Retention Questions P&C

A producer has each of the following responsibilities to the Insurer, except:

A duty to recommend only high rate policies.

A tornado that destroys would be an example of which of the following?

A peril

What is consideration on the part of the insurer?

A promise to pay in the event of a loss

Which part of an insurance policy covers claims-related expenses, reasonable expenses incurred by an insured to protect damaged property form further loss, or defense expenses/

Additional Coverage

According to the Law of Agency, who represents the principal?

Agent/Producer

What are the four elements of an insurance contract?

Agreement, Consideration, Competent parties, Legal purpose

An insured pays a $100 premium every month for his insurance coverage, yet the insurer promises to pay $10,000 for a covered loss. What characteristic of an insurance contract does this describe?

Aleatory

The declarations page of the homeowners policy provides all of the following information:

Amount of premium charged, Insured Address, what deductible amount applies to each loss covered by the policy

What is a warranty in an insurance contract?

An absolutely true statement upon which the validity of the policy depends.

Because an agent is using stationery with the logo of an insurance company, applicants for insurance assume that the agent is authorized to transact on behalf of that insurer. What type of agent authority does this describe?

Apparent Authority

What type of authority is based on the agent's actions, or words?

Apparent Authority

If the insured does not agree with the insurer's decision regarding a claim, what process helps decide the outcome?

Arbitration

Insurable interest in a property policy must be proven:

At the time of loss

In property insurance, when must insurable interest exist?

At time of loss

If an insurer holds a Certificate of Authority, it is known as what type of insurer?

Authorized or admitted

What are the methods of managing risk?

Avoidance, Transfer, Sharing, Retention, Reduction

A person who takes possession of another person's property in order to repair it is called?

Bailee

An insurance contract must contain all of the following to be considered legally binding EXCEPT:

Beneficiary's consent

A liberalization Clause serves which of the following purposes?

Broadened coverages applies automatically to all policies without a premium charge

Termination of an in-force insurance policy prior to the expiration date shown on the policy is known as:

Cancellation

What is the difference between cancellation and nonrenewal?

Cancellation is the termination of an insurance policy by either party prior to the policy's expiration date. Nonrenewal is the termination of a policy at its expiration date by not offering a continuation of the existing policy.

An insurance producer who by contract is bound to write insurance for only one company is classified as a/an:

Captive agent

What does the term reasonable expectations mean in insurance?

Certain expectations for coverage that a reasonable person would have based on sources other than just the policy language

What document is required for an insurance company to transact insurance?

Certificate of Authority

An insured is driving her car through a residential area when she loses control and crashes into a neighbor's front porch. The neighbor, who was sitting on the porch is injured. The insured's liability policy has a limit of $500,000. This amount applies to the total of damages for any bodily injury and property damage resulting from one accident. Which type of limit of liability does the insured have?

Combined single

In any case where there is a controversy or dispute between the insurance company and the insured, the soliciting agent is the agent of the:

Company

When applying for an individual life insurance policy, an applicant states that he went to the doctor for nausea, but fails to mention that he was also having severe chest pains. This is an example of:

Concealment

The duties and obligations of the insured are found under what part of the insurance policy?

Conditions

The part of a property policy that shows the amount of insurance, premium, and policy terms is the:

Declarations

Which of the following is a mandatory part of an insurance policy that varies with each individual policy?

Declarations tells who, what, when, where

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

Direct Loss

How are direct and indirect losses related?

Direct losses can cause indirect losses.

Insurers are classified according to their domicile. What are the three types of insurers?

Domestic, Foreign, Alien Domicile

Which of the following is attached to the policy to alter or add to the policy provisions?

Endorsement

The section of an insurance policy that details what perils are not insured against and what persons are not insured is known as the:

Exclusions

What are the three types of agent authority?

Expressed, Implied, Apparent

A federal regulation called the _____________ protects consumer privacy.

Fair Credit Reporting Act

Each of the following is a direct loss:

Fire damage, Cracked windshield, Broken pipe water damage

Which of the following would be named on the declarations page of a property or liability policy?

First named Insured

Which of the following is an insurance company that is organized under the laws of another state within the United States?

Foreign

What type of insurer is formed under the laws of another state?

Foreign Domicile

When doing business in this state, an insurance company that is formed under the laws of another state is known as which type of insurer?

Foreign Domicile

Which of the following entities is not an insurer but an organization formed to provide insurance benefits for the members of an affiliated lodge or religious organization?

Fraternal benefit society

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

Hazards

Otto fails to pay the premium on a Personal Lines Property Policy. Otto's policy can be canceled IF:

His policy has been in effect for at least 60 days.

Which of the following types of authority does the public assume an agent has when quoting insurance?

Implied

Each of the following is an element of legal contract, except:

Indemnity

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

Which principle of insurance restores the insured to the same economic condition?

Indemnity

An insured's business is damaged by a fire, and temporarily shut down for repairs. As a result, the insured suffers loss of income. What type of loss is the loss of income?

Indirect or consequential

To purchase insurance, the policy owner must have financial interest in the property. This is known as:

Insurable Interest

Tp purchase insurance, the policy owner must have financial interest in the property being insured. This is known as:

Insurable interest

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

Insurance

Which of the following BEST describes a scheduled limit of insurance on a property policy?

Insures a single item of property on a single policy for a specific limit.

A deliberate act that cause harm to another person, regardless of whether the harm is intended is called a:

Intentional tort

The insurer may suspect that a moral hazard exists if the policyholder:

Is not honest about his health on an application for insurance.

Each of the following must be included in an insurable risk, except:

Large group with dissimilar members

For teh reported losses of an insured group to be more likely to equal the statistical probability of loss for that particular class, the insured group must become:

Larger

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

Limits of liability

An insurance organization that does not issue insurance policies but provides a meeting place for underwriters to conduct business is known as a:

Lloyd's assocation

What are the five characteristics of an ideally insurable risk?

Loss must be: 1) Chance, 2) Measurable, 3) statistically predictable, 4) Not Catastrophic, 5) coverage cannot be mandatory

Rates that are established on the similarities of the risk with other risks are known as:

Manual rates

Each of the following is a factor considered by an underwriter, except:

Marital Status

The insured's house is located one mile from the county's new landfill and across the road from the entrance of a rock quarry. It would cost $150,000 to rebuild the house if something happened to it, but when the insured tried to sell it, the best offer he received was $80,000. What method of valuation is used to insure this property?

Market Value

Dishonest tendencies that increases the probability of loss are what types of hazard?

Moral

A ___________ insurance company is owned by its policyholders.

Mutual

An insured purchased an insurance policy 5 years ago. Last year, she received a dividend check form the insurance company that was not taxable. This year, she did not receive a check from the insurer. From what type of insurer did the insured purchase the policy?

Mutual company

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

Open Perils (special)

Which of the following calculations equals a company's loss ratio?

Paid losses + loss reserves/ total earned premium

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

Per Occurance

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

Peril

What are the three types of hazards?

Physical, Moral, Morale

Which of the following individuals represents the insurance company when selling an insurance policy?

Producer

A situation in which a person can experience only a loss and no gain presents what type of risk?

Pure Risk

If an insurance company wants to transfer all or part of the risk it has accepted, it would buy which of the following types of insurance?

Reinsurance

___________ is the method of loss valuation that values damaged property at the cost to replace with property of like kind and quality, at current prices, and without deduction for depreciation.

Replacement Value

What calculation is used to determine the actual cash value (ACV) of a loss?

Replacement cost - depreciation = ACV

In property insurance, what is actual cash value?

Replacement cost at the time of loss, minus depreciation

Insurance is the transfer of

Risk

Local sportscaster Fred states on the air during a news telecast that the local pro football coach has a lousy record, which is untrue. This is an example of

Slander

What is consideration in an insurance contract?

Something of value that each party gives to the other. Consideration on the part of the insurer is binding. The insured is premium.

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

Speculative Risk

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

Split Limits

When the amount of insurance written in a property policy is not subject to any coinsurance provision and the amount is paid in the event of a covered loss, the coverage is said to be written as:

Stated Amount

A warranty is defined as which of the following?

Statement in the application that is guaranteed to be true

The transfer of an insured's rights to seek damages from the negligent party to the insurer is found in which of the following clauses?

Subrogation

In the agent/insurer relationship, who is considered the principal?

The insurance company/ insurer

When an individual purchases insurance, what risk management technique is he or she practicing?

Transfer

The process an insurer uses to evaluate applications and determine if a policy should be issued and on what terms, conditions, and rates is known as:

Underwriting

What is the process that insurers use to determine whether a policy should be issued and on what terms and conditions?

Underwriting

Which insurance company department accepts the insurance risk?

Underwriting

Insurance contracts are aleatory in nature. What does that mean?

Unequal values are exchanged between the parties to a contract.

In forming an insurance contract, when does acceptance usually occur?

When an insurer's underwriter approves coverage.

When would misrepresentation on an insurance application be considered fraud?

When it is intentional and material

In insurance contacts, when is the offer usually made?

When the insurance application is submitted

In insurance contracts, when does acceptance usually occur?

When the insurer approves a prepaid application

What does the term unilateral contract mean?

is a one-sided contract. This means only one party makes an enforceable promise.

Insurance is a contract by which one seek to protect another from:

loss

What does indemnify mean in insurance?

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

What is a risk?

uncertainty of a loss