that is apparent to the consumer that the agent has the authority to do, even if not expressed or implied by contract, then the agent does have that power.

Liability Coverage is

Coverage E

Rob received a hoverboard for Christmas and immediately went outside to ride around. After a bit it needed to be charged, so Rob went home and plugged it in. There was a short in the board and it exploded into flame, burning the house down. The house burning down would be considered the...

Direct Loss A direct loss is a loss that is the direct consequence of any particular peril.

The insurance company will require that a consumer report be run on the insured before approving the application. Under the provisions of the Fair Credit Act, the applicant has the right to do which of the following?

Dispute any incorrect information and have it removed from the report. A consumer report may be run by the insurer when underwriting the policy. The FCRA provides the consumer protection in insurance transactions. 1: The consumer must be advised they have a report being run on them. 2: If the consumer finds incorrect they can challenge it and if proven wrong within 30 days, it can be removed from the report. 3: You need authorization from the consumer before running a report.

A deer jumps through the window of an insured damaging the interior and exterior walls. Which of the following Homeowners Forms listed below is the least comprehensive form that will still provide coverage for this loss?

HO3 The HO3 will cover all the losses to the dwelling and other structures which are not excluded. It is less comprehensive then the HO3 Form with the HO15 endorsement (HO5).

Which form provides open perils coverage on the dwelling, and broad form coverage on personal property?

HO3 HO4 and HO6 do not cover the dwelling.

Once an appointment is granted to a producer, it is good until...

It is canceled by either the agent or the insurer or non renewed. The insurance company receives a certificate of authority while the producer gets an appointment. An appointment must be renewed every 2 years by the insurance company on a date set by the insurance commissioner.

Which of the following is NOT a characteristic of a fraternal insurance company?

It's run by an attorney-in-fact. A fraternal is not run by an attorney-in-fact (like a reciprocal company but by elected officials).

Which of the following is included in the Homeowner Policy but is not automatically included in the ISO Dwelling Property Policy?

Liability

Which of the following Homeowner coverage's does not generally contain a decutible?

Liability.

Which of the following is not an element of insurable risk?

The loss should be catastrophic.

Which type of misrepresentation persuades an insured, to his or her detriment, to cancel or switch a policy from one insurer to another?

Twisting

Janie B. filed a claim expecting payment. The insurer declined to pay based on their interpretation of a provision. Janie B., as a reasonable person who has not studied law interprets the provision otherwise. The company must pay according to the courts because...

of the reasonable expectations doctrine. The reasonable expectations doctrine is not a rule granting substantive rights to an insured when there is no doubt as to the meaning of policy language.

If a provision in a policy is ambiguous, a court will decide in favor of the consumer and what the consumer could reasonably believe was true or covered in the policy. This is due to the doctrine known as

reasonable expectations

What is Pro Rata Share?

Pro Rata Share is a method of apportioning loss among multiple insurers. The loss payment will be bases to a fraction, according to the policies share of the whole.

Courts generally require the presence of the following elements in order for a contract to be rescinded on the basis of fraud, EXCEPT

Qualify for Insurance - in the form of a policy being issued. A person having to qualify for insurance has nothing to do with fraud, the other three definitely do.

When must an insurance producer meet the continuing education requirement for license renewal?

Withing the 24 months prior to the month of the renewal. If you are a residential individual licensee with the lines of authority of life, disability, property or casualty insurance, you must complete the continuing education requirements as a prerequisite to renew your license. Must be completed withing 24 months of the renewal or reinstatement.

Which contract has an unequal exchange of values?

an aleatory contract Initially, the financial burden is on the consumer as we pay a premium and in exchange, we get a policy (which is a promise to pay). If there is a claim, the financial burden flips to the insurer who may pay out more than we have paid in.

Signing a contract with an agency is an example of

express powers Express powers are those expressly written in a contract, contractual obligations. The rights and powers of an agent explicitly provided in the agency contract.

A company that has a license to do business in our state is considered all of the following except

local. A company does not need to have an actual office in the state in order to conduct business here.

Which of the following Washington Insurancers do not need to be bonded?

A producer who acts as an agent.

All of the following would qualify for a Homeowner policy, EXCEPT:

A small shop carrying merchandise for sale to the public.

Which of the following covers the Dwelling?

Coverage A

Which of the following covers Appurtenant Structures?

Coverage B Also known as Other Structures, these buildings are separated by a clear space from the dwelling. Coverage B is an additional 10% of Coverage A.

Even though most coverage under the Mobile Home policy and Homeowner policy is the same, there are some differences. Which is a differnece?

Coverage B- other structures.

Which of the following covers personal property?

Coverage C- Personal Property (contents) covers 50% of coverage A in additional coverage. Personal Property owned or used by the insured is covered 100% anywhere in the world. Endorsements can be added to increase the percentage amount.

Due to a fire, an insured has three very expensive trees destroyed. How much is the total amount the can expect to receive for the trees under his Homeowners Policy?

$1,500 Under the Dwelling and Homeowner Policies, trees are covered for a max of $500 each.

Mrs. X has a dwelling insured for $200,000. she sustains a wind loss of $10,000 to her detached garage, which is covered under the policy, coverage B. How much of the loss could she expect to receive from the policy?

$10,000 minus the deductible.

Mary has insured her home under $200,000 HO OO O3 form. If she has a fire loss of $25,000 to her unattached garage, her Homeowner policy will reimburse her for which of the following amounts?

$20,000 Coverage B, other structures, cover 10% of coverage A. 10% of $200,000 is $20,000.

Eric has two Homeowner policies for $10,000 with both insurance companies. If a $10,000 covered loss occurs, how much will each insurer pay?

$5,000 Since each company has 1/2 of the total coverage, then each will pay half of any covered loss.

Consideration is an important element of a contract. Consideration refers to the price paid by each party to the other. Which of the following is not part of consideration in an insurance contract?

An application missing material information from the consumer to the company. Material information is critical to the underwriters and a policy cannot be issued without it.

The type of license that a person needs in order to be paid to report to insurance companies regarding claims is...

An independent adjusters license. An agent may act as an adjuster without being licensed with permission of the company they work with. Adjusters work property and casualty only.

Contribution by equal shares is a method of _______

Apportioning loss among multiple insurers

Which of the four coverage's under a Dwelling Policy and a Homeowner Policy is an indirect loss coverage?

Coverage D Coverage D, loss of use (indirect or consequential loss) pays for increased living expenses if the insured cannot occupy the residents following a loss of covered peril. Insured people may be reimbursed for the fair rental value of the residence.

Under the Homeowner Policy, which of the following provides coverage for the cost to the insured of staying at a hotel following a fire loss to the home?

Coverage D- Loss of Use.

__________ __________ is loss that would be sustained upon the loss, sufficient to warrant compensation, and must be present at the time of application.

Insurable Interest Insurable Interest is a relationship with a person (a spouse) or thing (a car) that will support the issuance of an insurance policy.

The Insurance Commissioner in Washington does NOT...

Make insurance contracts (policies) or state codes. The Commissioner DOES NOT make insurance policies, state code, arrest individuals, decide on the constitutionality of the laws, enforce any particular insurance company or decide on how many insurance agents a company may have.

A producer receives a written notice regarding a cease and desist order issued by the commissioner against the producer. The producer can request a hearing within how many days from the date of the order?

Ninety days.

The condition created by two or more policies covering the same loss exposure that does not have identical inception and expiration dates is called...

Nonconcurrency

A certificate of authority is issued by the commissioner and authorizes a company to sell insurance in our state. A certificate MUST specify all of the following, EXCEPT:

The amount of current assets owned by the company. Current asset amount is NOT required on a certificate. But it must specify: the name of the insurer, the location of the principal office, the kind of insurance it is authorized to transact in this state, and the powers that the insurers grant to its producers.

All of the following are correct about the co-insurance clause, EXCEPT:

The clause is required by mortgage companies to protect the mortgage balance.

An insurance producer is required to be bonded when s/he represents...

The consumer (insured). A producer acting as a broker needs the amount of $2,500, a producer acting as an agent needs to be appointed by a carrier or affiliated with an agency.

What type of contract has an unequal exchange of values?

An Aleatory contract

A home has a $50,000 covered loss, has a replacement cost of $10,000, but, is insured for only $40,000. What would the insurance company pay?

$25,000 minus the deductable. If 1/2 of $50,000= $25,000 (minus deductable) IS insured for, over SHOULD BE, times any loss. IS insured for $40,000, SHOULD BE is insured for $80,000 (80% of $100,000). Because the Homeowner is only insured for 1/2 of the required amount, then the insurer will only pay 1/2 of any covered loss. This is called Coinsurance Clause.

A home is insured for $200,000 with an 80% coinsurance clause. The home is valued at $300,000 when a fire causes $60,000 in damage. How much would the insurance company pay for this loss if there is a $250 deductible?

$49,750 IS insured for $200,000; SHOULD BE for $240,000 (80% of $300,000) The home is insured for 5/6 of the required amount meaning insurance will pay 5/6 of the loss. 5/6 of $60,000=$50,000 minus $250 deductible= $49,750

The insured sustains a fire to his rental home and two of his trees are destroyed. What is the maximum he could expect to receive for the loss of the trees if the deductible is $500?

$500 maximum indemnification per tree, plant, or shrub. 2 trees X$500=$1,000 minus $500 deductible= $500 paid back to Eric.

Ten years ago, and insured purchased a building for $50,000 that would cost $100,000 to rebuild today. If the physical value of the building has depreciated $2,000 each year, the current ACV of the building is...

$80,000 Replacement cost minus Depreciation= ACV $100,000 minus $20,000 (10 years X $2,000)= $80,000 *The original price isn't important.

Following submission of a claim, the insurance company must notify the insured within ________ days of their intention for payment of the claim.

30 days after the receipt of a signed sworn proof of loss.

In a Dwelling or Homeowners policy, if a building is left vacant, coverage for vandalism will continue for up to how many days?

60 days. *the days must be consecutive.

Which of the following is an incorrect statement regarding new licensees?

A new licensee who acts as an agent cannot sell insurance until they have an appointment, but the appointment must be secured within 180 days. A new licensee has NO TIME LIMIT for securing an appointment or affiliation.

The insurance company subtracted depreciation from the settlement amount to the insured. The insurance company paid the loss on an ____ basis.

Actual Cash Value. Actual Cash Value (ACV) means the current cost at the time of loss, to repair or replace the damaged property with new materials of like kind and quality, but with deduction for depreciation .

A producer may terminate his appointment by sending...

Advance written notice to the insurer and send a copy via e-mail to the commissioner.

Under a Personal Property Floater (Scheduled Personal Property Endorsement), a loss is covered when it occurs...

Anywhere in the world. Personal Property of an insured is covered anywhere in the world. the policy will not pay more than the stated amount of insurance, or the amount for which is insured could be expected to repair or replace the property.

An insurer indicates to a third party by way of company business cards, logo on a vehicle, etc., that a person is authorized to act on its behalf.

Apparent Authority Apparent authority refers to a situation where a reasonable person would understand that an agent had authority to act.

All of the following facts about an authorized company are not true, EXCEPT:

Authorized companies are also known as an admitted company. They have a license to transact business in our state known as a certificate of authority. The certificate of authority are now subject to the laws of this state (guarantee association, examination, prior approval, etc.) and are admitted to the the state to transact business.

Quitting smoking to limit your risk of getting lung cancer, or selling your car so you will not be liable for injuring another person while driving, is which method of managing risk?

Avoidance

The fire policy with the least amount of perils insured against is the ________ policy.

Basic Form without extended coverage.

A valued policy is generally used to insure fine arts, jewelry, and furs. In case of a covered total loss, the company...

Cannot dispute the amount to be paid.

_______ coverage obligates the carrier of the policy in the policy in effect when a claim is made to cover the claim, even if the negligent act or error occurred many years before.

Claims-made Claims-made coverage is a policy providing liability coverage only if a written claim is made during the policy period or any applicable extended reporting period. For example; A claim in the current year could be changed against the current policy even if the injury or loss occurred many years in the past. *Errors and omissions is often written on a claims-made basis.

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?

Conditions.

________ means any attempt by the existing insurer or its producer to dissuade a policy-owner from replacing an existing insurance policy.

Conservation. The existing insurer must try to save the replaced policy. It means any attempt by the existing insurer or producer to dissuade a policy owner from replacing an existing policy or annuity. The replacing insurer must provide that the applicant has a right to an unconditional refund of all premiums paid, said right may be exercised withing 20 days from the date the policy was received.

Premium from the insured represents

Consideration Premium in addition to the completed, signed, and dated application is the consideration from the consumer to the insurance company. The policy (promise to pay) is the consideration from the company to the insured. Once there is an exchange of values consideration is complete and the contract is in effect. (i.e. effective date)

Which of the following covers lost rental value?

Coverage D- loss of use Percentage of Coverage: 20% of A on HO2 and HO3 20% of C on Ho4 and 40% of C on HO6

A Basic Dwelling Policy is also known as...

DP-1 DP1- Basic Form (named perils) DP2- Broad Forms (named perils) DP3- Special Forms (open perils)

The Special Form (HO3) provides open perils coverage on the....

Dwelling HO3 provides open perils on the dwelling and the named peril coverage on personal property.

For an insurance company to write insurance in our state, it must...

File for Certificate of Authority. Insurance companies licenses are Certificate of Authority. Insurance producers licenses are Producer Licenses.

A producer puts the insurance premiums, paid to them directly into a separate account. A producer may also deposit money into the separate account for all of the following situations, EXCEPT:

Funds to cover previously used premiums by the producer.

Owners of older homes, or elaborate homes with detailed or decorative architecture, might have a replacement cost far in excess of the ACV or market value of their home. The owners of such homes should purchase a...

HO OO O8 HO OO O8 is the same as the HO OO O1, except losses are paid on ACV basis, not Replacement Cost. It provides a practical package of Homeowner coverage for owners of such dwellings.

A person renting a condo unit should purchase...

HO4 Ho6 is for the unit owner, HO4 is for the renter.

An individual lives in a condo, so he should purchase which Homeowner policy to cover his personal property and liability?

HO8

A producer is confused about when his license renews. You explain to him the producer. Which of the following would NOT be correct.

His license will expire at midnight every 2 years on his birth date and there is a 30 day grace period before any late fee or penalty is charged. There is no grace period. 1-30 days late= 50% surcharge of the license renewal few. 31-60 days late= 100% 61-12 months late= 200%

In order to sell Susan a life insurance policy, you as a producer, split you commission with her. Susan is not a licensed agent. Sharing your commission is an illegal practice known as...

Illegal Dealings in Commissions. It is illegal to share commissions with anyone who is not licensed. Producer may share commissions with another producer, even if they are licensed in different lines of insurance.

While soliciting the sale of an insurance policy, a producer offers her client an expensive piece of jewelry for buying the policy. Such an offer is considered to be...

Illegal Inducement. It is unlawful for insurance personnel to provide or promise in a policy anything valued at more than an aggregate of $100 per year, to anyone prospective or current policyholder. Violation represents illegal inducement.

Which of the following is an INCORRECT statement about a producer in Washington?

Once a producer receives their license, they may immediately represent any insurer. Once a producer receives their license they must become APPOINTED with an insurer to sell insurance for that insurer.

How often is the Insurance Commissioner required to examine the records of an authorized insurance company?

Once every five years. The Insurance Commissioner is required to examine the records of an authorized insurance company at least every five years, but may be examined at any time.

Rob received a hoverboard for Christmas and immediately went outside to ride around. After a bit it needed to be charged, so Rob went home and plugged it in. There was a short in the board and it exploded into flame, burning the house down. The fire would be the...

Peril A peril is anything that causes a loss.

Which of the following would be covered on both Dwelling and Homeowner forms?

Personal Property of the sister of the insured who is living in the house. Anyone living in a household with the insured under the policy. Theft and liability aren't automatically covered under the ISO Dwelling Property Policy.

The insurance producer offers a cash refund to a prospect for buying insurance. The producer is guilty of...

Rebating.

Tina purchased a pit bull 5 months after she purchased a Homeowner policy. She then received a cancellation notice from her insurer. The insurance company has to do all of the following, EXCEPT:

Send a written notice to Tina and Mortgagee with proof of receipt attached.

Someone dumps hot ash in your trash can, starting a fire that causes severe damage. Your insurance company pays your loss and then goes after the other person for payment. This is an example of...

Subrogration The Subrogration clause allows the transfer to the insurance company of the rights of recovery of the insured from a third party when the insurer pays the losses. It's closely related to indemnification.

Which of the following is incorrect regarding a Dwelling Property Policy?

The policy will only apply if the Dwelling is owner occupied. Most Dwelling Property Policies are on homes which are rented to others. A homeowner policy is written on owner occupied dwellings, NOT Dwelling Property Policies.

All of the following are characteristics of an insurance contract except:

They are made with an offer and acceptance, consideration, legal object, and competent parties. Offer and acceptance, consideration, legal object and competent parties are ELEMENTS of a contract, not characteristics.

Under Homeowners and Dwelling Policies, the insured company will only pay for losses if the insured has insurable interest. The insurance company is going to want insurable interest at the...

Time of loss. Insurable interest is any interest in a subject of insurance or any legal relation to it of such a nature that a certain happening might cause monetary loss to the insured. The Insurable Interest must exist at the time of loss.

When attempting to get a consumer to purchase a new policy, the producer makes malicious and false statements about the current insurance company and current policy of the prospect. In this situation, the producer is guilty of...

Twisting and Defamation

A policy that states that in the even of a total loss, a specific amount will be paid. That is set as the limit of the policy and is called _________ policy.

Valued.

Which of the following perils is covered by Broad Form perils but is not covered by the Basic Form?

Weight of ice. Weight of ice and snow is one of the perils added to a Broad Form policy.

Arthur and his client, Doug, are discussing signing Doug up for a new insurance policy. Doug believes that Arthur is telling him the truth about everything in the potential policy. Arthur believes that the information Doug provides to the best of his ability in order to fill out the application is true. This dealing is an example of...

good faith Good Faith is the best answer for this question. While the producer and soon-to-be insured are making representations, it is under a Good Faith dealing. Good Faith: Effort made, information given, or transaction done, honestly and without a deliberate intention to defraud the other party. However, good-faith does not necessarily mean 'without negligence.' Also called bona fide, it is implied by law into commercial contracts.

Insurance producers have very broad powers because courts decide most contests over the existence of insurance in favor of the

insured