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Special Damages Compensation
Out of pock expenses for medical, miscellaneous expenses and loss wages. (economic losses)
The insured has violated the contract without the knowledge of the mortgage holder after a loss
the insured cannot collect but the mortgage holder will still be paid
Frank steaks furnishes meat to steakhouses. An accident on the premises cause the building to lose refrigeration for 32 hours. The state inspectors will not allow the meat in the refrigerator units to be sold for human consumption and frank loses $18,500 in disposing of the meat. What coverage under franks BOP policy will cove the loss.
utility service- direct damage
Liability imposed on one party as a result of the actions of another person ( parent/child employer/employee) is known as?
vicarious liability
Outline of coverage
#110. Which of the following documents provides a disclosure of a Medicare supplement policy? a) Statement of renewal provisions b) Policy summary c) Outline of coverage d) Buyer's guide
Comparative Negligence
Applies a percentage of negligence to both parties, depending on the degree of responsibility each has toward the injury. --More recognized defense
What do agents need to transact insurance on behalf of an insurer?
Appointment
A policy condition that stipulates how the amount of damaged or lost property will be determined if the insured and the principal do not agree on the value of a property loss is known as
Appraisal
An assessment of property to determine either the correct amount of insurance to be written or the amount of loss to be paid
Appraisal
Losses caused by vandalism and malicious mischief (V&MM) are excluded from coverage under a homeowners policy if a dwelling has been vacant for how many days?
More than 60 consecutive days
Losses resulting from vandalism and malicious mischief (V&MM) will be excluded from coverage under a dwelling policy if a property has been vacant for what period of time?
More than 60 consecutive days
What type of coverage is included in Section II of homeowners insurance?
Personal Liability Coverage
Blanket Linsurance
Provides cover for multiple classes of property at one location or for one or more classes of property at multiple locations. -No single item assigned a specific limit
What method of dealing with risk is applied when insurance is purchased?
Transfer Transfer is the basic principal of insurance under which the risk of financial loss is assigned to another party. Insurance is the most common method of transferring risk from an individual to an insurance company.
An insure neglects to pay a legitimate claim that is covered under the terms of the policy? which of the following term best describes what the insure has violated?
consideration
Definition of Risk
The chance of a loss occurring
What is the name of the process that insurance companies use to determine whether a risk is insurable?
Underwriting Underwriting is a risk selection and classification process. The purpose of underwriting is to evaluate risk to determine which applicants to insure and what coverage to offer.
Coverage B - Other structures
Which dwelling policy coverage will insure a garage not attached to the primary insured dwelling?
Fire, lightning, and internal explosion
A basic dwelling policy automatically provides coverage against what?
How much coverage is provided under a homeowners policy for theft or unauthorized use of a credit card? A$100 B$500 C$1,000 D$5,000
$500 is provided automatically, and may be increased by endorsement.
Loss Costs are?
*rating method* The actual or expected cost to an insurer of indemnity payments & allocated loss adjustment expenses (ALAEs). Loss costs reflect only the costs and ALAEs associated with past claims. *They DO NOT include overhead (expenses) costs or profit loading*
Exclusive Agency System/Captive Agents
- 1 agent represents 1 company - Exclusive - Commissions on personal sales - Renewals can only be placed with the appointing insurer
Independent Agency/American Agency system
- 1 independent agent represents several companies - nonexclusive -commissions on personal sales Business renewal with any company
rates
-Amount charger for coverage - class/manual rating applies to applicants with a specific set of characteristics - Individual rate-making approaches - judgement rating - schedule rating experience rating merit rating
Relationship within law of agency
-An agent represents the insurer, not insured - Any knowledge of the agent is presumed to be knowledge of the insurer -If the agent is working within the conditions of his/her contract, the insurer is fully responsible -When the insured summits payment to the agent, it is the same as submitting a payment to the insurer
Types of Liability
1. Absolute Liability 2. Strict Liability 3. Vicarious Liability
Elements of a legal Contract
1. Agreement - offer and acceptance 2. Consideration 3. Competent parties 4. Legal purpose
Two classes of Compensatory damages
1. special damages 2. general damages.
If an agent's appointment is terminated, suspended or revoked, the agent must cease selling or soliciting on behalf of the insurer within
10 calendar days
In dwelling policies, within how many years of a loss may an insured bring a lawsuit against the insurer?
2 years
Within how many years of a loss may an insured bring a lawsuit against an insurer, according to the dwelling policy?
2 years
Within how many days of requesting an Investigative Consumer Report must an insurer notify the consumer in writing that the report will be obtained?
3 days.
MN no fault limit
30/60/10
What are the optional limits of liability by the Automobile Insurance plan?
50/100/25
In return for premium, an insurance company must...
?
Which of the following property clauses allows the extension of a major coverage, applying to specific losses not already insured?
?
What is a binder?
A temporary insurance contract that goes in effect prior to the policy issue. Temporary oral or written agreement issued by an agent or insurer that provides temporary coverage until the policy becomes effective.
Comparative Negligence
A theory in tort law under which the liability for injuries resulting from negligent acts is shared by all parties who were negligent (including the injured party), on the basis of each person's proportionate negligence.
Exposure
A unit of measure used to determine rates charged for insurance coverage. - The age of the insured - Medical history - occupation - Sex
What is a covered auto?
A vehicle shown in the policy declarations also includes trailers owned by the insured and newly acquired autos
When a mortgagee is named in a mortgagee clause attached to a fire or other direct damage policy...
A. The loss reimbursement will be paid to the mortgagee as their interest may appear. B. The mortgagee's rights of recovery will not be defeated by any act or neglect of the insured. C. The mortgagee may bring a suit in their own name to recover damages to covered property. ALL OF THE ABOVE ARE TRUE.
In the Personal Auto Policy, owned trailers being towed by an insured auto are automatically covered for A. Comprehensive (other than collision) Coverage. B. Collision Coverage. C. Uninsured Motorists Coverage. D. Towing Coverage.
ANSWER: C Trailers, while being towed by an insured auto, are covered automatically for BI/PD and U/M under Part A of a Personal Auto Policy.
A type of liability that occurs due to hazardous activities or dangerous operations
Absolute Liability
Workers compensation insurance covers injuries without regard to fault or negligence. This describes what type of liability?
Absolute Liability
An unplanned, unforeseen event which occurs suddenly and at a specific place
Accident
Retrospective Rating
Actual losses during the policy period actually determines the final premium, subject to min.-max. premium. A deposit premium is required at policy inception and is adjusted at the end of the policy term based on actual loss experience.
Membership in the Minnesota Assigned Claims Bureau consists of
All insurers who transact Minnesota No-Fault insurance
How many owner-occupied residences per covered home are allowed by homeowners policies?
An HO policy may insure a property that has a one-to-four family owner-occupied residence. *with no more than 2 families or 2 roomers or boarders per unit*
Proximate Cause is also known as?
An Unbroken Chain of Events
Warranty
An absolutely true statement upon which the validity of the insurance policy depends.
A driver of an automobile must have proof of insurance in their possession
At all times when operating an autombile
A commercial package policy designed for certain types of small businesses, combining property and liability coverages (very similar to a commercial package policy)
Businessowners Policy (BOP)
All of the following people would be considered insureds under the liability section of a homeowners policy, EXCEPT... A. The legal representative of a deceased insured. B. The 22-year old niece of the insured, who is only visiting. C. A 15-year old foster child residing in the premises. D. The mother of the insured who is residing in the household.
B. Relatives, any age, are considered insureds only if they are residents of the household.
An insurance agency could purchase an errors and omission insurance policy, which would provide protection in the event of any of the following events EXCEPT...
B. The agency loses commission income from policies that were not insured by the insurer.
When must a surcharge disclosure statement e supplied to an applicant for auto insurance?
Before the initial premium is accepted
A temporary contract that puts insurance coverage in effect before the actual policy is issued
Binder
A single property insurance policy that provides coverage for multiple classes of property at one location, or for one or more classes of property at multiple locations
Blanket Insurance
Under the HO-4 and HO-6 policy forms, property is insured against what type of perils?
Broad Form Perils
What type of licensee represents the insured?
Broker
What insurance principle does pro rata liability protect?
Indemnity
Not Catastrophic
Insurers need to be reasonably certain their losses will not exceed specific limits.
Hazard
Conditions or situations that increase the probability of an insured loss occurring.
Peril
Cause of loss
A demand made by the insured to cover a loss protected by the insurance policy
Claim
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?
Consequential loss, also known as indirect loss, is a second financial loss caused by a covered direct loss.
An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which insurance principle has the insurer violated?
Consideration
When an insured makes truthful statements on the application for insurance and pays the required premium it is known as...
Consideration
Provides coverage against liability arising out of an insured's contractual obligations
Contractual Liability
Functional Replacement Cost
Cost to replace damaged property with less expensive and more modern construction or equipement.
Replacement Cost
Cost to replace damaged property with like kind and quality at today's price, without depreciation.
ACV
Current Replacement Cost- Depreciation
Which dwelling form is called the Broad form?
DP-2
The lessening of value of real and personal property due to age and wear and tear
Depreciation
What are the two coverage triggers in commercial crime policies?
Discovery form and loss sustained form
A printed addendum to a contract that is used to change the policy's original terms, conditions, or coverages
Endorsement
A professional liability coverage that protects the insured against liability for committing an error or omission in performance of professional duties.
Errors and Omission
What type of coverage do umbrella policies provide?
Excess coverage over the primary policy
All of the following are found in the declarations section of a policy EXCEPT the
Exclusions
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.
The requirement that agents must account for and promptly remit all insurance funds collected is known as what type of agent responsibility?
Fiduciary
A policy that provides coverage for garage businesses (dealers, service stations, garages, parking lots, etc). Includes coverage for liability, physical damage, and garagekeepers losses arising out of owned, nonowned, and hired autos
Garage policy
Which of the following policies does NOT contain an automatic reinstatement provision?
General liability written with an aggregate limit An aggregate limit is reduced by the payment of claims. It is possible for an insured to run out of coverage before the expiration of the policy. Aggregate limits are restored on the anniversary date of the policy.
What are the coverage forms available in homeowners policies?
HO-2, HO-3, HO-4, HO-5, HO-6, and HO-8
Loss Valuation
How a loss is valued at the time of a loss.
How does an endorsement affect an insurance contract?
It modifies the contract's original terms.
Fraternal Benefit Societies
Life or health insurance companies formed to provide insurance for members of an affiliated lodge, religious organization, or fraternal organization with a representative form of government.
The maximum amount of money the insurance company will pay for a particular loss, or for loss during a period of time
Limits of liability
Insurance is contract by which one seeks to protect another from
Loss
Which of the following best describes an unfair trade practice of defamation?
Making derogatory oral statements about another insurer's financial condition.
Class Rating is also known as?
Manual Rating
What type of professional liability coverage would a medical doctor need?
Medical Malpractice indemnifies the insured against legal liability for bodily injury or death to third parties
What type of vehicle is excluded from the definition of an auto?
Mobile Equipment
Any person, firm, or corporation, or any member thereof, specifically designated by name as insured(s) in a policy, as distinguished from the others who, though unnamed, are protected under some circumstances
Named Insured
The cause of loss specifically covered by the insurance policy
Named peril
The federal government's program to provide flood insurance at subsidized rates
National Flood Insurance Program
Named Peril
No coverage for unnamed perils. If it ain't named, it ain't covered
A broader definition of loss, which differs from accident in that it includes losses caused by continuous or repeated exposure to conditions resulting in injury to persons or damage to property that is neither intended nor expected
Occurrence
What term describes a loss caused by continuous exposure to a condition?
Occurrence
Marine insurance designed to provide broad coverage for cargo and ships in transit over sea. Includes cargo insurance, hull insurance, and liability coverage (protection and indemnity)
Ocean Marine Insurance
How does the equipment breakdown coverage form value loss?
On a replacement cost basis However, if the damaged property is not repaired or replaced within 24 months after the accident, settlement is at the smaller of ACV or the cost to repair or replace
How is crime insurance usually written?
On an all-risk (or open peril) basis
How are the dwelling and other structures covered in an HO-3 policy form?
On an open peril basis
An agent license can be issued...
Only to individuals.
Liability arising out of the rendering or failure to render services of a professional nature
Professional Liability
What is the name for the deductible in liability umbrella policies?
Self-Insured Retention (SIR)
No Fault Symbol
Symbol 5
Deductibles
The amount an insured must pay on a claim before the insurance policy provides coverage.
In homeowners policies, what determines the amount an insurer will pay under Coverage D?
The amount of coverage on a dwelling
What is the occurrence form trigger based on?
The date of loss *not the date it is discovered or reported
Apassengerinafriend'scarisinjuredwhilegettingintothecar.Whichofthe following statements would apply if both the passenger and the driver had medical payments coverage under a Personal Auto Policy?
The driver's policy will pay.
WhenanUmbrellaPolicyisbroaderthanunderlyinginsuranceanditpaysa loss that is not covered by the underlying policy, it usually only pays
The excess over the self-insured retention.
Cancellation
The termination of an in-force insurance policy, either by the insurer or insured, prior to the expiration date shown in the policy.
What do numerical symbols represent in auto policies?
The type of vehicle insured for specific coverages
Risk
The uncertainty or chance of a loss occurring.
Waiver
The voluntary act of relinquishing a legal right, claim or privilege
An insured is driving her auto and strikes a large pothole, causing a flat tire. Which of the insured's personal auto policy will pay for the repair?
This loss is not covered
mis-representation
Untrue statements of the application and could void the contract
What is the maximum number of units in residential dwellings insurable by a dwelling policy?
Up to 4 units
An absolutely true statement that, if breached, may void an insurance contract
Warranty
Due to Chance
a loss that is outside the insured's control
Termination of an in-force insurance policy prior to the expiration date shown in the policy is known as?
cancellation
Avoidance
eliminating exposure to a loss
What is the purpose of the coinsurance clause found in the property insurance policy?
encourage insurance to value
Which of the following is a common exclusion found in Part D: coverage for damage to your auto of a PAP?
mechanical breakdown
A bond is written for a set limit and the surety will be liable only for this amount of the limit. This is known as the?
penalty
which of the following liability exposures is most likely for a small specialty retail clothing boutique?
premises liability exposure
The occurrence form trigger is based on
the date when injury or damage occurs
Regulates consumer reports.
#10. The Federal Fair Credit Reporting Act a) Regulates consumer reports. b) Protects customer privacy. c) Regulates telemarketing. d) Prevents money laundering.
Signed waiver of premium.
#100. Upon policy delivery, the producer may be required to obtain any of the following EXCEPT a) Delivery receipt. b) Signed waiver of premium. c) Statement of good health. d) Payment of premium.
Medical background
#101. Which of the following information about the applicant is NOT included on Part 1 of the application for insurance? a) Marital status b) Medical background c) Gender d) Occupation
90 days.
#87. Most policies will pay the accident death benefits as long as the death is caused by the accident and occurs within a) 30 days. b) 60 days. c) 90 days. d) 120 days.
A pizza shop has a neon sign attached to it building during a severe thunderstorm the sign is damaged by wind and hail what is the maximum the business and personal policy will pay for the damage to the sign?
$2,500
If a property is covered by Company A for $20,000 and Company B covers the same property for $40,000, how much will company A pay on a $24,000 loss?
$8,000
What are the four elements of an insurance contract?
1) agreement [offer and acceptance] 2) consideration 3) competent parties 4) legal purpose
An insured must get advance warning if the premiums will be increased by more than...
15%. Written notice of an increase in premiums that exceeds 15% of the current policy's premium must be delivered or mailed to the insured at least 45 days before the effective date of the change.
Under a personal auto policy (PAP), coverage for medical payments applies to expenses following a covered accident that are incurred within what time period?
3 years
A willful violation of an agent's fiduciary responsibility that involved funds exceeding $500 will be considered...
A felony.
Internal explosion
A gas stove exploding in the dwelling is an example of which named peril?
Agent
A legal representative of an insurance company
Applicant
A person applying for insurance
Insured
A person covered by an insurance policy
A method of property valuation that is based on the property's current replacement value minus depreciation
Actual Cash Value (ACV)
Actual Loss or Damage
Actual loss or Damage must have been suffered by the party seeking recovery.
The maximum limit of coverage available under a liability policy during a policy year, regardless of the number of claims made or the number of accidents that may occur
Aggregate Limit
Agreed Value
Agreed upon by the insurer and insured as to the amount of insurance that represents a fair valuation for the property at the time the insurance is written and suspends any coinsurance or other contribution clauses in the policy -no regard to appreciation or depreciation -works best with values that do not fluctuate much in value
In which of the following types of property valuation will the policy pay the full value as specified on the policy schedule, regardless of the insured property's appreciation or depreciation?
Agreed value
DP-3 (Special) is an open-peril form. What does that mean?
All perils are insured unless specifically excluded
How much is covered for debris removal under the HO property additional coverages?
All reasonable costs
Contract
An agreement between two or more parties that is enforceable by law
To be covered, which of the following exposures must be added by endorsement under a Dwelling Form? ARental Value BDwelling CDetached garage DPersonal liability
Answer: D. Personal liability
Legal liability arising from death or physical trauma to a person as a result of a negligent or purposeful act by an insured
Bodily Injury Liability
What are the three types of coverage forms available in dwelling policies?
Basic, Broad, and Special
What are the three causes of loss forms in commercial property coverage?
Basic, broad, and special
What types of losses are indicated by the split limits in an auto insurance policy?
Bodily injury per person/ bodily injury per accident/ property damage per accident
A man is working on the roof of his house, and his neighbor is watching from the ground. When roof shingles are thrown off the roof, they hit the neighbor in the face, injuring his eye. Which best classifies the homeowner's legal liability?
Bodily injury. The legal liability arising from physical trauma to a person or death arising from the negligent or purposeful act and omissions by an insured.
Which commercial property form is used to insure buildings while under construction?
Builders risk
Modified Fire-Restive
Buildings constructed with masonry and/or other materials with fire resistance rating between 1 hour and 2 hours
Joisted Masonry
Buildings constructed with masonry or fire-resistive walls and combustible floors and roof.
Masonry Noncombustible
Buildings constructed with masonry or fire-resistive walls and noncombustible or slow-burning floors and roof.
With regards to a homeowners policy, which coverage provides for indirect or consequential losses?
Coverage D covers indirect or consequential losses.
Which of the following must an insurer obtain in order to transact insurance within a given state?
Certificate of authority. All insurers (domestic, foreign, or alien) must obtain a certificate of authority before transacting insurance within a given state.
If an insured was at fault in an automobile accident, which coverage would pay for damage to the insured's auto?
Collision Collision is defined as impact of a covered vehicle or nonowned auto with another vehicle or object.
What authority issues a Cease and Desist Order?
Commision
Too offset the effects of inflation
In dwelling policies, what is the purpose of the automatic increase in insurance endorsement that increases the amount of insurance by an annual percentage?
What are the two types of compensatory damages?
General & Special General damages are intangible losses such as pain and suffering. Specific damages are out-of-pocket expenses such as medical expenses or loss of wages.
2 years
In dwelling policies, within how many years of a loss may an insured bring a lawsuit against the insurer?
Standard of Care
Implies acting as a reasonable person would act.
Where is the policy period stated in an insurance policy?
Declarations page
Coverage provided under a workers compensation policy to cover the employer's liability arising out of employees' work-related injuries
Employers Liability Coverage
Purpose of Underwriting
Evaluating applications to determine whether a policy should be issued, if so, the terms, conditions & rates for that policy.... It is a risk selection process
A program established by law that makes property insurance available and affordable to insureds who might otherwise be uninsurable because of environmental hazards
FAIR Plan (Fair Access to Insurance Requirements)
Under the professional liability loss settlement provision, what must an insurer do before offering to pay a claimant to settle a claim?
Get the insured's consent. If a claim has been filed under a professional liability policy, an insurer MUST get the consent of the insured before offering to pay to settle a claim. If the insured's professional reputation is at risk, and the insured feels he or she is not negligent, the insured can require the insurer to defend the action in court.
Under what conditions can broad theft coverage be added to a dwelling policy?
If the insured is the owner-occupant of the dwelling
The valued policy statue applies in which of the following events?
In the event of a total loss by a fire to a one or two family residential building or structure.
Conditions
Indicates the general RULES or PROCEDURES that the insurer and insured agree to follow under terms of the policy -Inspections -Changes to the policy -Liberalization clause -Return of premium
What is controlled business?
Insurance on the producer'sown life or property, or the lives or property of the producer's family or business associates
Lloyd's Association
Insurance resulting from an interchange of reciprocal agreements of indemnity
Reciprocal
Insurance resulting from an interchange of reciprocal agreements of indemnity among persons known as subscribers.
A general liability policy will respond to claims against the insured when bodily injury or property damage is caused by what?
Insured's Negligence
AllofthefollowingaretrueregardingdepositpremiumEXCEPT
It is 50% of the actual premium
Fair Rental Value coverage in the dwelling policy is similar to which HO policy form?
Loss of Use
On its advertisement, a company claims that it has funds that are, in fact, not available for the payment of losses or claims. What is the company guilty of?
Misrepresentation
The use of written or oral statements of the insured or insurance company misrepresenting the risk, terms, coverages, benefits, privileges, or estimated future dividends of any policy
Misrepresentation
What type of property does a Personal Floaters policy cover?
Movable personal property, wherever it may be located.
Technically, an insurance policy that insures against more than one peril. More commonly, an insurance policy that provides coverage against both property and casualty perils.
Multi-Peril Policy
Which of the following would be covered under personal injury liability?
Slander. In insurance, personal injury includes injury to the character of another person caused by libel, slander, false arrest, invasion of privacy and other acts. The injury is less physical than those covered under bodily injury liability.
The policy provision found in property insurance policies that prevents the insured from collecting twice for the same loss is called
Subrogation
Robbery
Taking of property by use of force, violence, or fear
If the insurer pays an amount less than the amount insured under the policy in the event of a total loss to property, how much of the insured's premium must the insurer return?
The amount of premium actually paid and the premium that would have been charged for a policy with an amount of insurance equal to the amount paid by the insurer for the loss. In the event of a total loss to property, if the insurer pays an amount less than the amount insured under the policy, the insurer must return the amount of premium actually paid and the premium that would have been charged for a policy with an amount of insurance equal to the amount paid by the insurer for the loss.
What does Form HO-5 cover?
The dwelling and other structures, as well as contents and personal property HO-5 (comprehensive form) covers both the dwelling and other structures on a n open peril basis. It also covers personal property, with the exception of landlord furnishings in a rented apartment.
Aleatory Contract
The exchange of value is unequal.
Tort in regards to property damage
The extent of the loss is usually simple to determine, it's measured by the actual monetary loss the injured party suffered, which is measured by the value of the property damaged or destroyed, and the loss of use of that asset.
To whom does the term "we" refer to in a personal auto policy?
The insurer
Vicarious Liability
The master was liable for the acts of their servant "respondeat superior" -Parents liable for acts of their children & employers liable for acts of their employees
What are policy limits?
The maximum amount an insured may collect for a loss under the terms of the policy
What is a combined limit in an auto insurance policy?
The maximum amount the insurer will pay on a covered loss *this includes both bodily injury and property damage*
Premium
The money paid to an insurance company to purchase a policy
Tortfeasor
The person who commits the tortious act.
In surety bonds, who purchases the bond and promises to fulfill the obligation?
The principal or obligor The principal or obligor is the person who promises to fulfill the obligation and who purchases the bond. The obligee or insured is the person to whom the promise has been made and to whom the bond is payable in the event the principal defaults on its obligation.
What is the purpose of business income insurance?
To cover the loss of business income that occurs when a business must suspend its operations because of a direct loss.
Which of the following terms refers to the acts of soliciting insurance, making an insurance contract effective, and dealing with matters arising from that contract?
Transacting insurance. Any of the following acts is considered to constitute an act of "transacting insurance" in Georgia: solicitation and inducement to insurance, preliminary insurance negotiations, effectuation of an insurance contract, and transactions of matters subsequent to and arising out of effectuation of an insurance contract.
Which type of misrepresentation persuades an insured, to his or her detriment, to cancel, lapse, or switch policies from one to another?
Twisting
Automobile coverage designed to provide bodily injury protection for the insured should he or she be involved in an accident in which the driver at fault has no insurance to cover the loss
Uninsured Motorist Coverage
A property that has no contents, furnishings, or occupants
Vacant
Insurance that covers an employer's obligations under workers compensation laws, which make the employer responsible for state damages n the event of a work-related injury or illness. Workers compensation coverage also includes separate coverage for employers liability.
Workers Compensation Insurance
In property and casualty policies, what is required for an assignment to be valid?
Written consent of the insurer
Which of the following is covered by the camera and musical instruments dealers floater?
a customers camera left at a camera shop for repair
Twisting
a misrepresentation, or incomplete or fraudulent comparison of insurance policies that persuades an insured/owner, to his or her detriment, to cancel, lapse, switch policies, or take out policy with another insurer
Coverage F (medical payments) under a homeowners policy would cover
a residence employee who is injured on the job
When other insurance is written on the same basis as a commercial property policy, what is the insurer obligated to cover?
a share of the loss
Which of the following definitions best defines the term accident?
a sudden, unplanned and unexpected event not under the control of the insured resulting in injury or damage neither expected nor intended
What would be considered a newly acquired auto?
a vehicle acquired by the insured during the policy period
Which of these is defined as the maximum limit of coverage available under a liability policy during a policy year regardless of the umber of claims that may be made or the number of accidents that may occur?
aggregate limit of liability
Indirect Loss -property insurance
aka consequential loss. Losses considered a result of direct loss. Usually result from the time it take to repair or replace damaged property.
Insured
anyone who is covered under the policy, whether named or notl
Which inland marine form would provided the best protection for a dry cleaning company against loss or damage to their customers property while in the care custody and control of the dry cleaners?
bailee's customer policy
Intervening Cause
bars or reduces recovery to an injured person if an intervening cause interrupted the chain of events and sets in motion a new chain of events. ex; you clear snow from walkway, it begins to snow again and before you can re-clear it, someone slips and falls.
Coverage A in the Commercial General Liability (CGL) form protects against what type of losses?
bodily injury or property damage suffered by a third party
Frame
buildings constructed of combustible materials, or with noncombustible or slow-burning walls and combustible floors and roof.
noncombustible
buildings constructed of noncombustible materials
Frame construction
constructed of combustible materials or with noncombustible or slow burning wall and combustible floor and roof. -Usually receives the LEAST favorable rating.
Noncombustible construction
constructed of noncombustible materials (materials that will not ignite and burn when subjected to fire)
Joist-masonry contruction
constructed with masonry or fire-resistive walls and combustible floors and roof.
All of the following are supplemental payments found in liability policies EXCEPT
costs the insured incurred in hiring an attorney
Market conduct
describes the way companies and producers should conduct their business
3 types of insurers
domestic, foreign, alien
Components
factors that determine rates, including loss reserves, loss adjusting expenses, operating expenses and profits
How does the mobile home coverage law or ordinance in a homeowners policy?
it removes the coverage
In which type of commercial crime policy coverage is triggered by a loss that happens during the policy period but is not necessarily discovered during the policy period?
loss sustained form
Fire-resistive construction
masonry and/or materials with fire resistance rating of 2 hours or more. Usually most favorable rating
modified fire-resistive construction
masonry and/or other materials with a fire resistance rating between 1 hour and 2 hours.
Masonry noncombustible construction
masonry or fire resistive walls and noncombustible or slow bunring floors & roof
When a driver does not produce proof of insurance upon the demand of a police officer, they are guilty of a
misdemeanor
Which of the following would be covered under the film coverage form?
none of these covered
Losses caused by continuous or repeated exposures 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?
occurence
Pennsylvania Property and Casualty Guaranty Associations
organization of insurers licensed to write property and casualty insurance on a direct basis in PA
What insurance policy provisions define how the policy will respond if there is more then one insurance policy written on the same risk?
other insurance
Which of the following personal auto coverage pay for damages to be covered auto due to contact with a deer?
other then collision (comprehensive coverage)
Who are parties to a bond?
principal-oblige-surety
Before an insure will pay any loss under a policy what is usually required from the insured?
proof of loss
when the amount of insurance written in a property policy is not subject to any coinsurance provision and that amount is paid in the event of a covered loss the coverage is said to be written
stated amount
Representations
statements believed to be true to the best of one's knowledge, but they are not guaranteed to be true
Your accounts receivable records have been destroyed or damaged. Your loss may be covered with
the accounts receivable coverage form
Which of the following would NOT considered a source of insurability information by an insurer?
the applicants marital status
In insurance an offer is usually made when?
the application is submitted
Express Authority
the authority a principal intends to grant to an agent by means of the agent's contract
Surety bonds are written for a definite limit called
the bonds penalty
Insurer
the company who issues an insurance policy
What is the purpose of the NFIP?
to fill the gap left by the private insurers in flood coverage
What is the purpose of a claims-made form?
to pay for bodily injuries or property damage reported during the policy period
Prior to state- directed workers compensation statues being enacted employees had?
to sue employer for the loss and prove that the employer was at fault
In forming an insurance contract when does acceptance usually occur?
when an insure approves a prepaid application
ACV: Actual Cash Value
Current replacement cost - depreciation
How is the actual cash value of a property calculated?
Current replacement cost - depreciation
The dwelling insured on HO-2, HO-3, or HO-5 forms is covered for replacement, provided that it is insured for at least what percentage of replacement cost on the date of loss? A. 25% B. 40% C. 75% D. 80%
D. 80% Correct! HO-2, -3, and -5 provide replacement cost coverage if the house is insured for at least 80% of its value on the date of the loss.
Which of the three dwelling policy forms provides the most limited coverage?
DP-1 (Basic) DP-1 may cover dwellings, other structures, personal property, and fair rental value.
Which dwelling coverage form(s) will pay for the replacement cost of a dwelling?
DP-2 (broad) & DP-3 (special)
Which dwelling coverage form would pay replacement cost for the dwelling?
DP-2 and DP-3
All perils are insured unless specifically excluded.
DP-3 (Special) is an open-peril form. What does that mean?
Which dwelling form provides open peril coverage on the building?
DP-3 (special)
A coverage provided in many property contracts that reimburses the insured for expenses involved in removing debris produced by a loss from a peril insured against
Debris Removal
What are the four additional coverages under the builders risk coverage form?
Debris removal, preservation of property, fire department service charge, and pollutant cleanup and removal
What are additional coverages available in homeowners policies without additional premiums?
Debris removal, trees/shrubs/plants, reasonable repairs, fire department service charge, property removed, loss assessment, collapse, ordinance or law Additional coverages listed above (and several others) are available under HO policy forms without any additional premium
A section of an insurance policy that includes the basic underwriting information, such as the insured's name, address, amount of coverage and premiums and a description of insured locations, as well as any supplemental representations by the insured
Declarations
Which of the following is a mandatory part of an insurance policy that varies with each individual policy?
Declarations
What part of the policy shows the amount of insurance, premium, and policy terms?
Declarations The dec page gives information on who, what, when, where, and how much.
Which of the following is a mandatory part of an insurance policy that varies with each individual policy?
Declarations. It's also the part of a property policy that shows the amount of insurance premium
The portion of the loss that is to be paid by the insured before any claim benefits may be paid by the insurer
Deductible
If a producer makes maliciously critical statements about another insurer, what is this illegal practice called?
Defamation
Policy Territory
Defines location where coverage will be provided.
The part of a policy that clarifies terms in the policy is the...
Definitions.
An insured is applying for a casualty insurance policy. One of the conditions of the policy allows the insurance company to inspect the insured's books at the end of the policy term to make sure sufficient premium has been collected for the exposure she plans to insure. Which condition is part of the insured's policy?
Deposit premium audit. Deposit premium audit is a condition that allows an insurer to inspect the insured's books at the end of the policy term to make sure sufficient payment has been collected for the exposure.
Exclusions
Details the perils that are not insured against and what persons are not insured.
If an insured peril was the proximate cause of loss, what type of loss is it?
Direct Direct loss means direct physical damage to buildings or personal property. It also includes damage where an insured peril was the proximate cause of loss.
Physical damage to buildings and/or personal property as a result of direct consequence of a particular peril
Direct loss
What term includes damage where the insured peril was the proximate cause of loss?
Direct loss
Direct Loss -property insurance
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 will NOT be considered unfair discrimination by insurers?
Discriminating in benefits and coverages based on the insured's habits and lifestyle. Insurers are also not allowed to cancel individual coverage due to a change in marital status. Discriminating in benefits based on the insured's habits and lifestyle (such as smoking or dangerous hobbies) is acceptable.
Two individuals are in the same risk and age class; yet, they are charged different rates for their insurance policies due to an insignificant factor. What is this called?
Discrimination. Permitting individuals of the same class to be charged a different rate for the same insurance is the unfair trade practice of discrimination.
Which type of workers are NOT covered under Workers Compensation?
Domestic workers
Which type of workers are NOT covered under Workers Compensation?
Domestic workers.
Insurers are classified according to their domicile. What are the three types of insurers?
Domestic, foreign, and alien
Domestic, Foreign, and Alien Insurers
Domestic: Licensed in state Foreign: Formed under the laws of another state. Alien: Formed under the laws of another country
What do dwelling policies insure?
Dwelling only, contents only, or both dwelling and contents
What is true of dwelling policy coverage?
Dwelling policy forms contain several general exclusions that define the actual extent of coverage provided. These exclusions are found in all 3 dwelling forms; basic, broad, and special.
In general, what do homeowners policies cover?
Dwellings used primarily as private residences HO policies cover dwellings used as private residences, both owner occupied and tenant occupied. Coverage for business occupancies is limited.
How is the Commissioner of Insurance selected to be the chief officer of the Department of Insurance?
Elected to office. The Commissioner is elected to office for a term of 4 years.
Professional liability coverage protects the insured against legal liability resulting from what?
Errors and Omissions Professional liability coverage in fields other than medical is classified as errors and omission insurance. It covers liability arising out of the failure to use due care and a degree of skill expected of a person in a particular profession.
Insuring Agreement or Insuring Clause
Establishes the obligations of the insurance company to provide the insurance coverage as stated in the policy -Lists the parties to the contract, effective & renewal dates, the description of coverage provided & perils covered
When an employee is injured and the workers compensation benefits are paid, they are barred from bringing legal action against the employer for further damages
Exclusive remedy
Which of the following are the authorities that an agent can hold?
Expressed and Implied. The powers and authorities that an agent holds are express and implied. Apparent authority is the appearance of, or the assumption of, authority based on the actions, words, or deeds of the principal or because of circumstances the principal created.
Negligence
Failure to use reasonable and prudent ccare 4 elements - legal duty - standard of care -unbroken chain of events -actual loss or damage
An applicant is denied insurance because of information found on a consumer report. Which of the following requires that the insurance company supply the applicant with the name and address of the consumer reporting company?
Fair Credit Reporting Act.
State laws that require owners or operators of autos to provide evidence that they have the funds to pay for automobile losses for which they might become liable. Insurance is the usual method for providing this evidence to the state.
Financial Responsibility Laws
What basic dwelling policy automatically provides coverage against what perils?
Fire, lightning, and internal explosion Extended coverage perils may be added to the basic policy for an additional premium.
In commercial property policies, who has control of the policy and who can cancel it?
First Named Insured
The individual whose name appears first on the policy's declarations
First Named Insured
Protection that follows moveable property, covering it wherever it may be, rather than applying only at a fixed location, such as a personal articles floater (PAF)
Floater policy
Insurance designed to reimburse property owners for loss due to flood or to flood-related erosion, administered through the Federal Insurance Administration, but marketed through independent agents
Flood insurance
For what reason can a temporary license be issued?
For continuation of business in case a licensed producer dies or becomes disabled In the event of the death, disability, or military service of a licensed producer, the Department of Insurance may issue a temporary license for a short period of time to the surviving spouse or an appointed representative of the producer to continue the business of insurance.
How is the coverage usually written for HO-8 forms?
For the market value of the property May be used when the market value of the structure is considerably lower than its replacement cost
Which of the following is an example of an agent's fiduciary responsibilities?
Forwarding premiums to the insurer. Fiduciary refers to a position of trust. When an agent is handling the premiums that belong to an insurance company, they are acting in a fiduciary capacity.
The homeowners policy covers collapse caused by all of the following EXCEPT
Foundation cracks. Collapse must be caused by some sudden, unexpected reason. The foundation cracks would take years to cause collapse, meaning there would be plenty of time to notice and repair them.
Not an insurer but an organization formed to provide insurance benefits for members of an affiliated lodge or religious organization
Fraternal Benefit Society
A coverage that is part of the garage policy that covers a garage risk's legal liability for customers' autos in the care, custody, or control of the garage
Garagekeepers liability
What are the coverage parts that may be included in a commercial package policy (CPP)?
General liability, commercial property, commercial auto, inland marine, crime, equipment breakdown, and farm
Difference between private and government insurance ?
Government insurance is funded by taxes and serve national and state social purposes Private insurance is funded by premiums
What homeowners policy form is known as a special form?
HO-3 (special form) provides protection for dwelling and other structures on an open peril basis and personal property is covered for broad perils
Which of the following homeowners policies covers those who rent their dwelling?
HO-4
What homeowners policy form is known as contents broad form?
HO-4 (contents broad form)
What HO form insures a tenant living in an apartment?
HO-4 (contents/tenant broad form)
Why does the HO-4 form not provide dwelling coverage?
HO-4 is written for a tenant residing in a rented dwelling; the tenant does not own the dwelling
Which HO form insures both buildings and personal property on an open peril basis?
HO-5 (comprehensive)
What HO form covers condominium unit owners?
HO-6 (condominium unit-owners form) Designed for the owner-occupant of a condo and included coverage for the structures owned by the insured and parts of the building, alterations, and appliances that require insurance per condominium association agreement.
What HO form would cover a historic home with replacement cost more than the market value?
HO-8 (modified coverage form)
Which is the most limited HO coverage?
HO-8 (modified coverage form) intended for use when replacement cost coverage is not practical. it is the most limited of all HO forms.
A circumstance or condition that increases the likelihood of a loss
Hazard
Events or conditions that increase the chances of an insured loss occurring are referred to as...
Hazards are conditions or situations that increase the probability of an insured loss occurring.
A vehicle rented from a commercial rental company is known as what type of auto?
Hired auto hired autos include those that are leased, hired, rented, or borrowed from someone other than an employee or partner.
Contributory Negligence
Holds the plaintiff responsible for their injury if the plaintiff was in any way responsible for it. Even if defendant was more responsible than the plaintiff. Ex; out drinking, going to store, slip & fall. No reason for the cause of fall other than yourself. --*Not used very often, most abolished by the courts.*
The businessowners policy is most similar to which personal lines policy?
Homeowners
What are the 4 major types of Ocean Marine policies?
Hull, cargo, freight, and protection and indemnity Hull - for physical damage or loss of the ship itself Cargo - for what the ship is hauling Freight - for loss of revenue if the ship owner cannot deliver the cargo Protection & indemnity - for liability
Reasonable Expectations
If an agent implies through advertising, sales literature or statements that these provisions exist, an insured could reasonably expect coverage
30 days
If an insured is in the process of moving to a new location, his personal property coverage under the dwelling policy will apply on a pro rata basis at both locations for
An insurer publishes intimidating brochures that portray the insurer's competition as financially and professionally unstable. The insurer is hoping that this advertising will help to eliminate the competition and therefore create a monopoly. Which of the following best describes this act?
Illegal. It is illegal to be involved in any activity of boycott, coercion, or intimidation that is intended to restrict fair trade or to create a monopoly.
utmost good faith
Implies that there will be no fraud, misrepresentation or concealment between the parties.
Absolute Liability
Imposed on defendants engaged in HAZARDOUS activities such as harboring wild animals, using explosives, etc. Injured party does NOT need to prove negligence
How are supplementary payments paid in liability insurance policies?
In addition to the limits of liability
72 hours
In dwelling policies, any volcanic activity will be considered part of one occurrence if it all happens within how many hours?
Morale Hazard
Indifference. Careless attitude that could increase the chance of a loss. Smoking in bed
A loss that results from a named peril, but not directly caused by it
Indirect Loss
A form of insurance originally designed as an extension of marine coverage to insure transportation of goods over land. Today, it covers a variety of portable property, in addition to goods in transit
Inland Marine Insurance
Whom does an insurance agent represent?
Insurance Company An agent always represents the insurer and the agent's actions are deemed to be the insurer's actions.
an organization made up of member companies that analyzes statistics collected from members and then establishes and files standard rates for many lines of insurance. Also develops and files standardized policy forms on behalf of members
Insurance Services Office (ISO)
In general, who may be excluded from producer licensing and examination requirements?
Insurance company officers, directors, or any other employees who do not transact insurance and who do not receive commissions for their services
What are residual markets?
Insurance market designed to assume risk that are generally not insurable in the normal insurance market
What is controlled business?
Insurance on the producer's own life or property, or the lives or property of the producer's family or business associates
Merit Rating
Insured's premiums are based NOT on actual loss recorded but on other factors that indicate the PROBABILITY that loss will occur. (most commonly used in auto insurance)
Declarations
Insureds name, address, amount of coverage, premiums, description of location & any supplemental representations
Statistically predictable
Insurers must be able to estimate the average frequency and severity of future losses and set appropriate premium rates.
Open Peril
Insures any risk of loss that is not specifically excluded
A section of an insurance policy that contains the insurer's promise to pay, the description of coverage provided and perils insured against
Insuring Agreement
All of the following are conditions commonly found in the insurance policy EXCEPT...
Insuring agreement provides information on the policy's coverages. Conditions state the legal obligations and duties of the parties to the contract.
Fraud
Intentional misrepresentation or intentional concealment of material fact used to induce another party to make or refrain from making a contract, or to deceive or cheat a party.
Concealment
Intentional withholding of information of a material fact that is crucial in making a decision.
A gas stove exploding in the dwelling is an example of which named peril?
Internal explosion
Speculative Risk
Involves the chance of gain or loss and is not insurable
Punitive damages
Is a form of punishment for extremely outrageous behavior, gross negligence or willful intent.
How does the auto medical payments coverage endorsement modify a commercial auto policy?
It adds medical payment coverage to a commercial auto policy
Who can have an insurable interest?
It can be created by ownership, custody or control of a property. Example, mortgagees & leaseholders
All of the following statements describe the concept of strict liability EXCEPT...
It is imposed on defendants engaged in hazardous activities. Strict liability is commonly applied in product liability cases. The business is then liable for defective products, regardless of fault or negligence.
Which of the following is NOT true regarding a Certificate of Authority?
It is issued to group insurance participants. Before insurers may transact business in a specific state, they must apply for a license or Certificate of Authority from the state department of insurance and meet any financial (capital and surplus) requirements set down by the state.
Tort in regards to bodily injury
It is more difficult to determine monetary loss. Bodily injury leads to claims not only for medical expenses and lost wages but also for disfigurement, pain and suffering, metal anguish and loss of consortium.
Which of the following is true regarding personal liability coverage?
It must be added as a supplement or written as a separate policy. Unlike the homeowners policy, the dwelling policy does not include any coverage for personal liability. The personal liability supplement can be added to the dwelling policy or written as a separate policy. The coverage form includes 2 major coverages: personal liability and medical payments to others.
When do certificates of authority expire in Georgia?
June 30th of the year following insurance. All certificates of authority expire at midnight on June 30th of the year following insurance.
According to the Nationwide Marine Definitions, risks that may be the subject of inland marine insurance include all of the following EXCEPT...
Large pleasure boats
What law is the foundation of the statistical prediction of loss upon which rates for insurance are calculated?
Law of Large Numbers The law of large numbers states that the larger the number of people with a similar exposure to loss, the more predictable actual losses will be.
Estoppel
Legal process that can be used to prevent a party to a contract from re-asserting a right or privilege after that right or privilege has been waived. Estoppel is a legal consequence of a waiver
Responsibility under the law
Liability
Insures the individual for financial losses that may arise out of the person's responsibilities to others imposed by law or contract
Liability Insurance
What type of coverage is included in homeowners policies, but is not available in dwelling policies?
Liability coverage
What determines an insurer's responsibility for payment on a claim under an insurance policy?
Limits of liability
Employee fidelity may be written in all the following ways EXCEPT a) Location Schedule b) Individual c) Name Schedule d) Position Schedule
Location Schedule
Complete the coinsurance formula: (Insurance Carried / Insurance Required) x Loss Amount =
Loss Payment
a factor in determining the premium charged and the amount of insurance required
Loss Valuation
What are the five characteristics of an ideally insurable risk?
Loss must be 1) due to chance 2) definite and measurable 3) statistically predictable 4) not catastrophic 5) coverage cannot be mandatory
An insured's home is mortgaged by the local bank. The insured us required to carry insurance on the home, showing the bank as the mortgagee. If the home is damaged by a covered peril, which of the following is true?
Losses will be paid to the mortgagee and mortgagor as their interest appears.
A form of insurance primarily designed to cover property in transport over land or sea
Marine insurance
Wilber's house is located 1 mile from the county's new landfill and across the road from the entrance of a rock quarry. To rebuild the house if something happened to it would cost $150,000. But when Wilber tried to sell it, the best offer he received was $80,000. His insurance company will insure the house for only $80,000. How is Wilber's house insured?
Market Value. When insured for market value, it is insured for what a willing buyer would pay prior to a loss. This is different from ACV or replacement cost.
An insured stated on her application for life insurance that she had never had a heart attack, when in fact she had a series of minor heart attacks last year for which she sought medical attention. Which of the following will explain the reason a death benefit claim is denied?
Material misrepresentation will affect whether or not a policy is issued. If the insured had been truthful, it is very likely that the policy would not be issued.
Which of the following statements concerning a personal auto policy is true?
Medical payments coverage applies per person, per accident.
What illegal act does a producer commit when the producer represents a policy in a more favorable light than the policy really is?
Misrepresentation *issuing, publishing, or circulating any illustration or sales material that is false, misleading, or deceptive as to policy benefits or terms, or the payment of dividends. This includes oral statements.
On its advertisement, a company claims that it has funds in its possession that are, in fact, not available for the payment of losses or claims. The company is guilty of...
Misrepresentation. Issuing or circulating any sales material that is false or misleading would be considered misrepresentation and illegal.
What type of policy consists of the declarations, conditions, endorsements, and other attachments applicable to a single line of insurance?
Monoline A monoline policy is a policy that contains only one coverage part.
a policy written separately as a single coverage
Monoline policy
Which of the following perils is covered by flood insurance?
Mudslide caused by accumulations of water under the ground. Flood policies exclude losses caused by landslides, sinkholes, and falling water. Rising water or excessive runoff is covered.
Competent Parties
Must be capable of entering into a contract in the eyes of the law - Must be legal age, mentally competent to understand the contract, and not under influence of drugs or alcohol
Legal Duty
Must be shown that the defendant had a legal duty to act or not to act.
An insured purchased an insurance policy 5 years ago. Last year, she received a dividend check from 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. Funds not paid out after paying claims and other operating costs are returned to the policy owners in the form of a dividend. If all funds are paid out, no dividends are paid.
A disappearance of property with no physical evidence as to the location, time, or the manner of loss
Mysterious Disappearance
A document designed to categorize and classify risk eligible for ocean or inland marine insurance
Nationwide Definition
Failure to use the care that a reasonable, prudent person would under similar circumstances
Negligence
Protection for the policyholder against claims for bodily injury and property damage liability caused by his or her employees or others using autos not owned or hired by the insured while conducting business. A named nonowner policy protects an individual who drives only borrowed or rented cars.
Nonowners Automobile Liability Insurance
Burden of Proof
Normally it is on the insured party to prove the other party was negligent. However, there are certain doctrines that impose liability by stature or that shift the burden of proof from the injured party to the defendant.
An insured carries a property policy on her home in the amount of $250,000. A bank is shown as the mortgagor in the policy. Last month the insured made her final mortgage payment, but did not remove the bank from the policy. In the event of a covered loss to her home, how much will the bank receive?
Nothing. Because the bank does not have a financial interest in the house at the time of loss, they will receive nothing.
A boat owners policy does NOT cover...
Nuclear Hazards
If 3 volcanic eruptions happen within 72 hours and each contributes to property damage, how many deductibles will apply in the dwelling policy?
One deductible
When will damage to the interior of the building be covered under the falling objects peril in the DP-3 form?
Only if the interior damage is a direct result of exterior damage from a falling object Damage to the interior of a building resulting from falling objects is covered only if the roof or an outside wall was damaged first. There is no coverage for the falling object itself.
Where can National Flood Insurance be issued?
Only in participating, flood-prone areas
Unitlateral Contract
Only one of the parties to the contract is legally bound to anything
Who may share in the commissions from the sale of an insurance policy?
Only producers properly licensed for the type of insurance transaction (licensed in the same like of insurance)
Under Coverage C - Personal Property in the dwelling policy, when will a guest's property be covered?
Only when the property is at the insured location
When would theft of property of guests and residence employees be covered under the HO-8 form?
Only while on the insured premises
Term used in property insurance to describe the breadth of coverage provided under an insurance policy form that insures against any risk of loss that is not specifically excluded.
Open Peril
A policy that covers all causes of loss except for those specifically excluded is known as what type of policy?
Open Peril (or Special) Open peril policies cover all perils except those that are specifically excluded. Named peril policies cover only perils specifically named in the policy.
The HO-3 homeowners policy provides...
Open peril coverage on the dwelling and broad form coverage on personal property.
Speculative risk
Opportunity for either loss or gain. These types of risks are not insurable
What provision defines how a policy will respond if there is more than one insurance policy written on the same risk?
Other Insurance The other insurance provision states that an insurer will be responsible for a proportional share of an insured loss when the insured has other insurance written on the same risk.
Rental reimbursement endorsement is available only if an auto policy has what type of coverage?
Other Than Collision Coverage
The existence of another contract covering the same interest and perils. Sometimes called pro rata liability because the insurers pay claims according to the proportion of premiums paid to each.
Other insurance
What insurance policy provision defines how the policy will respond if there is more than one insurance policy written on the same risk?
Other insurance. A provision in an insurance policy that defines how the policy will respond if there is other valid insurance written on the same risk.
What personal auto coverage would pay for damages to a covered auto caused by a collision with a deer?
Other than collision other than collision covers losses caused by falling objects, fire, theft, vandalism, or contact with birds or animals
Mutual Companies
Owned by the policy owners and issue participating policies.
Stock Companies
Owned by the stockholders who provide the capital necessary to establish and operate the insurance company and who share in any profits or losses.
General Damages compensation
Pain, suffering, mental anguish, disfigurement and other similar type of losses. (noneconomic losses) -determination is highly subjective & amount to whatever a judge or jury feels is right
If an insured is injured while driving his own car, what coverage in the personal auto policy will pay for the loss?
Part B - Medical Payments Medical payments would pay reasonable expenses associated with medical and funeral expenses caused by an accident and sustained by an insured
Which auto policy coverage part is for uninsured motorist?
Part C Part-C Uninsured Motorist (UM) coverage provides the insured with money for bodily injuries that the insured would be legally entitled to recover from the owner or operator of a vehicle who does not carry the required liability insurance coverage
What personal auto coverage would pay for the insured's travel expenses and defense costs incurred while the insured is involved in the settlement process for a covered loss?
Part-A Liability Coverage Liability coverage protects the insured against loss arising from legal liability when an automobile that the insured owns, operates, or maintains is involved in an accident. That includes the insured's defense and settlement costs.
What sublimit in a liability policy puts a ceiling on the payment for all claims that arise from a single accident?
Per-Occurrence
Cause of loss
Peril
In insurance terms, a tornado that destroys an insured property would be considered what?
Peril Perils are the causes of loss insured against in an insurance policy.
First Named Insured
Person whose name appears FIRST on the policy's DEC page.
Personal inland marine insurance that provides all-risk coverage on 9 optional classes of personal property: jewelry, furs, cameras, musical instruments, silverware, golf equipment, fine arts, stamp collections, and coin collections
Personal Articles Floater (PAF)
Easy-to-read auto policy that provides broad coverage for both owned and nonowned autos that are used, maintained, and/or operated by the insured and family
Personal Auto Policy
Liability coverage for third-party claims for damages that are other than physical, such as libel, slander, false arrest, wrongful eviction, invasion of privacy, etc.
Personal Injury Coverage
Type of coverage available to individuals and families for nonbusiness risks
Personal Lines Insurance
Personal inland marine floater that provides all-risk coverage on unscheduled personal property
Personal Property Floater
What is the difference between a personal injury and an advertising injury?
Personal injury is incurred by an individual; advertising injury is incurred by a business. Both however are nonphysical injuries.
What type of coverage is Coverage E in homeowners policies?
Personal liability Coverage E - personal liability will respond if a claim is made or a suit is brought against an insured for damages due to bodily injury or property damage caused by an occurrence to which the coverage applies.
Section I of a boatowners policy covers...
Physical damage.
Risk Retention
Planned assumption of risk by an insured through the use of deductibles, co-payments, or self-insurance.
What policy provision defines the location where coverage is provided?
Policy Territory
What components make up a commercial policy?
Policy cover, policy declarations, interline endorsements, lines of insurance declarations, lines of insurance coverage forms, policy conditions, causes of loss forms, and endorsements
Under Coverage A - bodily injury and property damage in a CGL policy, contractual liability, liquor liability, and the insured's work are examples of what?
Policy exclusions also may exclude: workers comp, pullution, mobile equipment, etc.
The person entitled to exercise the rights and privileges in the policy
Policyowner
What is the fee a policyowner pays an insurance company to receive coverage?
Premium Premium is the payment by the policyowner to the insurance company for insurance coverage and for keeping a policy in force.
All of the following are examples of risk retention EXCEPT...
Premiums Retention is a planned assumption of risk, or acceptance of responsibility for the loss by an insured through the use of deductibles, copayments, or self-insurance.
What type of policy is a businessowners policy?
Prepackaged, stand-alone policy a BOP is a stand-alone policy with its own forms. It provides property and liability coverage in a single contract.
A basic, fundamental insurance policy which pays first with respect to other outstanding polices
Primary policy
What is the Term for the entity that an agent represents regarding contractual agreements with third parties?
Principal: An agent represents the principal, acting on the entity's behalf in contractual agreements with third parties
Endorsements
Printed addendums to a contract that are used to change the policy's original terms, conditions or coverages. -Must be in writing, attached to policy & signed by executive officer of insurer -used to add or delete coverage or may be used to correct items such as insured name, address, etc.
Ordinary cars, station wagons and jeeps, utility autos (pickups, panel trucks, and delivery vans not used commercially) and utility trailers designed to be pulled by a private passenger auto
Private passenger autos
Proportional distribution of shares of the loss for each insurance policy written on a property
Pro Rata
The termination of a contract with premium charge being adjusted in proportion to the exact time the protection has been in force. All unearned premium is returned to the insured.
Pro Rata Cancellation
The other insurance provision that limits the liability of the insurer to a portion of the loss no greater than the amount the insurer bears to all the insurance covering the property is called...
Pro rata liability. To preserve the principle of indemnity, each policy pays a pro rata share based upon the share of the coverage. The insured cannot collect the full amount of loss from each policy.
A form of general liability insurance that covers a company against liability arising out of it's products (a manufacturer) or its completed operations (a contractor or architect)
Products and completed operations
What type of insurance is usually written on a claims-made form?
Professional Liability Insurance
What liability policy is usually written on a "claims-made" form?
Professional liability insurance
Which of the following is NOT consideration on the part of an insured?
Promise to submit timely claims.
A sworn statement that must be furnished by the insured to the insurer before any loss can be paid under the policy
Proof of Loss
Before an insurer will pay any loss under a policy, what is usually required from the insured?
Proof of loss. A sworn statement, called proof of loss, must usually be furnished by the insured to an insurer before any loss under a policy can be paid.
What type of coverage is included in Section I or homeowners insurance?
Property Coverage Property coverage must be included under Section I and personal liability must be included under Section II.
Legal liability arising from physical damage to tangible property of others caused by the negligence of an insured
Property Damage Liability
Which of the following is defined as the legal liability arising from physical damage to the belongings of others caused by the negligence of an insured?
Property Damage Liability.
A type of insurance that covers losses of physical property or the loss of its ability to produce income
Property Insurance
What is covered under the Legal Liability Coverage form?
Property in the insured's care, custody, or control
What are an insured's duties after a loss?
Protect the damaged property from further loss, cooperate with the insurer in settling a loss and submit proof of loss.
Standard Mortgage Clause
Protects the interest of the financial institution against loss to real property caused by perils insured against.
Additional or supplementary coverage
Provides additional amount of coverage for specific loss expenses, at no additional premium
The NFIP (National Flood Insurance Policy) emergency program...
Provides limited amounts coverage at subsidized rates. It also provides more coverage than the normal program.
An act or event that is the immediate or actual cause of a loss
Proximate Cause
What term defines an exact, direct, and uninterrupted cause of loss?
Proximate Cause Proximate cause is an act or event considered a natural and reasonably foreseeable cause of the damage to property.
Third class of damages
Punitive damages
Loss Costs can also be called?
Pure Premium
A situation in which a person can only experience a loss and no gain presents what type of risk?
Pure risk Pure risk is the only insurable type of risk.
The risk of loss may be classified as...
Pure risk and speculative risk. Pure risks involve the probability or possibility of loss with no chance for gain. Pure risks are generally insurable. Speculative risks involve uncertainty as to whether the final outcome will be gain or loss. Speculative risks are generally uninsurable.
A situation in which a person can only lose or have no change represents
Pure risk. Pure risk is the only type insurance companies are willing to accept.
Schedule Rating
Rates developed by applying a schedule of charges/credits to some base rate to determine appropriate rate for an individual exposure. The very largest & most complex risks are schedule rated.
An agent offers a client free tickets to a sporting event in exchange for the purchase of an insurance policy. What is the agent guilty of?
Rebating
An agent offers a client free tickets to a sporting event in exchange for the purchase of an insurance policy. What is the agent guilty of?
Rebating Both offer and acceptance of rebates are illegal.
An agent offers his client free tickets to a sporting event in exchange for the purchase of an insurance policy. The agent is guilty of...
Rebating. When producers give or promise anything of value that is not specified in the policy, they are guilty of rebating.
Proximate Cause
Refers to the first event, or first peril, in a series of events that causes damage or injury. The negligence MUST have been the PROXIMATE CAUSE of the damage if the injured party is to collect for damages.... Beginning with negligence and leading to injury or damage... Negligence must have been cause without which the accident would not have happened, also referred to as direct liability)
What method do insurers use to protect themselves against catastrophic losses?
Reinsurance Reinsurance is a contract under which one insurance company (the reinsurer) indemnifies another insurance company for part of all of its liabilities. The purpose of reinsurance is to protect insurers against catastrophic losses.
Process of removing property for the purpose of preserving it from a peril insured against
Removal
The cost to replace damaged property with like kind and quality at current price, without any deduction for depreciation
Replacement Cost
Which method of loss valuation is contrary to the principle of indemnity?
Replacement Cost The replacement cost method may give the insured a settlement that exceeds the property's actual cash value.
Which method of loss valuation is contrary to the basic concept of indemnity?
Replacement cost
At least 80% of the replacement cost
Replacement cost coverage is provided in both the broad and special form dwelling policies when the amount of insurance on the dwelling is what percentage?
A statement made by the applicant on the insurance application that is believed to be true
Representation
Conditional Contract
Requires that certain conditions must be met by the policyowner and the company in order for the contract to be executed, and before each party fulfills its obligations.
Authority and Powers of Producers
Responsible to the insurer when completing applications for insurance, Submitting the application to the insurer for underwriting, and when issued, delivering the policy to the policy owner and explaining the contract
In an umbrella liability policy, the amount the insured must pay for a loss not covered by an underlying policy before the umbrella will begin to cover losses
Retention Limit
What is the date stipulated on the Declarations page of a claims-made liability form as the earliest date on which an incident may occur and be covered by the policy?
Retroactive date a retroactive date in a claims-made liability policy is a coverage limitation that stipulates that coverage applies only to claims that arise out of events that occur on or after the specified retroactive date
Moral Hazard
Right vs. wrong. The predisposition of the person. (using illegal drugs)
Underwriting
Risk selection and evaluation process Establishes terms, rates, and conditions
What is the deductible of a personal liability umbrella policy called?
SIR (self-insured retention)
When the insured's car was totaled in a recent accident, the ownership of the car was transferred to the insurer. The insurer then sold off the wrecked car to recover some of the loss it paid to the insurer. What is the term for this action.
Salvage
A fund established under workers compensation laws in most states to help pay any increased compensation that may result when an employee with a previous injury is injured again
Second-Injury fund
What types of businesses qualify for coverage under a BOP?
Small-to medium-sized businesses
Payment for medical expenses, loss of wages, funeral expenses, or the cost to repair or replace damaged property are known as what type of compensatory damages?
Special
Policies that insure against only the perils named, contrary to all-risk policies which cover all perils except those that are excluded (also called named peril policies)
Specified-Peril
Events in which a person has both the chance of winning or losing are classified as...
Speculative risk (?)
Separately stated limits of liability for different coverages, which may be stated on a per person, per occurrence, per policy period basis, or can be divided between bodily injury and property damage
Split limits
What is the name for the limits of liability that are stated separately for different coverages?
Split limits Split limits show separately the maximum amounts the insurer will pay for bodily injury per person/bodily injury per accident/property damage per accident
Insurance contract written to insure an item of property for a specific amount of insurance, used in insuring hard-to-value items, such as fine arts
Stated Value (or Stated Amount)
Which of the following insurers are owned by stockholders who have the usual rights of ownership, including the right of voting?
Stock. Only stock insurance companies are owned and controlled by stockholders.
A liability that refers to damages caused by defective products, even though the manufacturer's fault or negligence cannot be proven
Strict Liability
If a manufactured product is unsafe, what type of liability applies to the manufacturerer?
Strict Liability A person of business that manufactures or sells a product makes an implied warranty that the product is safe. The business is then liable for defective products, regardless of fault or negligence.
The transfer to the insurance company of the insured's right to collect for damages. After paying a claim, the company stands in the place of the insured in suing the negligent party, thus preventing the insured from collecting twice
Subrogation
What provision found in property policies prevents an insured from collecting twice for the same loss (first from the insurer and again from a third party)?
Subrogation
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
Subrogation. 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.
Found in most liability contracts. Supplementary payments provide extra coverage over and above the insured's limit of liability. Included are first aid, bond premiums, accrued interest on judgments, etc.
Supplementary Payments
A bond that guarantees that someone will perform faithfully whatever he or she agrees to do or that someone will make an agreed upon payment to another party. Note that in a surety bond, there are three parties: the principal, who has agreed to perform the obligation; the obligee. for whose benefit the bond is written and the surety, the insurer that provides the bond in consideration for the premium paid
Surety Bond
Insurance for which there is no readily available admitted market and which is marketed through nonadmitted insurers who specialize in offering insurance to the high risk market on an unregulated basis
Surplus Lines
What is the name for nonadmitted insurers who are allowed to transact business in a state?
Surplus lines insurers
What auto designation symbols are used in the business auto coverage form?
Symbols 1-9 and 19
Nonrenewal
Termination of a policy at its expiration date by not offering a continuation of the existing policy or a replacement policy
Who must be notified of a producer's change of address?
The Department of Insurance (Commissioner/Director/Superintendent)
What law protects consumers from the circulation of inaccurate or obsolete information?
The Fair Credit Reporting Act The Fair Credit Reporting Act governs what information is collected and who may receive the information.
If the insurer pays an amount less than the amount insured under the policy in the event of a total loss to property, how much of the insured's premium must the insurer return?
The amount of premium actually paid and the premium that would have been charged for a policy with an amount of insurance equal to the amount paid by the insurer for the loss.
Apparent Authority
The appearance or the assumption of authority based on the actions, words, or deeds of the principal or because of circumstances the principal created.
Under what conditions would a contract between an insurer and prospective insured be legal?
The applicant has been convicted of a felony. When an insurer and insured enter into a contract, both parties must be of legal age and mentally competent. It is legal for a person convicted of a felony to buy an insurance contract. An intoxicated person, however, may not be mentally competent, and a 12-year-old student is considered to be underage in most states.
Which of the following would NOT be considered a source of insurability information by an insurer?
The applicant's marital status. An insurer may inspect, with the applicant's written permission, the following: application form, motor vehicle records, interviews with neighbors, friends and employers, inspection of property, and inspection of insurance history.
Which of the following is NOT the consideration in a policy?
The application given to a prospective insured. Consideration is something of value that is transferred between the two parties to form a legal contract.
In insurance, an offer is usually made when...
The application is submitted.
In dwelling policies, the premium for the dwelling under construction endorsement is based on what?
The average amount of insurance during construction The premium for the dwelling under construction endorsement is based on the average value of the structure and building materials from the first day of construction until completion.
Peril is most easily defined as...
The cause of loss insured against.
According to the liberalization condition, if an insurer makes a change to broaden coverage in newly issued dwelling policies, how will that change affect policies in force?
The change will apply automatically If the policy coverage is broadened with no additional premium, the expanded coverage will auto apply to all policies of the same type.
The Commissioner of Insurance is...
The chief officer of the Dep. of Insurance.
Negligence may be defined as...
The failure to use reasonable and prudent care. Just because something bad happens does not mean there was negligence. Negligence is when the failure to use proper care results in injury or damage.
Negligence
The failure to use the care that a reasonable person would have taken under the same or similar circumstances.
A homeowner sells his house to a friend. The friend wants to keep the homeowner's current policy in effect. Under the assignment provision, which of the following is most likely?
The homeowner will need to get written consent from the insurer before the policy can be reassigned. In property and casualty insurance, assignments of policies are usually valid only with the prior written consent of the insurer.
If an insured owns a homeowners policy and a personal umbrella policy on the same dwelling, which would be considered underlying insurance?
The homeowners policy
Who is entitled to the salvage of property after a total loss has been paid under the terms of an insurance policy?
The insured (?)
Indemnity
The insured will collect only to the extent of the financial loss and nothing more
Which of the following is most likely to occur if it is determined by the audit that the deposit premium was too high?
The insured will receive a return premium. If the audit shows that the initial (deposit) premium to the insured was too high (the exposures were over-estimated), the insured will receive a return premium.
An insured invites his neighbors out for a day on the water in his boat powered with a 150 hp outboard motor. While attempting to tie the boat to dock, his neighbor's hand is broken when caught between the boat and dock. What coverage would apply to the broken hand?
The insured's boat owners policy. Outboard boat and motor policies are property coverage only. Homeowners liability does not apply to outboards with more than 25 hp. Boatowners policies contain property, liability, and medical payments coverage.
Experience Rating
The insured's own past loss experience enters into the determination of the final premium. The past loss experience is used to determine future changes in the premium. (associated with workers comp)
Who is responsible for the costs associated with the examination of insurers?
The insurer being examined
What is the limit of liability in Part D - coverage for damage to your auto?
The lesser of the actual cash value of the vehicle or the amount needed to repair or replace the vehicle
To whom does the term "you" refer to in a personal auto policy?
The named insured shown in the declarations and the insured's spouse (if resident of the same household)
Physical Hazard
The physical condition of the item being insured, which can create or increase the chance of a loss.
Legal Purpose
The purpose of the contract must be legal and not against public policy.
Loss
The reduction, decrease, or disappearance of value of the person or property insured in a policy, by a peril insured against.
Who is considered insured under Part A - Liability of a personal auto policy?
The vehicle owner or his or her family members, or any person using the covered auto with permission
What is the broadest coverage in the commercial crime form?
Theft Coverage
Which of the following losses would most likely NOT be covered under Coverage A in the dwelling policy?
Theft of a renter's lawnmower used to service the premises.
If a specific coverage part is listed on the CPP declarations page, but no premium is shown, what does that mean?
There is no coverage under the policy.
Offer and acceptance
There must be a definite offer by one party, and the other party must accept this offer in its exact terms. In insurance, the applicant usually makes the offer when submitting the application. Acceptance takes place when an insurer's underwriter approves the application and issues a policy.
Randomly selected and large loss exposure
There must be a sufficiently large pool of the insured that represents a random selection of risks in terms of age, gender, occupation, health and economic status, and geographic location.
What are Components?
They are factors in determining rates. (including loss reserves, loss adjustment expenses, operating expenses and profits).
The business income coverage form covers consequential loss of business income that occurs when a business must suspend operations because of a direct loss. What term best describes the nature of this type of coverage?
Time element
Policy Period
Time period policy provides coverage, listed on dec page.
What is the purpose of interline endorsements in Commercial Package Policies (CPPs)?
To eliminate redundancy and minimize the number of other policy endorsements
What is the purpose of the National Flood Insurance Program (NFIP)?
To fill the gap in flood coverage left by private insurers
What is the purpose of the NFIP?
To fill the gap left by the private insurers in flood coverage.
What is the purpose of surety bonds?
To guarantee that specif duties and obligations of the principal will be fulfilled
In dwelling policies, what is the purpose of the automatic increase in insurance endorsement?
To offset the effects of inflation
What is the purpose of a cease and desist order?
To prevent a producer or insurer from further violating laws for transacting insurance
What is the purpose of Insurance Guaranty Associations?
To protect policyowners, insureds, and beneficiaries from financial losses caused by insolvent insurers
What is the main purpose for requiring a person to be licensed to transact insurance?
To protect the general public
A wrongful act or a violation of someone's rights that leads to legal liability
Tort
Transfer
Transfer of risk to another party
Provides broad coverage for an insured's liability over and above liability covered by underlying contracts or retention limits
Umbrella Liability Policy
Only when the property is at the insured location
Under coverage c - personal property in the dwelling policy, when will a guests property be covered?
90 days of a loss.
Under the uniform required provisions, proof of loss under a health insurance policy normally should be filed within#31. d)c)b)a)30 days of a loss.60 days of a loss.20 days of a loss.90 days of a loss.
If the insured is the owner-occupant of the dwelling
Under what conditions can broad theft coverage be added to a dwelling policy?
Coverage in an automobile insurance policy under which the insurer will pay costs up to specified limits for bodily injury if the liable driver's policy limits are exhausted or insufficient
Underinsured Motorist Coverage
Any fraudulent, deceptive, or dishonest business practice that is prohibited by statutes and regulations
Unfair Trade Practice
What type of auto coverage will apply in a hit-and-run accident where the driver cannot be identified?
Uninsured motorist
Which type of liability insurance may an insured reject in writing?
Uninsured motorist coverage.
A property that has contents or furnishings in it but that is not being used or lived in
Unoccupied
Valued Policy
Used when difficult to establish the value of insured property after a loss occurs or when it is desirable to agreed on a specific value in advance. -without regards to actual value or depreciation. -OFTEN used in MARINE COVERAGE because its difficult to establish value of the cargo loss after a ship sinks.
Protects property against damage caused by vandals. May be added by endorsement to the DP-1 Basic form; included coverage in may other property forms
Vandalism and Malicious Mischief (VMM)
A type of liability in which one person is responsible for the acts of another
Vicarious Liability
When a parent is required to pay for damages caused by his or her children, this is an example of...
Vicarious liability. When one party is held liable for act of another party, it is called vicarious liability. Employers are responsible for employees acting within the scope of their employment. Parents sometimes are held responsible for acts of their children.
Earth movement, water damage, power failure, neglect, war, nuclear hazards, intentional loss, freezing of plumbing, ordinance or law, and government action
What are some of the exclusions found in all 3 dwelling forms?
Basic, broad, and special
What are the 3 types of coverage available in dwelling policies?
Coverage A - Dwelling, Coverage B - Other structures, Coverage C - Personal property, Coverage D - Fair rental value, and Coverage E - Additional living expenses
What are the 5 coverages of dwelling policies?
Windstorm or hail, explosion, smoke, aircraft and vehicles, riot or civil commotion, volcanic eruption, and vandalism and malicious mischief
What are the extended covered perils on a basic dwelling policy?
Dwellings only, contents only, or both dwelling and contents
What do dwelling po
up to 4 units
What is the maximum number of units in residential dwellings insurable by a dwelling policy?
When does pro rata liability apply?
When an insured has more than one policy covering a loss Each policy will pay its pro rate share of the loss, but not more than the amount of loss in total
Definition of Reciprocal
When insurance is obtained through a reciprocal insurer, the insureds are sharing the risk of loss with other subscribers of that reciprocal
When would a misrepresentation on an insurance application be considered fraud?
When it is intentional and material
When would a misrepresentation on an insurance application be considered fraud?
When it is intentional and material A misrepresentation would be considered fraud if it is intentional and material **and** would be grounds for voiding a contract
In insurance, when is the offer usually made on a contract?
When the insurance application is submitted The offer is usually made by the applicant in the form of the application for insurance. Acceptance takes place when the insurer approves the application and issues a policy.
When can insurance be sold through a surplus lines insurer?
When the insurance cannot be obtained through an authorized carrier Although surplus lines insurers are considered unauthorized, most states compose an approved listing of excess and surplus lines insurers deemed acceptable.
When does Uninsured Motorist coverage apply?
When the other party is legally liable but has no insurance
Only if the interior damage is a direct result of exterior damage from a falling object
When will damage to the interior of the building be covered under the falling objects peril in the broad form of the dwelling policy?
DP-2 (broad) and DP-3 (special)
Which dwelling coverage form(s) will pay for the replacement cost of a dwelling?
DP-2
Which dwelling form is called the broad form?
DP-3 (special)
Which dwelling form provides open peril coverage on the building?
Coverage C - Personal property
Which dwelling policy coverage will provide protection for contents damaged by fire in an insured dwelling?
DP-1 (basic)
Which of the 3 DP forms provides the most limited coverage?
insurance policy
a contract between a policyowner (and/or insured) and an insurance company which agrees to pay the insured or the beneficiary for loss caused by specific events
Most fidelity bonds have a period of time in which occurred whine the bond was in force are covered even though not found until after the coverage has terminated. this is know as?
a discovery period
Payments for medical expenses, loss of wages, funeral expenses or the cost to repair or replace damaged property are known as what type of compensatory damages?
an employee of a medical facility who suffers from a common cold
A liability policy that covers all claims arising out of incidents occurring during the policy period, regardless of whether the policy is still in effect at the time of the claim, is known as what type of policy?
an occurrence policy
an insurance contract must contain all of the following to be considered legally binding EXCEPT...
beneficiary's consent
Fire Resistive
buildings constructed with masonry and/or other materials with a fire resistance rating of 2 hours or more. Fire-resistive usually receives the most favorable rating.
The crime of forced entry into the premises of another by a person or persons with felonious intent is defined as a
burglary
Peril
cause of loss
A professional who wants coverage for all liability exposures should purchase what form of liability insurance?
commercial general and professional
Which of the following is covered under the mail floater of a commercial inland marine policy ONLY id it is sent by registered mail?
currency and unsold travelers checks
Which of the following is a mandatory part of the insurance policy that varies with each individual policy?
declarations
Law of Agency
defines the relationship between the principal and the agent/producer: the acts of the agent/producer within the scope of authority are deemed to be the acts of the insurer
Expenses that an organization would not have incurred if business interruption has not existed are known as
extra expenses
CGL coverage B (personal injury and advertising injury) will cover?
inadvertent injury to others caused in the occur of advertising the insured product
Physical Hazards
individual characteristics that increase the chances of the cause of loss
Named insured
individual(s) whose name appears on the DEC page
Additional insured
individuals or businesses that are not named as insured on the dec page but are protected by the policy, usually added to the policy by an endorsement.
Which of the following is NOT true of National Flood Insurance?
insurance provided by the flood program also is available in standard property policies
expierence rating
insureds own past loss experience enters into the determination of the final premium
Adverse selection
insuring of risks that are more prone to losses than the average risk
All of the following statements describe the concept of strict liability EXCEPT
it is imposed on defendants engaged in hazardous activities
An insured is driving his or her automobile and strikes a large pothole causing a flat tire which coverage of the insured personal auto policy will pay for the repair?
loss is not covered
Basic economic loss benefits in Auto Insurance policies covers
medical expenses
Contract of Adhesion
prepared by one of the parties (insurer) and accepted or rejected by the other party (insured)
What type of damages may be awarded by the court to create disincentives that discourage behavior that is deemed highly undesirable by society?
punitive
Actual Cash Value (ACV)
replacement cost - depreciation
Indemnify
restore an insured to the same financial status as before a loss
Consideration
something of value that each party gives to the other - Insured consideration is the payment of premium and the representations made in the application. -The consideration of the insurer is the promise to pay in the event of loss
Law of Large Numbers
the larger the number of people with a similar exposure to loss, the more predictable actual losses will be
Who is NOT an insured for liability on a BAP?
the owner of a car the insured borrows
Policy owner
the person entitled to exercise the rights and privileges in the policy
Moral Hazard
the tendency of a person who is imperfectly monitored to engage in dishonest or otherwise undesirable behavior
For the purpose of insurance risk is defined as
the uncertainty or chance of loss
What is the maximum number of boarders per unit that would be allowed in the homeowners policy?
two roomers or boarders
100%
#109. Under the Affordable Care Act, what percentage of preventive care must be covered without cost sharing? a) 25% b) 50% c) 80% d) 100%
10 calendar days.
#111. If an agent's appointment is terminated, suspended or revoked, the agent must cease selling or soliciting on behalf of the insurer within a) 30 calendar days. b) 5 calendar days. c) 10 calendar days. d) 15 calendar days.
Longevity of at least 10 years.
#115. All of the following are required of an association in order to qualify as a group life insurance coverage EXCEPT a) A constitution and by-laws. b) A good faith purpose. c) Membership of 100 or more. d) Longevity of at least 10 years.
50
#116. How many employees can a business have and still meet the definition of "small employer"? a) 50 b) 20 c) 30 d) 40
4 years
#118. According to the general standards for health policy advertisements, how long are insurers required to keep records of all advertisements? a) 2 year b) 3 years c) 4 years d) 5 years
31 days
#119. In order to convert from group coverage to an individual plan, an eligible individual must pay the premium within how many days after the written notice of termination? a) 60 days b) 90 days c) 15 days d) 31 days
Since Jonny was an eligible employee, the insurer must offer Jonny any plan being marketed by the insurer.
#121. Jonny has decided to leave her current employer and to become self-employed in her career field. What are Jonny's right regarding the former employer's health insurance plan under HIPAA? a) Jonny may select from any plan the insurer is currently marketing, nut may be required to provide proof of insurability and await coverage based on pre-existing conditions. b) The insurer must offer Jonny the right to continue paying the premiums herself. c) Since Jonny was an eligible employee, the insurer must offer Jonny any plan being marketed by the insurer. d) The insurer can limit Jonny to an equivalent plan that the employer offered as long as Jonny meets the minimum standards of insurability.
3
#124. How many hours of continuing education must be completed on the subject of ethics biennially? a) 3 b) 5 c) 10 d) 12
She will be able to convert to term insurance.
#125. Your client was insured under her employer's group life insurance plan at her place of employment. She contacted you as she was terminated from her job. She wants to convert her group policy to an individual policy. All of the following statements about her situation are correct EXCEPT a) She would not need to prove insurability for a conversion policy. b) Application for an individual policy and the first premium payment must be made within 31 days of termination of employment. c) Should she convert to individual coverage, the premium will be based upon her current age and risk class. d) She will be able to convert to term insurance.
Implying that the agent is the insurer
#126. Which of the following would be considered false advertising? a) Failing to include premiums in sales materials b) Implying that the agent is the insurer c) Stating the differences in benefits between Whole Life Insurance and Term Life Insurance d) Stating that a policy has limitations and exclusions
Yes, the insurer must maintain records for 1 more year.
#127. If an insurer's health insurance advertising materials have been examined by the Commission 3 years ago, does the insurer have to maintain records any longer? a) No, the records must only be kept for 2 years. b) No, once examined, the records can be discarded. c) Yes, the insurer must maintain records for 1 more year. d) Yes, the insurer must maintain records for 4 years, in all cases.
Active duty service members
#129. Who does the military sales regulation protect? a) Anybody who is exempt from coverage due to the war exclusion b) Producers who solicit insurance on military installations c) Active duty service members d) Retired military personnel and their families
Examining each domestic insurer at least once a year
#131. Which of the following is NOT a duty of the Commission of Insurance? a) Examining each domestic insurer at least once a year b) Appointing the Commissioner of Insurance c) Enforcing the Insurance Code d) Suspending or revoking licenses of Insurance Code violators
4 hours every 24 months
#133. In order to sell long-term care partnership policies, how much ongoing training are agents required to undergo? a) 8 hours every 24 months b) 4 hours every 24 months c) 8 hours every 12 months d) 4 hours every 12 months
A business entity may receive a viatical settlement broker license.
#137. Which of the following is true regarding licensing of viatical settlement brokers? a) A business entity may receive a viatical settlement broker license. b) Licensees are permitted to transact viatical settlements and annuity contracts. c) License must be renewed every 2 years. d) A person may be licensed after completing prelicensing examination and submitting all applicable forms and fees.
Rebating
#138. Giving a client an inducement to a sale not stated in the policy is an unlawful practice known as a) Rebating. b) Twisting. c) Unlawful distribution of dividends. d) Coercion.
Provider
#139. Who is a person, other than a viator, that enters into a viatical settlement contract? a) Purchaser b) Effectuator c) Broker d) Provider
The agent
#140. An agent has been convicted of a felony in another jurisdiction. Who must report the offense to the Commission? a) The police b) The agent c) The prosecuting attorney of the other jurisdiction d) The Commissioner of the other jurisdiction
A copy of the agent's license.
#141. All of the following must be included in the report to the Commissioner after any felony conviction or administrative action is taken against a licensed insurance agent EXCEPT a) General facts and circumstances surrounding the conviction/action. b) Specific facts and circumstance surrounding the conviction/action. c) A copy of the agent's license. d) Consent to the order.
In 5 years
#143. Bart applies for an insurance license, but the Commission decides not to issue the license because of Bart's past conduct. What is the earliest date that he can reapply? a) In 6 months b) In 1 year c) In 5 years d) Never. If a license has been denied or revoked, the person is not allowed to reapply, unless it is legally determined that the reason behind the denial or revocation was false or unjust.
Individual tax deduction for premiums paid.
#145. The Patient Protection and Affordable Care Act includes all of the following provisions EXCEPT a) Right to appeal. b) No lifetime dollar limits. c) Coverage for preventive benefits. d) Individual tax deduction for premiums paid.
30 days
#146. An agent is convicted of a felony in another jurisdiction. Within what period of time must the agent report the felony charge to the Commission? a) Immediately b) 5 days c) 10 days d) 30 days
The person may be fined $20,000.
#147. All of the following may occur to a person who knowingly and willfully obtains information about an individual from an insurance institution, agent or insurance-support organization under false pretenses, EXCEPT a) The person may be fined $20,000. b) The person may be fined $5,000 or be confined in jail for no more than 12 months. c) The person may be fined $10,000. d) The person may be punished by confinement in jail for 6 months.
The client's insurability.
#148. Most methods used to determine the suitability of a particular annuity recommendation to a client are based on information regarding all of the following EXCEPT a) The client's insurability. b) The client's tax status. c) The client's investment objectives. d) The client's financial status.
A copy of any fee disclosure must be provided to the insured.
#149. When an insurance producer is to charge an administrative fee to an insured, all of the following must be done EXCEPT a) The agent must disclose the fees in writing. b) The insured must provide a signature on any fee disclosure. c) A schedule of fees must be posted in the office. d) A copy of any fee disclosure must be provided to the insured.
Accelerated benefits provisions.
#150. One method that insurers have incorporated into many life insurance policy contracts to assist policyholders with terminal conditions in paying for living expenses under certain conditions is called a) Accelerated benefits provisions. b) Mortuary provisions coverage. c) Pre-paid funeral expense coverage. d) Last right protection.
100,000
#24. An individual purchased a $100,000 Joint Life policy on himself and his wife. Eight years later, he died in an automobile accident. How much will his wife receive from the policy? a) Nothing b) $50,000 c) $100,000 d) $200,000
Usual, customary and reasonable.
#26. A medical expense policy that establishes the amount of benefit paid based upon the prevailing charges which fall within the standard range of fees normally charged for a specific procedure by a doctor of similar training and experience in that geographic area is known as a) Benefit schedule. b) Gatekeepers. c) Usual, customary and reasonable. d) Relative-value schedule.
The Medicare Part A deductible
#27. Which of the following is NOT covered under Plan A in Medigap insurance? a) The 20% Part B coinsurance amounts for Medicare approved services b) The first three pints of blood each year c) The Medicare Part A deductible d) Approved hospital costs for 365 additional days after Medicare benefits end
10 days
#28. An insured pays a monthly premium of $100 for her health insurance. What would be the duration of the grace period under her policy? a) 7 days b) 10 days c) 31 days d) 60 days
Any occupation - more restrictive than other definitions.
#29. Disability income coverage specifies that the policy covers the insured if he is unable to perform any job for which he is qualified. In this case, total disability is defined as a) Own occupation - more restrictive than other definitions. b) Own occupation - less restrictive than other definitions. c) Any occupation - more restrictive than other definitions. d) Any occupation - less restrictive than other definitions.
Upon the last death
#34. In a survivorship life policy, when does the insurer pay the death benefit? a) If the insured survives to age 100 b) Upon the last death c) Upon the first death d) Half at the first death, and half at the second death
A STOLI policy.
#35. An investor buys a life policy on an elderly person in order to sell it for a life settlement. This is an example of a) A prearranged funeral plan. b) A viatical settlement. c) Third-party ownership. d) A STOLI policy.
Immediate annuity
#38. A lucky individual won the state lottery, so the state will be sending him a check each month for the next 25 years. What type of annuity products are they likely to use to provide these benefits? a) Deferred interest annuity b) Immediate annuity c) Variable annuity d) Flexible payment annuity
It is a period during which the payments into the annuity grow tax deferred.
#39. Which of the following is TRUE regarding the accumulation period of an annuity? a) It is a period of time during which the beneficiary receives income b) It is limited to 10 years. c) It is a period during which the payments into the annuity grow tax deferred. d) It is also referred to as the annuity period.
Consideration
#40. When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following? a) Legal purpose b) Contract of adhesion c) Acceptance d) Consideration
Obtaining an insurance license.
#43. All of the following would be considered an insurance transaction EXCEPT a) Obtaining an insurance license. b) Soliciting a policy. c) Advising a policyholder regarding a claim. d) Negotiating coverage.
Level term
#49. A policy will pay the death benefit if the insured dies during the 20-year premium-paying period, and nothing if death occurs after the 20-year period. What type of policy is this? a) Ordinary life policy b) Limited pay whole life c) Level term d) Term to specified age
Rent
#51. In the event of a loss, business overhead insurance will pay for a) Salary of the business owner. b) Medical bills of the business owner. c) Rent. d) Loss of profits.
Executive is the owner, and the executive pays the premium.
#52. In the Executive Bonus plan, who is the owner of the policy, and who pays the premium? a) Board of directors is the owner, and the board of directors pays the premium. b) Company is the owner, and the company pays the premium. c) Executive is the owner, and the executive pays the premium. d) Company is the owner, but the executive pays the premium.
Annually Renewable Term.
#53. All other factors being equal, the least expensive first-year premium payment is found in a) Annually Renewable Term. b) Increasing Term. c) Decreasing Term. d) Level Term.
Impairment rider
#54. Which of the following riders would NOT increase the premium for a policyowner? a) Payor benefit rider b) Waiver of premium rider c) Multiple indemnity rider d) Impairment rider
Insurer's executive officer
#56. Which of the following entities has the authority to make changes to an insurance policy? a) Insurer's executive officer b) Department of Insurance c) Broker d) Producer
Guaranteed insurability option
#58. An individual is purchasing a permanent life insurance policy with a face value of $25,000. While this is all the insurance that he can afford at this time, he wants to be sure that additional coverage will be available in the future. Which of the following options should be included in the policy? a) Dividend options b) Guaranteed renewable option c) Nonforfeiture options d) Guaranteed insurability option
Probationary period
#60. What is the initial period of time specified in a disability income policy that must pass, after the policy is in force, before a loss can be covered? a) Contestable period b) Elimination period c) Grace period d) Probationary period
Term
#63. Children's riders attached to whole life policies are usually issued as what type of insurance? a) Adjustable life b) Whole life c) Term d) Variable life
Immediately
#64. A Health insurance policy lapses but is reinstated within an acceptable timeframe. How soon from the reinstatement date will coverage for accidents become effective? a) Immediately b) After 14 days c) After 21 days d) After 31 days
Immediate
#65. A man purchased a $90,000 annuity with a single premium, and began receiving payments 2 months after that. What type of annuity is it? a) Immediate b) Flexible c) Deferred d) Variable
To allow the consumer to compare the costs of different policies
#67. What is the purpose of the buyer's guide? a) To provide the name and address of the agent/producer issuing the policy b) To list all policy riders c) To provide information about the issued policy d) To allow the consumer to compare the costs of different policies
Premiums are tax deductible and benefits are not taxed.
#69. Which of the following is correct regarding the taxation of group medical expense premiums and benefits? a) Premiums are tax deductible and benefits are taxed. b) Premiums are tax deductible and benefits are not taxed. c) Premiums are not tax deductible and benefits are taxed. d) Premiums are not tax deductible and benefits are not taxed.
The same face amount as in the whole life policy.
#72. Under an extended term nonforfeiture option, the policy cash value is converted to a) The same face amount as in the whole life policy. b) The face amount equal to the cash value. c) A lower face amount than the whole life policy. d) A higher face amount than the whole life policy.
To purchase a smaller amount of the same type of insurance as the original policy.
#75. The paid-up addition option uses the dividend a) To reduce the next year's premium. b) To accumulate additional savings for retirement. c) To purchase a smaller amount of the same type of insurance as the original policy. d) To purchase a one-year term insurance in the amount of the cash value.
To help the insurance company to prevent overutilization of the policy
#79. What is the purpose of coinsurance provisions? a) To ensure payment to the doctors and hospitals b) To share liability among different insurance companies c) To help the insurance company to prevent overutilization of the policy d) To have the insured pay premiums to more than one company.
Monthly
#8. Under an individual disability policy, the MINIMUM schedule of time in which claim payments must be made to an insured is a) Biweekly. b) Monthly. c) Within 45 days. d) Weekly.
The recommended amount to keep the policy in force throughout its lifetime
#80. Which of the following best defines target premium in a universal life policy? a) The corridor of insurance b) The recommended amount to keep the policy in force throughout its lifetime c) The maximum amount the policyowner may pay on a policy d) The minimum amount to make sure the policy is annually renewable
It may last for the lifetime of the annuitant.
#83. Which of the following is TRUE regarding the annuity period? a) It is also referred to as the accumulation period. b) It is the period of time during which the annuitant makes premium payments into the annuity. c) It may last for the lifetime of the annuitant. d) During this period of time the annuity payments grow interest tax deferred.
A statement that is sufficiently clear to identify the insured and the nature of the claim.
#84. Under the mandatory uniform provision Notice of Claim, the first notice of injury or sickness covered under an accident and health policy must contain a) A statement from the insured's employer showing that the insured was unable to work. b) An estimate of the total amount of medical and hospital expense for the loss. c) A complete physician's statement. d) A statement that is sufficiently clear to identify the insured and the nature of the claim.
Is renewable at the insured's option to a specified age.
#86. A guaranteed renewable disability insurance policy a) Is renewable at the option of the insurer to a specified age of the insured. b) Is guaranteed to have a level premium for the life of the policy. c) Cannot be cancelled by the insured before age 65. d) Is renewable at the insured's option to a specified age.
Principal sum
#88. Under the Accidental Death and Dismemberment (AD&D) coverage, what type of benefit will be paid to the beneficiary in the event of the insured's accidental death? a) Refund of premiums b) Principal sum c) Capital sum d) Double the amount of the death benefit
24 months.
#89. The relation of earnings to insurance provision allows the insurance company to limit the insured's benefits to his/her average income over the last a) 6 months. b) 12 months. c) 18 months. d) 24 months.
Fixed period
#90. If a beneficiary wants a guarantee that benefits paid from principal and interest would be paid for a period of 10 years before being exhausted, what settlement option should the beneficiary select? a) Fixed period b) Life with period certain c) Fixed amount d) Interest only
Fixed amount
#91. When the policyowner specifies a dollar amount in which installments are to be paid, he/she has chosen which settlement option? a) Life income period certain b) Extended term c) Fixed amount d) Fixed period
Disability expected to last for at least 6 months.
#94. Social Security disability definition includes all of the following EXCEPT a) Disability resulting from a medically determinable mental impairment. b) A physical impairment expected to result in death. c) Disability expected to last for at least 6 months. d) The inability to engage in any gainful work.
A dread disease policy
#98. Which of the following would be an example of a limited accident and health insurance policy? a) An accidental death and dismemberment policy b) A Medicare policy c) A long-term care policy d) A dread disease policy
What is the minimum amount of additional coverage provided by umbrella policies?
$1 million
The broad theft coverage endorsement on the dwelling form specifies all of the following limitations EXCEPT...
$1,000 on silverware. The real limit is $2,500.
What is the max penalty for habitual willful noncompliance with the Fair Credit Reporting Act?
$2,500.
If an auto policy has split limits of 30/50/25, how much will the policy pay for property damage in a single accident?
$25,000
An insured's building has an actual cash value of $200,000 and he has insured the property for $120,000 with an 80% coinsurance clause. a $40,000 loss occurs. how much will the policy pay?
$30,000
If an auto policy has split limits of 30/50/25, what is the maximum amount the policy will pay for injuries to one person in a single accident?
$30,000
An insured's roof cost $4,000 when installed 5 years ago. It has been damaged by hail and must be replaced. The new roof will cost $6,000 at today's prices. If the roof has been depreciating at $200 per year and his policy is ACV, how much will it pay toward the insured's new roof?
$5,000. ACV is calculated as replacement cost less depreciation.
An insurance policy specifies that it will pay $600 for a specific loss. The policyowner suffers a loss of $535. How much will the policy pay?
$535. Applying the principle of indemnity, the insurer will pay the actual cost of the loss, up to the limit stated in the policy. In this case, the insurer will pay $535.
Three years ago an insured move to an unfurnished apartments, she bought new furniture that cost $9,000 last week there was a fire in the apartment that destroyed the furniture. Replacement cost is $10,500. The adjuster told the insured her furniture depreciated $2,500 If the insurance is written on the actual cash value basis how much will it pay for the loss?
$8,000
Three years ago, an insured moved to an unfurnished apartment. She bought new furniture that cost $9,000. Last week, there was a fire in the apartment that destroyed the furniture. Replacement cost is $10,500. The adjuster told the insured her furniture depreciated $2,500. If insurance is written on an actual cash value basis, how much will it pay for the loss?
$8,000.
If an auto policy has liability limits of 40/60/20, what would be the equivalent combined single limit?
$80,000 - combined total of coverage for bodily injury and property damage
Insurable Interest
- Must exist at time of loss - 3 elements: 1. Financial 2. Blood(family) 3.Business
direct-response marketing
- No agents - Company advertises directly to consumers (through mail, internet, television, other mass marketing) - Consumers apply directly to the company
Managerial System
-Branch manager (supervises agents) -Salaried -Agents can be insurer's employees or independent contractors
General Agency System
-General agent-entrepreneur represents 1 company -Exclusive -Compensation and commissions -Appoints subagents
Defense Against Negligence
1. Assumption of Risk 2. Comparative Negligence 3. Contributory Negligence 4. Intervening Cause Reduce a defendants liability or shift a portion of the responsibility onto the plaintiff
Major Policy Structure
1. Declarations 2. Definitions 3. Insuring Agreement 4. Additional (supplimentary) Coverages 5. Conditions 6. Endorsements 7. Exclusions & policy limits
3 elements of insurable risk?
1. Financial (monetary interest) 2. Blood (a relative) 3. Business (a business partner)
5 Individual Rate-Making Approaches
1. Judgement Rating 2. Schedule Rating 3. Experience Rating 4. Retrospective Rating 5. Merit Rating
Elements of Negligence
1. Legal Duty 2. Standard of Care 3. Unbroken chain of events 4. actual loss or damage
What are the 4 primary elements considered in order to prove negligence on the part of another party? -defendant
1. Legal Duty 2. Standard of Care 3. Unbroken Chain of Events(Proximate Cause) 4. Actual Loss or Damage. Reasonable forseen Must be satisfied to prove negligence.
What are the 3 types of hazards underwriters are concerned about?
1. Physical Hazard 2. Moral Hazard 3. Morale Hazard
If a policy is cancelled due to nonpayment of premium, how many days' advance notice must the insurer give the policyholder before cancellation?
10 days.
An insured with a homeowners policy has removed property from the insured location to protect it from loss that could be caused by a covered peril. The removal coverage applies for how many days?
30 days
Under workers compensation laws, injured workers are entitled to how many weeks of treatment from the date of the accident?
400 weeks. Medical treatment for injuries due to an on-the-job accident is limited to a maximum of 400 weeks of coverage from the date of the accident. Review ContentNext Question
If the premiums for a policy will be increased by more than 15 percent, how much warning must the insured get?
45 days. A notice of increase in premiums that exceeds 15% of the current policy's premium must be delivered or mailed to the insured at least 45 days before the effective date of such termination or change.
If a consumer requests additional information concerning an Investigative Consumer Report, how long does the insurer or reporting agency have to comply?
5 days
A Certificate of Authority should arrive in how many days?
60 days
In dwelling policies, any volcanic activity will be considered part of one occurrence if it happens within how many hours?
72 hours
In order for forms HO-2 , HO-3, and HO-5 to provide coverage, a dwelling must be insured for at least what percentage of the replacement cost?
80%
An insured owns a building that is valued at $400,000. To comply with the 80% coinsurance provision of his insurance policy, how much should he insure the property for?
80% of the property's ACV or more. The coinsurance clause states that, in consideration of a reduced rate, the insured agrees to maintain a certain minimum amount of insurance on the insured property. Market value is affected by location. Insurance is designed to pay, in the event of a covered loss, replacement cost minus depreciation.
The employee theft crime policy includes a coverage extension that applies to employees temporarily outside the coverage territory for up to
90 days
Hazard
A CONDITION / situation that creates or increases the probability or extent of a probable loss from a peril
Who would benefit from the Individual Named Insured endorsement?
A business owner who uses a company vehicle for personal use the individual named insured endorsement is used with the business auto and motor carrier coverage forms to insure a sole proprietor. The endorsement is used by individual business owners who use company vehicles for personal use rather than purchasing a personal vehicle.
What are the most common penalties for violations of Insurance Code statutes?
A cease and desist order, monetary fines, and license suspension or revocation
If a policy has been in effect for at least 60 days or is due for renewal, a cancellation may only be effected for which of the following reasons?
A change in the risk that substantially increases the hazard insured against.
Morale Hazard
A condition of carelessness or indifference that increases the frequency or severity of loss.
Reinsurance
A form of insurance whereby one insurance company (the reinsurer) in consideration of a premium paid to it, agrees to indemnify another insurance company (the ceding company) for part or all of its liabilities from insurance policies it has issued.
Contributory Negligence
A legal defense that may be raised when the defendant feels that the conduct of the plaintiff somehow contributed to any injuries or damages that were sustained by the plaintiff.
Risk Retention Group
A liability insurance company owned by its members, which are exposed to similar liability risks by virtue of being in the same business or industry.
Definite and measurable
A loss that is specific as to the cause, time, place and amount. An insurer must be able to determine how much the benefit will be and when it becomes payable.
Sharing
A method of dealing with risk for a group of individual persons or businesses with the same or similar exposure to loss who share the losses that occur within that group.
When would a misrepresentation on the insurance application be considered fraud?
A misrepresentation would be considered fraud if it is intentional and material. Fraud would be grounds for voiding the contract.
Who is an insurance agent?
A person authorized to sell, solicit, and negotiate insurance contracts
Assumption of Risk
A person recognizes AND understands that there is DANGER involved in an activity & voluntarily chooses to encounter it. Ex: Going to a baseball game there is a chance of getting hit by a ball.
With respect to auto insurance, the term owned autos includes all of the following except
A pickup or van titled to and used in the named insured's business
Loss Payable Clause
A provision in property insurance that is used to cover the interest of a secured lender in personal property.
No Benefit to Bailee
A provision that excludes any assignment or granting of any policy provision to any person or organization holding, storing, repairing, or moving insured property for a fee.
Blanket Insurance
A single property insurance policy that provides coverage for multiple classes of property at one location, or provides coverage for one or more classes of property at multiple locations.
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.
Sally has a property insurance policy that is not subject to any coinsurance requirements. Her policy has a set amount of insurance scheduled for her property. What loss valuation method does her policy use?
A stated amount is an amount of insurance scheduled in a property policy which is not subject to any coinsurance requirements in the event of a covered loss.
The Declarations of the Homeowners policy provides all of the following information EXCEPT
A statement that earthquake damage is not covered.
Material Misrepresentation
A statement that, if discovered, would alter the underwriting decision of the insurance company.
In a dwelling policy, which of the following other structures would be covered?
A structure rented to a neighbor for use as a private garage.
Which of the following definitions best defines the term "accident"?
A sudden, unplanned and unexpected event, not under the control of the insured, resulting in injury or damage neither expected nor intended.
Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract?
A warranty in insurance is a statement guaranteed to be true. When an applicant is applying for an insurance contract, the statements he or she makes are generally not warranties, but representations. Representations are statements that are true to the best of the applicant's knowledge.
Claim related expenses, reasonable expenses incurred by an insured to protect damaged property from further loss, or defense expenses are covered by which part of a policy?
Additional coverage
Persons who are not named on the declarations page of a policy but who are protected by the policy are known as what type of insured?
Additional insureds Usually added by an endorsement
Third-party provisions
Address the rights of a third party that may have a secured financial interest in the insured property.
Represents the insurance company and acts for the company in working on agreements as to the amount of a loss and the liability of the company
Adjuster
Which of the following is the closest term to an authorized insurer?
Admitted. Insurers who meet the state's financial requirements and are approved to transact business in the state are considered authorized or admitted into the state as a legal insurer.
Workers compensation disability benefit payments begin
After 3 days
An individual who is licensed to sell, negotiate, or effect insurance contracts on behalf of the insurer
Agent
What is the limit that the insurer will pay for all losses that occur during a policy period?
Aggregate Limit The general aggregate limit is the most the insurer will pay for all losses that occur during a policy period.
Who is considered a nonresident agent?
An agent who resides and is licensed in another state, but who is authorized to transact insurance in this state
Personal Contract
An agreement between an insurance company and an individual. - The insured cannot be changed to someone else without the written consent of the insurer. - Life insurance is an exception to this rule: A policy owner can transfer ownership to another person, but the insurer must be notified in writing
Stated Value
An amount of insurance scheduled in a property policy that is NOT subject to any coninsurance requirements in the event of a covered loss.
Fiduciary Responsibility
An ethical and legal obligation to perform a person's duties in a trustworthy manner.
Producers and General Rules of Agency
An individual licensed to sell, solicit or negotiate insurance contracts on behalf of the principal (insurer).
Foreign insurer
An insurance company that is incorporated in another state.
Domestic insurer
An insurance company that is incorporated in the state.
Alien insurer
An insurance company that is incorporated outside the United States.
Coverage E - additional living expenses
An insured's house becomes uninhabitable due to damage by a fire. As a result, the insured has to rent an apartment until repairs are made. Which type of coverage under the dwelling policy will pay for the expense of renting the apartment?
If an insurance company wishes to order a consumer report on an applicant to assist in the underwriting process, and if a notice of insurance information practices has been provided, the report may contain all of the following information EXCEPT the applicant's
Ancestry. The Fair Credit Reporting Act regulates what information may be collected and how the information may be used. Consumer Reports include written and/or oral information regarding a consumer's credit, character, reputation, and habits collected by a reporting agency from employment records, credit reports, and other public sources. Ancestry is not a relevant factor assessed in these reports.
An insured suffers a windstorm loss in which the insured's driveway is blocked by 2 of the insured's trees and 2 of the neighbor's trees. The total amount of the removal adds up to the following: 3 trees at $300 per tree, and one tree at $600. How much will the insurer pay for the loss?
Answer: $1,000 It is important to pay particular attention to coverages that have a maximum amount of coverage and an additional sublimit for one particular item. The most the policy will pay for this loss is $1,000.
Under the Personal Auto Policy, liability for bodily injury resulting from the insured's use of a nonowned automobile is A. Provided by the insured's policy on an excess basis. B. Provided by the insured's policy on a primary basis. C. Not covered. D. Shared on a pro rata basis.
Answer: A Automobile insurance follows the insured auto, so the coverage written on the auto is primary. Automobile insurance also follows the insured as excess over other collectible insurance.
Under the dwelling policy, Coverage C - Personal Property is A. Limited to covering a servant's property while at the insured location. B. Automatically provided as 50% of Coverage A. C. A prohibited coverage in the dwelling form. D. Limited to 50% of the amount of insurance that is written as Coverage A. Correct!
Answer: A Dwelling Coverage C is limited to covering property owned by a guest or servant while the property is at the insured location. Under a homeowners policy, the property would be covered the same while on or off the premises.
In a personal umbrella, the amount paid by the insured for certain losses not covered under the primary coverage is called A. Self-insured retention. B. Stop-loss. C. Coinsurance. D. Participation requirement.
Answer: A In casualty insurance, the portion of a claim not paid by insurance is called a retention. In property insurance, it is called a deductible.
Which of the following would NOT be considered a misrepresentation on the part of the insurer? A. Backdating policies to secure a lower premium for the insured B. Implying that term insurance has cash value C. Embellishing the benefits provided in the policy D. Overstating returns on policy dividends Correct
Answer: A It is illegal to issue, publish, or circulate any illustration or sales material that is false, misleading, or deceptive as to policy benefits or terms, or the payment of dividends. Demonstrating conservative returns in the illustrations would not be a violation.
Which of the following situations would NOT be covered by Connie's uninsured motorists coverage? A. Connie's son's girlfriend who was hit by the same hit-and-run driver while jogging with her boyfriend. B. Connie's neighbor borrowed Connie's car and is hit by an uninsured motorist. C. Connie's car is hit by someone whose auto insurer is insolvent and has bodily injury damages. D. While jogging, Connie's son is hit by a hit-and-run driver who cannot be identified.
Answer: A Uninsured motorist coverage applies to the insured, resident relatives, and those occupying the covered car.
All of the following statements concerning liability coverage are true EXCEPT A. The policyholder can sue the insurer whether or not all conditions and provisions of the policy have been met. B. The insurer cannot refuse to pay a claim even if the insured is bankrupt. C. Liability policies normally include supplementary payment provisions. D. Liability policies defend the insured against claims real or alleged
Answer: A. The legal action against the insurer condition states that the policyholder cannot sue the insurer unless he or she has met all conditions of the policy.
An insured owns a large dog. The first day he has to leave the dog home alone to go to work, the insured comes back to find his $400 couch torn apart, his $100 coffee table chewed up, his $50 window curtain shredded, and a $200 window pane shattered where his dog jumped through. The insured has personal property coverage under a special form dwelling policy. How much of this loss will the policy cover? A. $0 B. $200 C. $250 D. $750
Answer: A. $0 Damage that results from domestic animals is excluded under the special form dwelling policy.
An insured has a special form dwelling policy written for $100,000 on a dwelling. The dwelling's replacement cost is $115,000. Fire causes $75,000 in damage to the dwelling, $15,000 damage to a separate garage, and kills 10 trees valued at $600 each. How much will the policy pay for the trees? A$5,000 B$10,000 C$60,000 D$75,000
Answer: A. $5,000 In the broad and special form, Coverage B (Other Structures) is an additional amount of insurance, limited to 10% of Coverage A (in this example, $10,000). Trees, shrubs, and plants are covered, limited to not more the $500 for any one tree or plant, and not to exceed 5% of Coverage A in total (in this example, $5,000).
All of the following are true regarding flood insurance EXCEPT... A. Coverage may be provided for growing crops and livestock. B. Coverage is excluded for money and securities. C. It is available in designated areas only. D. Coverage is provided for dwellings or commercial property.
Answer: A. Coverage may be provided for growing crops and livestock. NFIP is available for buildings and their contents in designated geographic areas only.
Which of the following terms describes making false statements about the financial condition of any insurer that are intended to injure any person engaged in the business of insurance? A. Defamation B. Undercutting C. Twisting D. Slandering
Answer: A. Defamation Defamation is making statements which are false as to the financial condition of any insurer and which are calculated to injure any person engaged in the business of insurance.
Under which of the following conditions can broad theft coverage be added to a dwelling policy? A. If the insured is owner-occupant of the dwelling B. If permission is granted by the department of insurance C. Broad theft coverage cannot be added to a dwelling policy. D. If the policy has been in effect for 60 days
Answer: A. If the insured is owner-occupant of the dwelling
Which of the following statements is NOT true regarding a personal umbrella liability policy? A. It provides excess liability coverage over underlying personal liability. B. It provides errors and omissions coverage for an agency. C. It may cover certain exposures not provided under the primary layer. D. It may require the payment of a self-insured retention.
Answer: B
All of the following statements regarding a boatowners policy are true EXCEPT A Perils are insured on an open-peril basis, providing that the insurer will pay for direct and accidental loss to the property insured. B. Replacements for the boat listed in the Declarations are automatically covered, if the insured notifies the insurer within 60 days and pays the additional premium. C. Watercraft liability protects up to specified limits for claims against a "covered person" for damages due to bodily injury caused by a watercraft. D. Physical damage coverage is provided on an actual cash value (ACV) basis.
Answer: B Automatic coverage is provided on replacements for the boat listed in the declarations provided the insured notifies the insurer within 45 days of purchase and pays any additional premium required.
An insurance producer fails to obtain automobile insurance for client after agreeing to do so. The client is involved in an automobile accident after running a red light and is found to be at fault. The damage to the other vehicle totals $5,000. Which statement regarding the producer's errors and omissions liability policy is true? A. It will provide coverage because punitive damages have been awarded. B. It will provide coverage because the damage to the client resulted from the producer's negligence. C. It will not provide coverage; such physical damage to property is not covered. D. It will not provide coverage because the property damage resulted from the client breaking the law.
Answer: B Errors and omissions coverage protects insurance producers and brokers from financial losses they may suffer if an insured sues to recover his or her financial loss due to the producer giving incorrect advice or not informing the insured of important issues.
All of the following are special personal property limits under a homeowners policy EXCEPT A. $1,500 for trailers not used with watercraft. B. $2,500 for theft of firearms. C. $500 for business personal property on the insured premises. D. $1,500 for securities, accounts, deeds, and evidences of debt.
Answer: B HO forms place a $2,500 limit for business personal property that applies on premises only. A limit of $500 applies to loss of business personal property while away from the premises.
Which of the following could be covered by a HO policy? A. Property of a tenant not related to the insured B. An oriental rug in an on-premises apartment C. Birds, fish, and animals D. A sports car kept in an attached garage
Answer: B Homeowners contents coverage does not apply to animals, cars, or property of those who pay to be at your house; it does provide up $2,500 for a loss of landlord's furnishings in an on-premises apartment.
A passenger in a friend's car is injured while getting into the car. Which of the following statements would apply if both the passenger and the driver had medical payments coverage under a personal auto policy? A. Both policies would share equally in the loss. B. The driver's policy will pay. C. The driver's policy will act in excess of the passenger's policy. D. The passenger's policy will pay.
Answer: B Medical payments coverage pays all necessary medical and funeral expenses incurred and services rendered to the insured or passengers in the insured's vehicle, regardless of fault.
Which of the following statements would be correct if an insured failed to maintain the underlying limits as required by a personal umbrella policy? A. The insured would have to pay the self-insured retention limit. B. The insured would be responsible for the amount required as underlying limits in the event of a claim. C. It would have no effect on the umbrella policy. D. The policy will be cancelled.
Answer: B The amount of insurance required as underlying limits in other policies is treated as a deductible amount to the umbrella for that particular exposure, so if underlying limits are not maintained; it is the insured's responsibility.
While Jake was towing a utility trailer with his auto, the trailer came loose and ran into a store front. What part of Jake's auto policy would pay for the damage to the store? A. This loss would not be covered. B. Property Damage Liability C. Collision Coverage D. Other than Collision Coverage
Answer: B The auto policy provides liability coverage to a trailer being towed by a covered auto.
Which of the following losses would be covered by an unendorsed homeowners policy? A. Collapse caused by earthquake B. Fire or lightning C. Faulty or defective zoning D. Theft in a structure under construction
Answer: B Fire and lightning are included in the basic perils, which in turn are included in almost all homeowners policies. Earthquake coverage is only by endorsement. Theft in or to buildings under construction is not covered. If the insured's own acts, decisions, or failure to act causes the loss, it is not covered.
To be covered, which of the following exposures must be added by endorsement under a Dwelling Form? A. Detached garage B. Personal liability C. Rental Value D. Dwelling
Answer: B personal liability The personal liability supplement to the dwelling policy was designed to allow personal liability insurance to be written with a dwelling form. When written with the dwelling form, a personal liability schedule is used to show the appropriate limits of liability.
Which loss listed below would be fully covered by a homeowners policy? A. $5,000 firearm collection stolen B. $2,000 silver tea set stolen C. $1,200 pedigreed golden retriever stolen D. $24,000 bass boat destroyed in a tornado
Answer: B. $2,000 silver tea set stolen Tea sets are covered with a special limit of $2,500 for the peril of theft; the firearm collection is covered for no more than $2,500 if stolen; boats are covered for no more than $1,500 for any peril the policy covers; the dog is not covered at all.
Vandalism and malicious mischief would be covered if the insured's premises have been vacant for no more than how many days? A. 30 B. 60 C. 100 D. 365
Answer: B. 60 days Vandalism and malicious mischief will not be covered if the insured's premises have been vacant for more than 60 days immediately prior to the loss.
B&B Market was sued when an employee detained a person he believed to be a shoplifter, but the person turned out to be the meter reader. Which coverage would apply to this suit? A. Crime coverage part B. Personal and advertising injury liability C. Bodily injury liability D. Property damage liability
Answer: B. Personal and advertising injury liability This suit would fall under the coverage of personal injury, damage to the character of the claimant.
The medical payments coverage in a personal auto policy will pay reasonable medical expenses for all of the following EXCEPT A. The insured's child sustains injuries when the car she is in accidentally rolls down a hill. B. A friend is injured while driving the insured's vehicle with permission. C. The insured is injured while exiting a friend's mobile home. D. The insured is injured by a motor vehicle while crossing the street.
Answer: C
The insured with a homeowners policy has had damage to his property caused by a volcano. Which of the following is true? AAll eruptions are considered separate occurrences no matter how close together. BCoverage for each volcanic eruption would require a separate deductible. CAll volcanic eruptions within a 72-hour period will be considered one occurrence. DNone of the damage is covered.
Answer: C All volcanic eruptions that occur within a 72-hour period will be considered one event.
In an auto policy, the medical payments coverage is similar to A. Bodily injury coverage, because it pays the insured's doctor bills. B. Accident insurance, because it has the same limits. C. Accident insurance, because it pays medical expenses regardless of fault. D. Bodily injury coverage, because it provides legal protection if the insured causes injuries to others.
Answer: C Medical payments will pay for accidental bodily injury of an insured, regardless of fault or auto. It will pay medical expense of others occupying the insured auto.
Other than collision would cover financial losses due to A. Damage to your car in an accident for which you were found at fault. B. Legal action brought against you for an accident. C. Damage to your car caused by wind or hail. D. Damage to your neighbor's mailbox which was caused by your pickup.
Answer: C Other than collision includes losses caused by falling objects, fire, theft, windstorms, hail, and vandalism.
An insured has $5,000 of medical coverage on a personal auto policy at the time of a covered accident. The insured and two passengers are injured. Medical treatment costs $7,000 for the insured, $4,000 for the first passenger, and $8,000 for the third passenger. How much will the policy pay under medical payments coverage? A. $5,000 maximum for the accident B. $5,000 minus the policy deductible C. $14,000 D. $15,000
Answer: C The limit is not more than $5,000 per person per accident.
All of the following are true regarding physical damage coverage, EXCEPT A. The policy will pay up to $20 per day up to a maximum of $600 for rental transportation. B. The insurer will pay for direct and accidental loss to a covered auto minus any applicable deductible. C. The limit of liability is the greater of the actual cash value of the vehicle at the time of loss or the amount necessary to repair or replace the vehicle. D. Losses to non-owned autos will be covered the same as the broadest coverage available for any covered auto, except non-owned trailers are limited to $500.
Answer: C The limit of liability is the lesser of the actual cash value of the vehicle at the time of loss or the amount necessary to repair or replace the vehicle.
The type of professional liability coverage a medical doctor needs is A. Druggists' liability. B. Ordinance and law coverage. C. Malpractice coverage. D. Errors and omission coverage.
Answer: C The type of professional liability insurance written to protect those in the medical field is called medical malpractice.
What type of coverage do umbrella policies provide? A. Property coverage for the basic perils of fire, wind, and hail B. Primary coverage for risks that are difficult to insure C. Excess coverage over an underlying or primary policy D. Property coverage for those who do not qualify for homeowners insurance
Answer: C Umbrella policies, sometimes called catastrophe insurance, provide excess coverage over the underlying or primary liability policy.
A common exclusion found under physical damage to your auto includes A. Riot or civil commotion. B. Towing and labor. C. Mechanical breakdown. D. Glass breakage.
Answer: C Damage due to wear and tear, freezing, mechanical or electrical breakdown and road damage to tires are common exclusions to the physical damage coverage section.
Which of the following would NOT qualify as a hired auto? A. An auto leased from a commercial rental company B. An auto rented for personal use C. An auto borrowed from an employee D. An auto hired by an employer
Answer: C Hired automobiles include those that are leased, hired, rented, or borrowed, excluding autos that are owned by employees.
According to the common policy conditions for a commercial package policy, if the insured dies, the policy rights and duties A. Die with the insured. B. Are suspended until probate is completed. C. Automatically transfer to a legal representative. D. Transfer to a legal representative after court appointment.
Answer: C The ISO common policy conditions for the commercial package policy states that in the event of the insured's death, rights and duties are automatically transferred to the insured's legal representative.
Which of the following is true regarding single dwellings that are insured to at least 80% of the replacement value? A. They are excluded from the flood insurance policy. B. They are subject to a $1,000 deductible. C. They are automatically provided with replacement cost coverage. D. They qualify for maximum compensation under the flood insurance program. Correct!
Answer: C. Single-family dwellings are automatically provided with replacement cost coverage if insured to at least 80% of the replacement value, or the maximum allowed under the regular flood insurance program.
Coverage for medical payments under a personal auto policy applies to expenses following a covered accident that are incurred and services rendered within A. 90 days. B. 1 year. C. 3 years. D. 5 years.
Answer: C. 3 years
If an agent changes his residence address, within how many days must the agent notify the Commissioner of the change? A. 10 days B. 15 days C. 30 days D. 60 days
Answer: C. 30 days
Losses caused by vandalism and malicious mischief are excluded under a homeowners policy if the dwelling had been vacant for more than A. 30 days. B. 45 days. C. 60 days. D. 90 days.
Answer: C. 60 days V&MM is the first coverage suspended in the event of vacancy (vacant for more than 60 consecutive days).
In a dwelling policy, which of the following provides coverage for additional living expenses incurred by an owner-occupant in the event a covered peril makes the premises uninhabitable due to a covered loss? A. Coverage B B. Coverage C C. Coverage E D. Coverage A
Answer: C. Coverage E
A professional who wants coverage for all liability exposures should purchase what form of liability insurance? A. Directors and officers B. Fiduciary and employment practices C. Employee benefits D. Commercial general and professional
Answer: D
How much coverage can be available for watercraft damage in the homeowners policy? A. Unlimited amount B. No more than $1,000 C. Homeowners policies do not cover watercraft. D. Up to $1,500
Answer: D
Skip's home contains two apartments. Because it does not qualify for a homeowners policy, Skip has purchased a Dwelling Policy, Form 3. What other coverage would Skip need to cover his exposure of owning and maintaining this home? A. Landlords Broad Form Coverage B. Renters Insurance C. Non-owned property coverage D. Comprehensive Personal Liability coverage
Answer: D Because the Dwelling Form does not automatically include Personal Liability, it must be added by supplement or written as a stand alone policy.
With respect to the personal auto policy, which of the following vehicles could be classified as a nonowned auto? A. A vehicle leased to the named insured for 12 months by a leasing company B. A vehicle that is titled and insured by the named insured, but is driven principally by the named insured's son, who is resident of the household C. A vehicle rented for the insured's personal use D. A vehicle that is titled to another person, but is being used with permission by an insured
Answer: D Because the personal auto policy provides coverage on both owned and nonowned autos, situations will exist in which two or more policies will apply in a given situation. If the auto is owned and insured by someone other than the operator, then that policy will be primary coverage for that auto, and the operator's insurance would act as excess.
Johanna purchased a National Flood Insurance policy 10 days after her community entered an emergency program. When would her coverage be effective? A. 30 days after the application has been accepted B. 12:01 pm on the 5th day after the endorsement request has been mailed C. 5 days after the application and premium payment are mailed D. 12:01 am the day after the application and premium payment are mailed
Answer: D During the first 30 days after a community enters the emergency or normal programs, coverage on a flood policy begins at 12:01 a.m. the day after application and premium payment have been mailed.
Which of the following would be covered under the Broad Form (DP-2) policy's falling object peril? ADamage to the building's awnings BDamage to outdoor television antennas if there is no interior damage CExterior pavement and patio damage DInterior building damage if the exterior was damaged first
Answer: D In DP-1 and DP-2 policy forms, loss or damage resulting from falling objects is covered, except for damage to awnings, fences, outdoor equipment, outdoor radio and television antennas or aerials, masts, or towers. Damage to the interior of the building is covered only if the exterior has been damaged first.
Transportation expenses are covered under a Personal Auto Policy for A$25 per day, for a maximum of $500. B$50 per day, for a maximum of $500. C$50 per day, for a maximum of $750. D$20 per day, for a maximum of $600.
Answer: D Other than Collision coverage provides $20 a day for up to 30 days following the theft of the entire auto, providing the auto is not recovered within 48 hours.
When an umbrella policy is broader than underlying insurance and it pays a loss that is not covered by the underlying policy, it usually only pays A. The amount specified in the policy under the additional coverage provisions. B. The amount in excess of the underlying policy deductible. C. A percentage of the loss as described on the declarations. D. The excess over the self-insured retention.
Answer: D Retention is the equivalent of a deductible in property insurance.
Which of the following is NOT true of National Flood Insurance? A. Emergency program limits are available to communities immediately. B. Participating communities must agree to implement certain land use regulations. C. National Flood Insurance provides coverage that is excluded from property insurance policies. D. Insurance provided by the flood program also is available in standard property policies.
Answer: D The National Flood Insurance Program was created by the federal government to fill the gap left by the private insurance industry. When a community first enters the flood program, it is considered to be in the emergency program, and the amounts of insurance are limited. After the land use requirements are met and flood maps are available, the community will be placed in the regular program.
An insured was involved in an automobile accident for which the insured was at fault. Which of the following coverages would pay for damage to the insured's automobile? A. Other-than-collision B. Property damage liability coverage C. Comprehensive coverage D. Collision
Answer: D The policy defines collision as the upset or impact of a covered vehicle with another vehicle or object.
Which of the following situations would NOT be covered by Connie's uninsured motorists coverage? A. Connie's neighbor borrowed Connie's car and is hit by an uninsured motorist. B. Connie's car is hit by someone whose auto insurer is insolvent and has bodily injury damages. C. While jogging, Connie's son is hit by a hit-and-run driver who cannot be identified. D. Connie's son's girlfriend who was hit by the same hit-and-run driver while jogging with her boyfriend.
Answer: D Uninsured motorist coverage applies to the insured, resident relatives, and those occupying the covered car.
When would UM coverage apply? A. Only when the insured drives an uninsured car B. Any time the insured is involved in an accident with an uninsured driver C. Only when the insured is legally liable D. Only when the other party is legally liable but has no insurance
Answer: D Uninsured motorist coverage would not apply if the insured was at fault; only if the other driver is at fault but has no coverage.
Who would participate in a WYO program? A. Lloyd's associations B. Government insurance companies that write and service National Flood Insurance policies C. Businesses requiring National Flood Insurance policies D. Private insurers that wish to write and service National Flood Insurance policies on a no risk-bearing basis
Answer: D A WYO (write your own) program is made up of private insurers that write and service National Flood Insurance policies on a no risk-bearing basis through a special arrangement with the Federal Insurance Administration. WYO programs retain part of the flood insurance premium to pay for commissions and administrative costs. The remaining premiums, plus investment, are used to cover losses.
The mobilehome endorsement alters the homeowners policy to cover a mobilehome and other structures on land A. Owned or leased by a landlord who does not reside on the premises. B. Owned by a landlord who does not use the mobilehome located on it. C. Leased by the owner of the land. D. Owned or leased by the resident of the mobilehome.
Answer: D. The mobile home endorsement alters the homeowners policy to cover a mobile home and other structures on land owned or leased by the resident of the mobile home.
Which of the following perils is covered by the HO-2 and HO-3? A. Loss due to power interruption that occurs off the premises B. Flood C. War D. Sudden and accidental rupture of a heating system
Answer: D. Off-premises power failure, flood, and war are all excluded from all DP and HO policies.
The employee theft crime policy includes a coverage extension that applies to employees temporarily outside the coverage territory for up to A. 120 days. B. 30 days. C. 60 days. D. 90 days.
Answer: D. 90 days The coverage includes a coverage extension that applies to employees temporarily outside the coverage territory for up to 90 days.
All of the following are examples of transacting insurance in Georgia EXCEPT A. Insurance solicitation. B. Preliminary insurance negotiations. C. Making an insurance contract go into effect. D. None of the above. All are examples of transacting insurance.
Answer: D. None of the above. All are examples of transacting insurance.
A meteorite hits the insured's car, causing damage. Under which of the following coverages in a personal auto policy would this loss be paid? A. Liability B. Uninsured motorist Collision D. Other-than-collision
Answer: D. Other than collision Damage caused by a falling object would be covered under other-than-collision.
A bond is written for a set limit, and the surety will be liable only for this amount of the limit. This limit is known as the A. Face value. B. Stated amount. C. Limit of liability. D. Penalty.
Answer: D. Penalty A bond is written for a set limit, sometimes called the penalty. If the principal's obligation exceeds the limit, the surety will be liable only for the amount of the limi
Which of the following would NOT be considered a flood? A. Overflow of tidal waters B. Mudslides C. Runoff of surface waters D. Sewer backup
Answer: D. Sewer backup Flood is defined by the National Flood Insurance Program. It does not include sewer backup.
Prior to state-directed workers compensation statutes being enacted, employees had A. No right to sue their employers for their work-related injuries. B. Limited payments for their work-related injuries. C. Guaranteed protection for their work-related injuries. D. To sue an employer for the "loss" and prove that the employer was at fault.
Answer: D. To sue an employer for the "loss" and prove that the employer was at fault. Prior to workers compensation statutes being enacted, workers had to sue employers for damages, and few lawsuits resulted in ANY compensatory payments.
In the Personal Auto Policy, owned trailers being towed by an insured auto are automatically covered for A. Towing Coverage. B. Comprehensive (other than collision) Coverage. C. Collision Coverage. D. Uninsured Motorists Coverage.
Answer: D. Uninsured Motorist Coverage Trailers, while being towed by an insured auto, are covered automatically for BI/PD and U/M under Part A of a Personal Auto Policy.
What Personal Auto Coverage would pay for the insured's injuries sustained when struck by a hit-and-run driver while crossing a busy street? AComprehensive (other than collision) BCollision CLiability coverage DMedical payments Correct!
Answer: D. medical payments Medical Payments would pay for injuries arising out of an auto event, regardless of fault.
Who is covered by an HO-4 policy?
Answer: Tenants
With respect to auto insurance, the term owned autos includes all of the following EXCEPT A. A pickup or van acquired by the named insured during the policy period. B. Any private passenger auto leased to the named insured for a period of more than 6 months. C. A pickup or van titled to and used in the named insured's business. D. Any private passenger auto titled to the named insured.
Answer: c For eligibility, the personal auto policy will insure as covered autos those vehicles owned by the named insured and not used primarily for a business, other than farming. Vehicles leased to the named insured for periods of 6 months or longer also are classified as owned for insurance purposes.
In a personal auto policy, coverage territory is defined as what geographical regions?
Any U.S. state, its territories and possessions and Canada
Who must be a member of a state Insurance Guaranty Association?
Any authorized insurer within a state
Ambiguities in a Contract of Adhesion
Any doubt or ambiguity found in an insurance policy will be found in favor of the insured
What type of property can be covered under Inland Marine insurance?
Any type of property that is portable and in transit over land or in the air.
What type of agent authority is based on the agent's actions or words?
Apparent The powers and authorities that an agent may exercise are express and implied. Apparent (or perceived) authority is the assumption of authority based on the agent's actions, words, or deeds.
When the insured and the insurer cannot agree on a settlement in an auto policy, which provision applies?
Appraisal If the insured and the insurer cannot agree on a settlement, either party can demand appraisal. Each party will select and pay for its own appraiser.
A policy condition that stipulates how the amount of damaged or lost property will be determined if the insured and the principal do not agree is known as...
Appraisal. Loss valuation is a factor in determining the premium charged and the amount of insurance required.
What process is used to settle a casualty claim when the insured and the insurer cannot agree?
Arbitration
When a disagreement occurs as to how to settle a loss in a "fender bender" between two cars, what procedure is followed?
Arbitration through the court. Arbitration is a low-cost alternative to a full-blown lawsuit.
Which of the following is a method of claim settlement used when the insured and insurer cannot agree on how to settle a claim?
Arbitration. A method of claim settlement used when the insured and insurer cannot agree on how to settle a claim. The arbitrator's decision is binding to both parties.
Representations are written or oral statements made by the applicant which...
Are considered true to the best of the applicant's knowledge.
There are some applicants that underwriters do not care to insure, but because of state law or otherwise, must be provided protection. To become authorized, a casualty company must agree to participate in the Assigned Risk Pool and take its turn providing auto insurance to high-risk drivers
Assigned Risk
Which of the following describes the transfer of a legal right or interest in an insurance policy?
Assignment. The transfer of a legal right or interest in an insurance policy. In property and casualty insurance, assignments of policies usually are valid only with the prior written consent of the insurer.
When can an insured cancel a businessowners policy?
At any time by mailing a written notice of cancellation
Replacement cost coverage is provided in both the broad and special DP forms when the amount of insurance on the dwelling is what percentage?
At least 80% of the replacement cost
When must insurable interest exist in a property insurance policy?
At the time of loss
Insurable interest in the property covered in a policy must be proven...
At time of loss. Between the time a policy is issued and a loss occurs, ownership may have changed, mortgages may have been put into place, etc. Therefore, in property and casualty insurance, insurable interest must exist at the time of loss.
Reduction
Attempt to lessen the possibility or severity of a loss
Implied Authority
Authority that is not expressed or written into the contract, but which the agent is assumed to have in order to transact the business of insurance for the principal.
What is the closest term to an authorized insurer?
Authorized or Admitted
If an insurer holds a Certificate of Authority, it is known as what type of insurer?
Authorized or admitted
If an insurer meets the state's financial requirements and is approved to transact business in the state, it is considered what type of insurer?
Authorized or admitted
Who does the garage coverage form insure?
Auto dealers, service stations, and auto repair shops
If an insured has an umbrella liability policy in addition to his personal auto policy, which would be considered the underlying policy?
Auto policy
All of the following statements regarding a boatowners policy are true EXCEPT...
Automatic coverage is provided on replacements for the boat listed in the declarations provided the insured notifies the insurer within 45 days of purchase and pays any additional premium required.
If more than one person has an insurable interest in the property covered under a dwelling policy, A. All insureds must decide which one will be liable for the loss. B. The insurer will be liable for only the insured's interest in the damaged property. C. Liability will be split evenly among all people who have insurable interest. D. All involved insurers must decide which one will be liable for the loss.
B. Insurer will be liable for only the insured's interest in the damaged property. If more than one person has an insurable interest in a property, the insurer will be liable only for the insured's interest in the loss.
Market Value
Based on amount a buyer would be will to pay a seller for the property prior to the loss. -Seldom-used -takes into consideration land & location rather Agreed Valuejust cost of rebuilding the structure
What type of policy insures all property at multiple locations for a single amount?
Blanket Policy Provides coverage for multiple classes of property at one location under a single policy.
The crime of forced entry into the premises of another by a person or persons with felonious intent, is defined as a...
Burglary. Insurance policies covering the peril of burglary require that following a loss, there are visible signs of forced entry or exit from the premises.
On its advertisement, a company claims that it has funds in its possession that are, in fact, not available for the payment of losses or claims. The company is guilty of A. Unfair claim practice. B. Rebating. C. Misrepresentation. D. Concealment.
C. Misrepresention
Termination of an in-force insurance policy prior to the expiration date shown in the policy is known as...
Cancellation is the termination of an in-force insurance policy by either the insured or the insurer prior to the expiration date shown in the policy. Termination may be voluntary, involuntary, or in mutual accordance with provisions contained in the policy.
What is the difference between cancellation and nonrenewal?
Cancellation is the termination of an insurance policy by either the insured of insurer prior to the policy's expiration date. Nonrenewal is the termination of a policy by the insurer at it's expiration date.
A third-party insurance that covers the insured's legal responsibilities in an accident or negligent act
Casualty/Liability Insurance
If the Commissioner/Superintendent finds a licensee engaging in an unfair method of competition or an unfair practice, what order will be issued?
Cease and desist order
What document is required for an insurance company to transact insurance?
Certificate of Authority
Definitions
Clarifies terms used in policy, usually printed in bold, italics or quotations
A single dollar limit of liability applying to the total of damages for bodily injury and property damage combined, resulting from one accident or occurrence
Combined Single Limit
A multi-peril, multiline policy that provides a broad spectrum of property and casualty coverages for businesses that may include any of the seven coverage parts: general liability, commercial property, inland marine, commercial auto, equipment breakdown, crime, and farm
Commercial Package Policy (CPP)
What type of insurance should a person who requires coverage for all liability exposure purchase?
Commercial general liability (CGL) and professional liability CGL excludes professional liability and professional liabiliity does not cover premises liability. Between the two policies, all liability exposure would be covered
All of the following are classes of inland marine risks EXCEPT...
Common Carrier Cargo Liability. The 4 classes are 1. Domestic shipments and transportation risks 2. Bridges, tunnels, and other instrumentalities of transportation of communication. 3. Commercial property floater risks 4. personal property floater risks.
Tort
Common law jurisdictions, is a civil wrong that causes someone else to suffer loss or harm resulting in legal liability for the person who commits the tortious act
Strict Liability
Commonly applied to product liability cases. Person or business that manufactures or sells a product makes an implied WARRANTY that the product is safe. Their liable for defective products regardless of fault or negligence.
The ABC Corporation has $100,000 of coverage on its building through insurance Company A, and $50,000 of identical coverage on the same building through insurance Company B. Assuming coinsurance is not an issue, when a $24,000 loss occurs, how much will each insurer pay?
Company A will pay $16,000; Company B will pay $8,000 Each policy pays its pro rata share of the loss based upon each policy's share of the total amount of coverage.
What are agents/producers required to do in order to renew their license?
Complete continuing education hours and pay a renewal fee
Nonbusiness liability exposure of individuals who are insured under this policy, incorporated into homeowners policies
Comprehensive Personal Liability
Damages
Comprised of bodily injury or property damage
An applicant who knowingly fails to communicate a fact that would help an underwriter make a sound decision regarding coverage is guilty of
Concealment
What term best describes the act of withholding material information that would be crucial to an underwriting decision?
Concealment. Concealment occurs when a person withholds a material fact that is crucial to making a decision. In insurance, this involves withholding information that would be crucial to underwriting decisions. For instance, if someone omitted a 10-year smoking history from a health insurance application, this person would be guilty of concealment.
Multiple events leading to one loss
Concurrent Causation
What part of an insurance policy sets forth the rules of conduct, duties, and obligations of the parties to the contract?
Conditions
In which section of the commercial auto policy will the insured find specific information about how coverage applies in certain situations?
Conditions this section defines coverage in greater detail and determines such things as policy period, coverage territory and how coverage will apply in certain situations
The part of the policy that sets forth the rules of conduct, duties, and obligations of the parties is called the...
Conditions.
An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following terms best describes what the insurer has violated?
Consideration. The binding force in any contract is consideration. Consideration on the part of the insured is the payment of premiums and the health representations made in the application. Consideration on the part of the insurer is the promise to pay in the event of loss.
Liability that an insured person or business incurs because of the actions of others (family or employees), also called vicarious liability
Contingent Liability
What are the five coverages of dwelling policies?
Coverage A - Dwelling Coverage B - Other structures Coverage C - Personal property Coverage D - Fair Rental Value Coverage E - Additional Living Expenses Coverages A-D are included in all three policy forms, but coverage E must be attached by an endorsement.
What are the major coverages included in a homeowners policy?
Coverage A - Dwelling, Coverage B - Other Structures, Coverage C - Personal Property, and Coverage D - Loss of Use Coverage letters A through D indicate the type of coverage provided under a police. Coverages A and B are not available in HO-4.
What are the three liability coverages included in the commercial general liability (CGL) coverage form?
Coverage A - bodily injury and property damage, Coverage B - personal and advertising injury, and Coverage C - medical payments
Which dwelling policy coverage will insure a garage not attached to the primary insured dwelling?
Coverage B - other structures Other structures covers separate structures at the same location, such as detached garages and other outbuildings.
Which dwelling policy coverage will provide protection for contents damaged by fire in a n insured dwelling?
Coverage C - personal property
In homeowners policies, which coverage provides protection against an indirect or consequential loss?
Coverage D - loss of use All HO policies contain the loss of use coverage, which will pay for the loss of rent and additional living expenses for the shortest time required to repair or replace the damaged property or to relocate.
An insured's house becomes uninhabitable due to damage by a fire. As a result, the insured has to rent an apartment until repairs are made. What type of DP coverage will pay for the expense of renting the apartment?
Coverage E - additional living expenses
What are the two liability coverages included in homeowners policy forms?
Coverage E - personal liability and Coverage F - medical payments to others
What is true concerning uninsured motorist coverage under a personal auto policy?
Coverage applies only to the extent that the under insured motorist limits exceed the bodily injury limits carried by the operator of the other vehicle
Which of the following is NOT true about earthquake coverage?
Coverage is commonly provided through a federally-funded program. It is a peril excluded by most standard property forms. Coverage for the peril of earthquake may be added by endorsement to most property policies, or coverage may be written in a Difference in Conditions policy.
Specific Insurance
Covers a specific kind or unit of property for a specific amount of insurance.
Under a business owners policy, an insured can cancel the policy?
at the time by mailing a written notice of cancellation
Loss costs
method developed by ISO that provides an insurer with that portion of a rate that does not include provisions of expenses or profit and are based on historical aggregate loss and loss adjustment expenses projected through development to their ultimate value
Workers compensation benefits are provided for an employee injury or death that arises out of the course of normal employment in all of the following?
on his evening stroll and employee of an advertising company is injured whilew watching a competitors billboard sign being removed from an advertising site
Negligence can be defined as?
the failure to use reasonable and prudent care
The method of premium payment.
#12. The insuring clause of a disability policy usually states all of the following EXCEPT a) The types of losses covered. b) The method of premium payment. c) The identities of the insurance company and the insured. d) That insurance against loss is provided.
Life Paid-up at Age 65
#13. Which of the following is an example of a limited-pay life policy? a) Renewable Term to Age 70 b) Level Term Life c) Straight Life d) Life Paid-up at Age 65
Loss of the owner's income.
#15. If a business owner becomes totally disabled, a Business Overhead Expense policy will pay all of the following EXCEPT a) Loss of the owner's income. b) Rent. c) Utilities. d) Employee payroll.
What is the max period of time a temp license can be in force?
15 months. A temp license is good for 6 months and can be renewed at 3 month intervals for a max of 15 months.
Insurable Interest
A must have. In property insurance this means the insured would incur a financial loss is insured property was damaged. Must exist at the TIME OF THE LOSS.
Class Rating (Manual Rating)
Computing a price per unit of insurance for applicants that fall into certain "classes," provided that they meet certain eligibility criteria. Advantage of Class Rating is that it allows insurer to apply a single rate to a large number of insureds, simplifying the process of determining their premiums. Is used in most P&C fields.
Judgement Rating
Each exposure is individually evaluated & rate determined largely based off the judgement of the underwriter on an individual risk basis. Used in Inland Marine Insurance. *(May also be referred to as "A" rated)*
Negligence
The failure to exercise the standard of care that a reasonable person would exercise in similar circumstances.
Insurance Rate
The price of insurance, expressed as a price charged per unit of coverage. Rates may be developed by property value(property/fire insurance), revenue receipts (casualty or liability insurance) or payroll (WorkersComp)
Reciprocity
a mutual interchange of rights and privileges
An insure intentionally did not disclose a material fact on the application of insurance. This would be considered?
concealment
Which of the following is NOT an essential element of an insurance contract?
counteroffer
All of the following are true regarding flood insurance EXCEPT?
coverage may be provided by growing crops and livestock
Amount paid with the accelerated benefit, plus the earnings lost by the insurance company in interest income from the accelerated benefit
#14. Which of the following would be deducted from the death benefit paid to a beneficiary, if a partial accelerated death benefit had been paid while the insured was still alive? a) Amount paid with the accelerated benefit, plus the earnings lost by the insurance company in interest income from the accelerated benefit b) There are no deductions taken from death benefits. c) Penalty imposed for early withdrawal of the death benefit, plus the amount of earnings lost by the insurance company in interest income d) 10% federal death benefit income tax, plus the amount of the accelerated benefit
The insurer.
#17. The expense for an autopsy covered under the physical exam and autopsy provision is paid by a) The insurer. b) The state's autopsy fund. c) The limits of coverage under the health insurance policy. d) The estate of the insured.
The employees receive individual policies.
#19. Which of the following is INCORRECT concerning a noncontributory group plan? a) The employees receive individual policies. b) They help to reduce adverse selection against the insurer. c) They require 100% employee participation. d) The employer pays 100% of the premiums.
Insurer to the insured
#21. In the event of loss, after a notice of claim is submitted to the insurer, who is responsible for providing claims forms and to which party? a) Insurer to the insured b) Insured to the insurer c) Insurer to the Department of Insurance d) Insured to the Department of Insurance
The insured may choose to convert to term or permanent individual coverage.
#7. An employee is insured under her employer's group life plan. If she terminates her group coverage, which of the following statements is INCORRECT? a) The insured may choose to convert to term or permanent individual coverage. b) The insured would not need to prove insurability for a conversion policy. c) The insured may convert coverage to an individual policy within 31 days. d) The premium for individual coverage will be based upon the insured's attained age.
Paid-up additions.
#9. An insured has a life insurance policy from a participating company and receives quarterly dividends. He has instructed the company to apply the policy dividends to increase the death benefit. The dividend option that the insured has chosen is called a) One-year term purchase. b) Accumulation at interest. c) Reduction of premiums. d) Paid-up additions.
An insured's roof cost $4,000 when installed 5 years ago. It has been damaged by hail and needs to be replaced. The new roof will cost $6,000 at todays prices. If the roof has been depreciating $200 per year and his policy is ACV, how much will it pay the insures new roof?
$5,000
Under the commercial crime coverage inside a premises-robbery or safe burglary of other property, what is the special occurrences limits that applies to loss or damage to precious metals, precious and semi precious stones, pearls and furs, manuscripts, drawing or records.
$5,000
How many days before a policy is nonrenewed must an insurer deliver or mail written notice to the insured? A15 days B20 days C30 days D10 days
30 days.
Reimbursement
4. Which of the following is NOT provided by an HMO? a) Reimbursement b) Services c) Financing d) Patient care
Schedule Rating
A rating plan that awards debits and credits based on specific categories, such as the care and condition of the premises or the training and selection of employees, to modify the final premium to reflect factors that the class rate does not include.
Retrospective rating
A self-rating plan under which the actual losses during the policy period determine the final premium (subject to a minimum and maximum premium).
Pure risk
A situation in which there are only the possibilities of loss or no change
Named Peril
A specific cause of loss listed and described in an insurance policy. Also used to describe policies containing named perils.
If an insurer meets the state's financial requirements and is approved to transact business in the state, it is considered what type of insurer?
Authorized
Loss Ratio
Formula used to compare premium income to losses, including claims paid & claim-related expenses. (Incurred loss + Loss adjusting Expense) + Earned premiums = Loss Ratio
Conditions that increase the chance of a loss are known as what?
Hazards Hazards are any factors that increase the likelihood that a loss may occur.
1 deductible (all instances of volcanic eruptions that occur within a 72-hour period are considered 1 occurrence)
If 3 volcanic eruptions happen within 48 hours, and each contributes to property damage, how many deductibles will apply in the dwelling policy?
Judgement rating
Rating used by underwriters to rate one-of-a-kind risks.
Tort
a wrongful act or an infringement of a right (other than under contract) leading to civil legal liability.
Open Peril
all perils except those specifically excluded.
Broker
an insurance producer not appointed by an insurer and is deemed to represent the client
Theft coverage under an ho-8 is restricted to?
the actual cash value of what was stolen with limits for certain classes of property
Merit Rating
the insured's premium is based not on the actual loss record, but on other factors that indicate the probability that loss will occur
