Insurance Terms and Related Concepts

The legal process that gives the insurer, after payment of a loss, the right to seek recovery from a third party that was responsible for the loss is known as ASubrogation. BAdverse selection. CRight of rescission. DPrinciple of indemnity.

Subrogation

What provision found in property policies prevent an insured from collecting twice for the same loss: once from the insurer and again from a third party?

Subrogation

What provision states that if a policy allows for greater benefits than the financial loss incurred, the insured may be compensated only for the amount lost?

Indemnity

An insured's business is damaged because of a fire, and he is forced to close the business temporarily for repairs. As a result, the insured lost income. What type of loss is this?

Indirect or consequential

An Insurer discovers that an applicant for a policy has submitted a fraudulent insurance claim in the past. What type of hazard does this represent?

Moral

The risk of loss may be classified as ANamed risk and un-named risk. BHigh risk and low risk. CPure risk and speculative risk. DCertain risk and uncertain risk.

Pure risk and speculative risk

In property insurance, what is actual cash value?

Replacement cost at the time of loss, minus depreciation

An insured owns several buildings, each at a different location and insured on a separate policy. What type of coverage does the insured have? ASpecial BSpecific CSchedule DBlanket

Specific

Property insurance that provides $100,000 coverage for a building and $50,000 coverage for personal property at a single location is called ABlanket coverage. BDescribed coverage. CSpecific coverage. DSchedule coverage.

Specific coverage

Wagering on a sporting event is known as what type of risk?

Speculative

What type of limits of liability has the limits seperately stated for different coverages?

Split limits

If a manufactured product is unsafe, what type of liability applies to the manufacturer?

Strict liability

What do individuals use to transfer their risk of loss to a larger group?

insurance

All of the following statements describe the concept of strict liability EXCEPT AIt is applied in product liability cases. BIt is imposed on defendants engaged in hazardous activities. CClaimants may need to provide proof that a product defect caused an injury. DIt is imposed regardless of fault.

it is imposed on defendants engaged in hazardous activities

An insured has a liability policy that sets the amount for all claims that arise from a single incident at $50,000. Which type of limit of liability does this insured's policy have? ASplit BPer occurrence CPer person DAggregate

per occurence

What sublimit in a liability policy puts a ceiling on the payment for all claims that arise from a single accident?

per occurrence

A situation in which a person can experience only loss and no gain?

Pure risk

What is a deductible in an insurance policy?

A specified dollar amount that the insured must pay before the insurer will pay the policy benefits

What is subrogation?

An insurer's legal right to seek damages from third parties after reimbursing insureds for a loss

In property insurance, when must insurable interest exist?

At the time of loss

What type of policy insures all property at multiple location for a single amount?

Blanket policy

How is the actual cash value of a property calculated?

Current replacement cost minus depreciation

In property and casualty insurance, what is the term for the amount of a loss that the insured must cover out of pocket, and the insurer will only pay for the additional amount of the loss above this limit? APremium BDeductible CSelf-insured retention DCoinsurance

Deductible

If an insured peril was the proximate cause of loss, what type of loss is it?

Direct

How are direct and indirect losses related?

Direct losses can cause indirect losses.

What is negligence?

Failure to act as a reasonable, prudent person under given circumstances

Conditions that increase the chance of a loss are known as what?

Hazards

Which law is the foundation of the statistical prediction of loss upon which rates for insurance are calculated? ALaw of group evaluation BLaw of large numbers CLaw of masses DLaw of averages

Law of large numbers

What determines an insurer's responsibility for payment, as stated in an insurance policy?

Limits of liability

Insurance is a contract that protect the insured from what?

Loss

The reduction, decrease or disappearance of value of the person or property insured in a policy is known as what?

Loss

(insurance carried / insurance required ) x Loss Amount =

Loss Payment

A person who does not lock the doors to his or her house shows an indifferent attitude. What type of hazards does this represent?

Morale

Which of the following does the term proximate cause refer to? AInjury that leads to monetary compensation BDuty of the defendant to act CReason for filing a lawsuit DNegligence that leads to an injury

Negligence that leads to an injury

Under absolute liability, does an injured party need to prove negligence?

No. Absolute liability exist when a condition or conduct in inherently dangerous, so proof of negligence is not required

What term describes a loss caused by continuous exposure to a condition?

Occurence

A policy that covers all causes of loss except for those specifically excluded is known as what type of policy?

Open peril ( special) form

What is the term for the causes of loss insured against in an insurance?

Peril

What are the three types of hazards?

Physical moral, morale

What term defines an exact direct and uninterrupted cause of loss?

Proximate cause

What law protects consumers from the circulation of inaccurate or obsolete information?

The Fair Credit Reporting Act

Peril is most easily defined as ASomething that increases the chance of loss. BThe cause of loss insured against. CAn unhealthy attitude about safety. DThe chance of a loss occurring.

The cause of loss insured against

What is burglary?

The forced entry into another's premises with felonious intent.

When a direct chain of events resulting from a negligent act causes injury or damage, that act is considered to be AAn intervening cause. BThe proximate cause. CThe direct cause. DStrict liability.

The proximate cause

Both robbery and burglary can be considered what?

Theft

In property insurance, what is the purpose of a coinsurance clause?

To encourage insureds to insure property close to its value

Which of the following best expresses the purpose of a stated value contract? ATo provide a maximum limit for which the insurance company may become liable in casualty losses BTo pre-establish the amount of coverage available for property items that are difficult to value CTo ensure that the principle of indemnification applies DTo establish the value of property subject to loss by theft or robbery

To pre-establish the amount of coverage available for property items that are difficult to value

What does indemnify mean in insurance?

To restore an insured to the same financial status as before a loss

What is a risk?

Uncertainty regarding loss

What is the difference between vacancy and unoccupancy?

Vacancy refers to an insured structure in which no people have been living or working and no property has been stored for the specified period of time. Unoccupancy= no people have been living but some property is stored

Liability imposed on one party as a result of the actions of another person is known as AAbsolute liability. BVicarious liability. CComparative negligence. DStrict liability.

Vicarious liability