Property and Casualty Basics

Which of the following is a major section of the liability insurance policy?

conditions

What is NOT true about the appraisal clause?

cost of the appraisal is levied against the party who lost

Which of the following is NOT an example of replacement cost loss valuation?

depreciation value

A common-law defense (against being sued for negligence) in which it is argued that, since the injured person agreed to participate in the activity causing the injury, he or she accepted all risk of injury, is

doctrine of assumption of risk

What best describes the endorsement used in property policies that modifies building indemnification as a compromise between ACV and replacement cost?

functional replacement cost

Compensatory damages include what?

general and special

What type of insurance policy insures against all risks of loss that are not specifically excluded by the policy?

open peril policy

The clause in a property or auto policy protecting the lender for their interest in your property that is not a building is known as the

loss payable clause

The amount of losses paid out in comparison to the premiums received is referred to as

loss ratio

In liability insurance, what is considered to be an occurrence?

smoke from a factory discolors the paint on nearby homes

Lost wages, and medical bills are examples of what type of compensatory damages?

special damages

The doctrine of contributory negligence

states that if a party is partly at fault in an accident, he cannot recover from the other party at all

All of the following are common defenses against a negligence accusation, except:

strict liability

Being held responsible for someone's injuries, even though you might not have been negligent, is defined as

strict liability

An insurer fulfills the condition for notifying the insured a business policy is about to be canceled for non-payment of premium by sending notice to the

first name insured

Which of the following construction types favor a fire?

frame

What is NOT a defense against negligence?

vicarious negligence

Ben Graham purchases a $100,000 commercial fire policy. The value of his building is $150,000 and the policy contains an 80% co-insurance clause. After suffering a $12,000 loss, the insurer will pay

$10,000 (100,000/(0.80*150,000)*12,000=10,000 or (Did/Should)*loss

Tom purchased a home five years ago for $110,000. Its current replacement cost is $150,000. If it depreciates two percent per year, what is its current actual cash value

$135,000 (5years * 2% per year * $150,000= $135,000

John owns a building that is insured for $150,000 by two different insurers. Columbus Mutual provides $105,000 worth of coverage and Toledo Mutual provides $45,000 of coverage. John suffers a $10,000 loss. How much will Columbus Mutual pay?

$7,000 (105k/150k * 10k loss= $7,000)

Ten years ago, an 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 building's present actual cash value is

$80,000 (10 years*2,000= $20,000. $100,000-20,000=$80,000)

The most common co-insurance percentage amount that appears in a property contract is

80%

Which of the following is a liability loss?

A fire that was caused by the insured's negligence burns a neighboring building. The owner of the building sues the insured.

The typical components of a rate filing are

Claims + Expenses - Interest.

Liability determined by each party's contribution to an injury defines

comparative negligence

In liability insurance, paying defense costs and expenses in a suit brought against the insured is a contractual obligation known as the

Duty to Defend

What statement regarding "functional replacement cost" is correct?

Functional replacement cost covers the cost to replace with similar property that performs the same function.

Joel Crawford's home is insured by EBC insurance company. Last year he made the final mortgage payment to PNC mortgage company. Joel is considering selling his house to his niece Cynthia. Which of the following has an insurable interest in the home?

Joel Crawford

What statement about open peril coverage is true?

Open peril contracts cover losses resulting from unusual causes that are not excluded by the policy

The purpose of a binder is to:

Provide temporary protection for the insured between the time the application is made in the policy is issued or the binder expires.

The insured property insurance policy has a deductible clause. This means that

The insured must pay a certain amount for each loss incurred under the policy

In insurance, the term "statute of limitation" refers to the time

a person is allowed to press a lawsuit for alleged bodily injury or property damage

ABC Leasing has leased a car to Dwight. They need a loss payable clause for their interest if the car is damaged. But since it is still titled to ABC Leasing, they want the liability coverage of the policy to protect them as well in case of lawsuit. ABC will request a(n)

additional insured clause

ABC Leasing has leased a car to Dwight. They need a loss payable clause for their interest if the car is damaged. But since it is still titled to ABC Leasing, they want the liability coverage of the policy to protect them as well in case of lawsuit. ABC will request a(n) assignment clause. additional insured clause. loss payable clause. mortgagee clause.

additional insured clause

What statement about all risk coverage is true?

all risk policies cover unusual losses from undefined perils

If an insured requests cancellation of a policy which is in force, the insurer

applies the short rate basis

If the insurer and the insured disagree on the amount to be paid on a property claim, the dispute may be settled by

appraisal

The condition that provides a means to settle the amount of a loss when the insured and the insurance company cannot agree is the:

appraisal condition

In a liability insurance policy, if the insured and insurer cannot agree on a claim, a provision is provided called

arbitration

Punitive damages

are not allowed to be paid by an insurer in most states

To recover for a loss under a property policy, when must insurable interest exist?

at the time of loss

Which of the following is not a type of construction for property rating purposes?

bamboo

What damages awarded to the injured person are covered by liability insurance?

both general and special

If a policy is _________there could be a refund of premium, whereas a __________will result in no return of premium.

cancelled/non renewed

Rita has a property policy covering her home and contents. After a heavy wind storm she wants to know if that peril is covered. She needs to review the

cause of loss form attached to her policy

Vicarious liability

could involve one party being liable for acts of another party like an employer or parents

Actual cash value is found by taking the property's replacement cost and subtracting the

depreciation due to wear and tear

What part of an insurance policy personalizes the policy as to who and what are insured?

declarations

What statement does NOT describe necessary elements for negligence to be present?

each party must willfully enter into a contract

One purpose of a deductible is to

eliminate small claims

Phil bought an all risk policy and was told by his agent that everything was covered. After a loss, where does Phil look to see if in fact that loss will be covered?

exclusions section

What rating method involves modifying the premium based on the insured's loss experience or a specified period of time?

experience rating

What best describes "insurable interest?"

having a financial stake in the preservation if property

As a method of valuation, functional replacement cost is usually used when functional replacement cost is

higher than ACV, but lower than the cost of replacement with identical property

A loss suffered as a result of consequences of another loss is an example of

indirect loss

What formula is used to calculate a claim payment when a policy contains a co-insurance clause?

insurance carried/insurance required*loss= amount paid

The party or entity that has the power to investigate, negotiate, and settle losses covered by liability insurance contracts is known as the

insurer

Which of the following is not a requirement to prove negligence?

intervening cause

Negligence

is defined as failure to act as a reasonable person would under similar circumstances

What person is listed on the declarations page?

named insured

Vacancy on a property policy can eliminate certain perils. The definition of vacancy is

no people, no property

In regards to the insurer's rights when settling a claim, the insurer may

pay the claim, repair the property, or replace the damaged property

A dead tree beside a home is best described as what type of hazard

physical

An insured has two policies covering the same property. This is referred to as the Other Insurance Clause or

pro rata liability clause

A co-insurance penalty involves

the insured carrying less than required under the 80% co-insurance clause

If a person violates the co-insurance provisions of the policy, how much will be received in the event of a total loss?

the policy limit

The doctrine of insurable interest closely follows what principle?

theory of indemnity

Supplementary payments appear in a policy providing liability coverage and

three coverages : (1) bail bond coverage; (2) Interest on a judgment; (3) earnings to attend a hearing at insurer's request.

An unendorsed liability policy provides coverage for:

unintentional torts

When a property is present but there is no occupant, it is an example of

unoccupancy

An insurance policy that pays a predetermined amount of insurance at the time of loss best describes a

valued policy