Property and Casualty Basic

Which of the following is the basis for a claim against an insurance policy? A Loss B Material change C Hazard D Misrepresentation

A Loss Correct! Claims result from losses by a peril insured against in an insurance policy.

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? A Consequential B Direct C Special D Additional

A Consequential Correct! Consequential loss, also known as indirect loss, is a second financial loss caused by a covered direct loss.

Chapter: Property and Casualty Basics The reduction, decrease, or disappearance of value of the person or property insured in a policy, by a peril insured against is known as A Loss B Exposure. C Hazard. D Risk.

A Loss Correct! Loss is the reduction, decrease, or disappearance of value of the person or property insured in a policy, by a peril insured against.

The reduction, decrease, or disappearance of value of the person or property insured in a policy, by a peril insured against is known as A Loss B Exposure. C Hazard. D Risk.

A Loss Correct! Loss is the reduction, decrease, or disappearance of value of the person or property insured in a policy, by a peril insured against.

Chapter: Property and Casualty Basics Which of the following coverages in Dwelling and Homeowners policies is for indirect losses? A Loss of use B Dwelling C Structures D Contents

A Loss of use correct! Loss of use coverage applies only after a direct loss caused by a covered peril has occurred.

Question 9 of 12 Chapter: Property and Casualty Basics Losses caused by continuous or repeated exposure to conditions resulting in injury persons or damage to property that is neither intended nor expected is the definition of which of the following terms? A Occurrence B Peril C Hazard D Accident

A Occurrence Correct! An occurrence includes those losses caused by continuous or repeated exposure to conditions resulting in injury persons or damage to property that is neither intended nor expected. Review ContentNext Question

Chapter: Property and Casualty Basics What type of insurance policy insures against all risks of loss that are not specifically excluded by the policy? A Open peril policy B Specified peril policy C Binder policy D Named peril policy

A Open peril policy correct! Open peril (special) policies cover everything except what they say they don't. Named peril policies cover only perils named in them.

Chapter: Property and Casualty Basics The estimated amount that an insurer would have to pay on a claim is called the A Loss estimate. B Loss reserve. C Loss cost rating. D Loss quotient.

B Loss reserve. Correct! The loss reserve indicates an estimate of what would ultimately be paid on a claim.

The policy provision found in property insurance policies that prevents the insured from collecting twice for the same loss is called A Appraisal. B Subrogation. C Consent to settle loss. D Right of salvage.

B Subrogation. Correct! When insureds accept loss payment from the insurance company, they must transfer their rights to recovery to the insurer. This prevents the insured from collecting twice for the same loss, and allows the insurer to indemnify the insurance company.

Chapter: Property and Casualty Basics The policy provision found in property insurance policies that prevents the insured from collecting twice for the same loss is called A Appraisal. B Subrogation. C Consent to settle loss. D Right of salvage.

B Subrogation. correct! When insureds accept loss payment from the insurance company, they must transfer their rights to recovery to the insurer. This prevents the insured from collecting twice for the same loss, and allows the insurer to indemnify the insurance company.

Which of the following terms describes the act of revoking or terminating one's insurance policy? A Rate B Lapse C Cancellation D Premium

C Cancellation Correct! Cancellation is the act of revoking or terminating one's insurance policy.

A beauty parlor burns to the ground. What type of loss is this to the owner? A Specific B Consecutive C Direct D Consequential

C Direct correct! Damage caused by a peril that is insured against is classified as direct loss.

Chapter: Property and Casualty Basics Stevie purchased her own personal property insurance policy on her newly purchased dream home. This type of insurance coverage that applies to the insured's own property is known as A Commercial risk protection. B Third party coverage protection. C First party risk protection. D Personal lines coverage.

C First party risk protection. correct! First party risk protection is defined as insurance coverage that applies to the insured's own property or person. In contrast, third party coverage protection is defined as insurance coverage that applies to the property or person of one other than the insured.

An additional loss that results from a direct loss of property is called a/an A Liability loss. B Punitive loss. C Indirect loss. D Proximate loss.

C Indirect loss. correct! Direct losses come about because of perils named in the policy. Indirect losses, also known as consequential losses, come about as a result of a direct loss.

Adam is injured in a car accident caused by John. What kind of insurance would cover John's obligation to pay for Adam's injuries? A Life insurance B Health insurance C Liability insurance D Property insurance

C Liability insurance correct! Liability insurance provides compensation for harm or damage to a third party that the insured is obligated to pay.

Which of the following coverages in Dwelling and Homeowners policies is for indirect losses? A Structures B Contents C Loss of use D Dwelling

C Loss of use Correct! Loss of use coverage applies only after a direct loss caused by a covered peril has occurred.

Rates that are established based on the similarities of the risk with other risk are known as A "A" rates. B Merit rates. C Manual rates. D Experience rates.

C Manual rates. correct! Rates that are established by similarity of risk are manual rating or class rates.

All of the following would be considered an "expense" of an insurance company EXCEPT A Commissions. B Acquisitions. C Revenues received from investments. D Marketing & advertising.

C Revenues received from investments. Correct! Expense is defined as an insurer's costs of operations including overhead, marketing, and commissions.

Chapter: Property and Casualty Basics All of the following would be considered an "expense" of an insurance company EXCEPT A Commissions. B Acquisitions. C Revenues received from investments. D Marketing & advertising.

C Revenues received from investments. Correct! Expense is defined as an insurer's costs of operations including overhead, marketing, and commissions.

Which of the following definitions best defines the term "accident"? A Injury to the character of another person caused by libel, slander, false arrest, invasion of privacy and other acts B Physical damage to tangible property of others caused by the negligence of an insured C The negligent or purposeful act or omission by an insured that results in physical trauma or death to a person D A sudden, unplanned and unexpected event, not under the control of the insured, resulting in injury or damage neither expected nor intended

D A sudden, unplanned and unexpected event, not under the control of the insured, resulting in injury or damage neither expected nor intended Correct! "Accident" is best defined as a sudden, unplanned or unexpected event, not under the control of the insured, resulting in injury or damage neither expected nor intended.

In many circumstances, the action of more than one cause produces a particular harm or loss to an insured. The predominant legal rule is that if a loss is caused by both an insured peril and an uninsured peril, coverage is deemed to apply. This rule of law is called A Primary & excess causation. B Simultaneous causation. C Dual causation. D Concurrent causation.

D Concurrent causation. Correct! In many circumstances, the action of more than one cause produces a particular harm or loss to an insured. The predominant legal rule is that if a loss is caused by both an insured peril and an uninsured peril, coverage is deemed to apply. This rule of law is called "concurrent causation."

Chapter: Property and Casualty Basics What term includes damage where the insured peril was the proximate cause of loss? A Indirect loss B Consequential loss C Negligent loss D Direct loss

D Direct loss Correct! Direct loss is direct, physical damage to buildings and/or personal property. Direct loss also includes other damage where the insured peril was the proximate cause of loss.

Compared with other drivers in his age group, a driver has had more minor accidents and traffic violations. Which of the following rating types would most accurately reflect the driver's true insurance risk? A Class B Special C Schedule D Experience

D Experience Correct! In experience rating, the insured's own past loss experience enters into the determination of the final premium. Experience rating is superimposed on a class-rating system and adjusts the insured's premium either up or down, depending on the extent to which his experience has deviated from the average experience of the class.

All of the following are examples of insurable interest in property insurance EXCEPT A Fred and Ethel's personally owned vacation home. B Sally's own personal automobile. C Joe who is a partner in a thriving business. D Harry who is waiting for his distant cousin's beach-front property as part of his inheritance.

D Harry who is waiting for his distant cousin's beach-front property as part of his inheritance. correct! A mere contingent or expectant interest in anything, not based on any actual right or claim to that thing, nor upon any valid contract for the ownership or possession of it, is NOT considered to be an insurable interest in that thing.

Joe, Beau and Moe are business partners in a classy restaurant uptown. Joe name appears first on the declaration page of the policy, then Beau and lastly Moe. All of the following statements are FALSE regarding the first named insured EXCEPT A Joe, Beau and Moe will all three have to give their consent in order to cancel the policy. B Any of the insured's can receive notice of nonrenewal. C All three of the named insured's are responsible for paying the premiums. D Joe will be the one to receive any returned premiums.

D Joe will be the one to receive any returned premiums. Correct! The first named insured is ultimately responsible for paying premiums and is the one who has the right to receive any returned premiums. In addition, the first name insured can cancel the policy.

What type of insurance policy insures against all risks of loss that are not specifically excluded by the policy? A Specified peril policy B Binder policy C Named peril policy D Open peril policy

D Open peril policy Correct! Open peril (special) policies cover everything except what they say they don't. Named peril policies cover only perils named in them.

Chapter: Property and Casualty Basics The termination of an insurance contract with the premium charge being adjusted in proportion to the exact time the protection has been in force is considered a ARefund cancellation. B Short rate cancellation. C Flat rate cancellation. D Pro rata cancellation.

D Pro rata cancellation. Correct! The termination of an insurance contract or bond with the premium charge being adjusted in proportion to the exact time the protection has been in force is considered a pro rata cancellation

Which services are associated with Standard & Poor's and AM Best? A Investigating violations of The Fair Credit Reporting Act B Providing employment histories for investigative consumer reports C Storing medical information collected by insurance companies D Rating the financial strength of insurance companies

D Rating the financial strength of insurance companies Correct! Reports generated by Standard & Poor's and AM Best help prospective consumers to judge the financial security of various insurance companies.

Chapter: Property and Casualty Basics Which of the following is a cancellation procedure in which the premium returned to the insured is NOT in direct proportion to the number of days remaining in the policy period? A Pro rata B Flat rate C Proportional D Short rate

D Short rate correct! Short rate cancellation is a cancellation procedure in which the premium returned to the insured is not in direct proportion to the number of days remaining in the policy period.

Stevie purchased her own personal property insurance policy on her newly purchased dream home. This type of insurance coverage that applies to the insured's own property is known as A Personal lines coverage. B Commercial risk protection. C Third party coverage protection. D First party risk protection.

DFirst party risk protection. Correct! First party risk protection is defined as insurance coverage that applies to the insured's own property or person. In contrast, third party coverage protection is defined as insurance coverage that applies to the property or person of one other than the insured.

Concurrent causation occurs when A A loss is caused by both a covered and an uncovered peril. B A loss is caused by two uncovered perils. C A loss is caused by an uncovered peril. D A loss is caused by a covered peril.

A A loss is caused by both a covered and an uncovered peril. Correct! If a loss is cause by a covered and an uncovered peril, it is called concurrent causation. In this case, coverage is deemed to apply.

Chapter: Property and Casualty Basics Which of the following terms describes the act of revoking or terminating one's insurance policy? A Cancellation B Premium C Rate D Lapse

A Cancellation Correct! Cancellation is the act of revoking or terminating one's insurance policy.

For an individual claim, what is the loss reserve? A The amount the insured will pay on any covered loss B An estimate of what the insurer will ultimately pay out on a claim C Money the insurer reserves from each premium to pay claims D The amount a second policy will have to pay for the insured to be made whole after a loss

B An estimate of what the insurer will ultimately pay out on a claim Correct! For individual claims, the loss reserve is the estimate of what will ultimately be paid out on the claim to the insured by the insurer.

A beauty parlor burns to the ground. What type of loss is this to the owner? A Consecutive B Direct C Consequential D Specific

B Direct Correct! Damage caused by a peril that is insured against is classified as direct loss.

Rates that are established based on the similarities of the risk with other risk are known as AMerit rates. BManual rates. CExperience rates. D"A" rates.

BManual rates. Correct! Rates that are established by similarity of risk are manual rating or class rates.

Chapter: Property and Casualty Basics Bob insists that the insurer owes him $10,000 for liability damages, while his insurer asserts that they owe him no more than $7,000. Which of the following would most likely describe the type of claim settlement that they might pursue? A Independent audit B Appraisal hearing C Arbitration D Small claims court

C Arbitration Correct! When an insured and insurer cannot agree on how to settle a claim, arbitration is often used. The settlement is submitted to an arbitrator(s) whose decision may or may not be binding on both parties dependent on state law.

the number of days remaining in the policy period? A Flat rate B Proportional C Short rate D Pro rata

C Short rate correct! Short rate cancellation is a cancellation procedure in which the premium returned to the insured is not in direct proportion to the number of days remaining in the policy period.

Stevie purchased her own personal property insurance policy on her newly purchased dream home. This type of insurance coverage that applies to the insured's own property is known as A Commercial risk protection. B Third party coverage protection. C First party risk protection. D Personal lines coverage.

C First party risk protection. correct! First party risk protection is defined as insurance coverage that applies to the insured's own property or person. In contrast, third party coverage protection is defined as insurance coverage that applies to the property or person of one other than the insured.

What insurance concept is associated with the words "Weiss" and "Fitch"? A Types of mutual companies B Index used by stock companies C Guides describing company financial integrity D Policy dividends

C Guides describing company financial integrity Correct! Because an insurance company's strength and stability are two very crucial factors in its sustainability, independent rating services have formed to publish regular updates on the financial integrity of different insurance companies. Weiss and Fitch are two of these services, although there are more.

In many circumstances, the action of more than one cause produces a particular harm or loss to an insured. The predominant legal rule is that if a loss is caused by both an insured peril and an uninsured peril, coverage is deemed to apply. This rule of law is called A Simultaneous causation. B Dual causation. C Concurrent causation. D Primary & excess causation.

CConcurrent causation. Correct! In many circumstances, the action of more than one cause produces a particular harm or loss to an insured. The predominant legal rule is that if a loss is caused by both an insured peril and an uninsured peril, coverage is deemed to apply. This rule of law is called "concurrent causation."

Adam is injured in a car accident caused by John. What kind of insurance would cover John's obligation to pay for Adam's injuries? A Property insurance B Life insurance C Health insurance D Liability insurance

DLiability insurance Correct! Liability insurance provides compensation for harm or damage to a third party that the insured is obligated to pay.

Chapter: Property and Casualty Basics Which of the following is the basis for a claim against an insurance policy? A Misrepresentation B Loss C Material change D Hazard

B Loss Correct! Claims result from losses by a peril insured against in an insurance policy.

A beauty parlor burns to the ground. What type of loss is this to the owner? A Consequential B Specific C Consecutive D Direct

D Direct Correct! Damage caused by a peril that is insured against is classified as direct loss.

Compared with other drivers in his age group, a driver has had more minor accidents and traffic violations. Which of the following rating types would most accurately reflect the driver's true insurance risk? A Experience B Class C Special D Schedule

A Experience correct! In experience rating, the insured's own past loss experience enters into the determination of the final premium. Experience rating is superimposed on a class-rating system and adjusts the insured's premium either up or down, depending on the extent to which his experience has deviated from the average experience of the class.

All of the following are examples of insurable interest in property insurance EXCEPT A Harry who is waiting for his distant cousin's beach-front property as part of his inheritance. B Fred and Ethel's personally owned vacation home. C Sally's own personal automobile. D Joe who is a partner in a thriving business.

A Harry who is waiting for his distant cousin's beach-front property as part of his inheritance. Correct! A mere contingent or expectant interest in anything, not based on any actual right or claim to that thing, nor upon any valid contract for the ownership or possession of it, is NOT considered to be an insurable interest in that thing.

The termination of an insurance contract with the premium charge being adjusted in proportion to the exact time the protection has been in force is considered a A Pro rata cancellation. B Refund cancellation. C Short rate cancellation. D Flat rate cancellation.

A Pro rata cancellation. Correct! The termination of an insurance contract or bond with the premium charge being adjusted in proportion to the exact time the protection has been in force is considered a pro rata cancellation

The policy provision found in property insurance policies that prevents the insured from collecting twice for the same loss is called A Subrogation. B Consent to settle loss. C Right of salvage. D Appraisal.

A Subrogation. correct! When insureds accept loss payment from the insurance company, they must transfer their rights to recovery to the insurer. This prevents the insured from collecting twice for the same loss, and allows the insurer to indemnify the insurance company.

What company produces evaluations of insurer financial status often used by the Insurance Department? A SEC B AM Best C NAIC D Consumer's guide

B AM Best Correct! AM Best & Company assigns ratings to life, property and casualty insurance companies based upon the financial stability of the insurer.

What term includes damage where the insured peril was the proximate cause of loss? A Negligent loss B Direct loss C Indirect loss D Consequential loss

B Direct loss Correct! Direct loss is direct, physical damage to buildings and/or personal property. Direct loss also includes other damage where the insured peril was the proximate cause of loss.

What term includes damage where the insured peril was the proximate cause of loss? A Negligent loss B Direct loss C Indirect loss D Consequential loss

B Direct loss correct! Direct loss is direct, physical damage to buildings and/or personal property. Direct loss also includes other damage where the insured peril was the proximate cause of loss.

Which of the following is a cancellation procedure in which the premium returned to the insured is NOT in direct proportion to the number of days remaining in the policy period? A Proportional B Short rate C Pro rata D Flat rate

B Short rate Correct! Short rate cancellation is a cancellation procedure in which the premium returned to the insured is not in direct proportion to the number of days remaining in the policy period.

An unincorporated, nonprofit association representing all insurance companies in the State of California licensed to transact workers compensation insurance is known as A California Workers Compensation Rating Association (WCRA). B Rating Bureau of California. C California Workers Comp Inspection Rating Bureau (WCIRB). D Inspection Bureau of California Workers Compensation (IBCWC).

C California Workers Comp Inspection Rating Bureau (WCIRB). Correct! The California Workers Comp Inspection Rating Bureau (WCIRB) is an unincorporated, nonprofit association comprised of all companies licensed to transact workers compensation insurance in California and has over 400 member companies.

Which of the following terms describes the ratio that is the percentage of each premium dollar a property/casualty insurer spends on claims and expenses? A Expense B Loss C Combined D Profitability

C Combined Correct! Combined ratio is defined as the percentage of each premium dollar a property/casualty insurer spends on claims and expenses. A decrease in the combined ratio means financial profitability is improving; an increase means that profitability is decreasing. When the ratio is over 100, the insurer has an "underwriting loss."

An additional loss that results from a direct loss of property is called a/an A Liability loss. B Punitive loss. C Indirect loss. D Proximate loss.

C Indirect loss. Correct! Direct losses come about because of perils named in the policy. Indirect losses, also known as consequential losses, come about as a result of a direct loss.

Which of the following is a cancellation procedure in which the premium returned to the insured is NOT in direct proportion to the number of days remaining in the policy period? A Flat rate B Proportional C Short rate D Pro rata

C Short rate correct! Short rate cancellation is a cancellation procedure in which the premium returned to the insured is not in direct proportion to the number of days remaining in the policy period.

Chapter: Property and Casualty Basics 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 A Right of rescission. B Principle of indemnity. C Subrogation. D Adverse selection.

C Subrogation. Correct! Subrogation is a provision found in most insurance policies that gives the insurer, after payment of a loss caused by a third party, the insured's rights to recovery against that third party. The insurer's rights are only to the extent of the loss payment.

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 A Right of rescission. B Principle of indemnity. C Subrogation. D Adverse selection.

C Subrogation. Correct! Subrogation is a provision found in most insurance policies that gives the insurer, after payment of a loss caused by a third party, the insured's rights to recovery against that third party. The insurer's rights are only to the extent of the loss payment.

For an individual claim, what is the loss reserve? A Money the insurer reserves from each premium to pay claims B The amount a second policy will have to pay for the insured to be made whole after a loss C The amount the insured will pay on any covered loss D An estimate of what the insurer will ultimately pay out on a claim

D An estimate of what the insurer will ultimately pay out on a claim correct! For individual claims, the loss reserve is the estimate of what will ultimately be paid out on the claim to the insured by the insurer.

Chapter: Property and Casualty Basics Which of the following terms describes the ratio that is the percentage of each premium dollar a property/casualty insurer spends on claims and expenses? A Profitability B Expense C Loss D Combined

D Combined Correct! Combined ratio is defined as the percentage of each premium dollar a property/casualty insurer spends on claims and expenses. A decrease in the combined ratio means financial profitability is improving; an increase means that profitability is decreasing. When the ratio is over 100, the insurer has an "underwriting loss."

Chapter: Property and Casualty Basics A beauty parlor burns to the ground. What type of loss is this to the owner? A Consequential B Specific C Consecutive D Direct

D Direct Correct! Damage caused by a peril that is insured against is classified as direct loss.

In property and casualty insurance, insurable interest is defined as the right of a person or entity to property in that such a loss to that property would cause a direct monetary loss to the person or entity. Which of the following statements is TRUE regarding insurable interest in property and casualty insurance? A The insurable interest must exist only at the time of application of insurance. B Only the owner of the property has insurable interest. C Insurable interest also includes indirect monetary loss to the person or entity. D If the insured has no insurable interest, the contract is void.

D If the insured has no insurable interest, the contract is void. Correct! The person or entity making a claim for the damaged property must have an insurable interest in the property. In most property insurance losses, the insured is the owner of the property. However, others might also have an insurable interest in the property; such as, a mortgagee has an insurable interest in real property to the extent of the outstanding mortgage.

Chapter: Property and Casualty Basics The premium is determined by multiplying the number of units of insurance purchased times the A Number of dependents. B Grace period. C Mode. D Rate.

D Rate. Correct! The premium is determined by multiplying the rate times the number of units of insurance purchased.