MA Property Insurance Exam
NFIP must meet what requirements?
1. Located within Coastal Barrier Resource System 2. Has 2 solid walls and a roof 3. Principally above ground
Cancellation of a policy
1. May cancel by written notice to company 2. May cancel by first name insured 3. Give notice to insured
Loss Valuation Methods
Actual Cash Value; Replacement Cost; Functional Replacement Cost; Market Value; Agreed Value; Stated Amount; and Valued Policy. (At the time a property insurance policy is written, the insured has several options as to how a loss to the insured property will be valued at the time of a loss.)
Coverage E
Additional Living Expenses, only available if broad or special form dwelling coverage is written
What does not qualify as insured contract in commercial auto policy?
Agreement for demolition near railroad
Collision is not covered in...
Aircraft Hull Coverage
Principal Insurer
An agent/producer is an individual licensed to sell, solicit or negotiate insurance contracts
Stated Amount
An amount of insurance scheduled in a property policy which is not subject to any coinsurance requirements in the event of a covered loss.
Contract of Adhesion
Any contract in which one party must either accept the agreement as written by the other party or reject it.
What is not true regarding Coverage B - Other Structures on a HO policy on residence premises?
Any loss paid under Coverage B reduces limit of Coverage A limit of liability
Concealment
Intentional withholding of information of a material fact that is crucial in making a decision.
Example of a consequential loss
Insureds house catches on fire and has to stay in a motel
Specific Coverage
different locations on different policies
Aleatory Contract
exchange of unequal values
Liberalization
extends broader coverage as long as it doesn't result in higher premiums
Endorsements
extras that change policies
Loss Valuation Method refers to...
functional replacement cost
There is no additional premiums if an insurance policy...
has additional provision coverage and how it affects the policy premium
Coinsurance
insured agrees to maintain a certain minimum amount of insurance on insured property
Adverse Selection
insuring of risks that are more prone to losses than the average risk
Policy Period
is the time period stated on declarations page
Conditions
legal duties of insurer/insured
There is no coverage if the premises have been vacant for...
more than 60 days prior to the loss
MA Insurers Insolvency Fund
non-profit legal entity to cover claims of insolvent insurers. Workers compensations is covered, notify funds of insolvent insurer no later than 3 days after recovering notice
Mutual Insurance Companies
nonprofit corporations owned by the policyowners. True: 1. Dividends allow policy holders to share in mutual company divisible surplus 2. Dividends are a return of unused premiums 3. Issue policies referred to as participating False: 1. Policy dividends issued by mutual companies are guaranteed and not taxable
Implied
not written but assumed
Risk Purchasing Group
offers insurance to groups of similar business with similar exposure to risk
Rowboats are covered under...
personal property in dwelling
Risk Retention
planned assumption of risk through the use of deductibles, co-payments or self-insurance. Purpose of it is to 1. reduce cash expenses and increase cash flow 2. increase control of claim reserving 3. fund for losses that cannot be insured
Express
principal intends to grant an agent by means of agent contract
Nonowned autos
private passenger auto, pickup, van or trailer operated in custody of the first named insured
Direct losses
property only covers, proximate cause of loss (ex. building catches on fire)
Ordinance or law
provides an additional amount of insurance for costs associated with changed in building ordinances and codes after a recovered loss. Up to 10% of coverage A
Buisness auto coverage form
provides protection for most commercial auto exposures except trucks, garages, motor carriers
Indirect losses
related to direct losses
Fiduciary Responsibility
someone in a position of trust
Insurance Rate
the amount charged for a particular amount of coverage
Consideration
the binding force in the contract
Misrepresentation
Act of portraying sales material that is false
Policy structure includes...
conditions, exclusions and insuring clause
Paying a claim is...
consideration on the part of the insurer
HO policy covers up to how much money of newly acquired principal residence for how many days?
$100,000 for 30 days
Loss Ratio
(incurred losses + loss adjustment expenses) / premiums earned
Defamation
Act of harming or ruining another's reputation, false oral/written statement
Section III of Business Auto Policy Coverage provides physical damage coverage, what physical damages may be selected or not?
1. Comprehensive 2. Collision 3. Specified causes of loss NOT included: 1. Limited peril
Common Policy Conditions of Policy
1. policy can be changed only by written endorsement by company 2. requested by first named insured 3. made by companies consent NOT: 1. Insurer must obtain permission from all named insureds to make a change
Personal property off-premises extension of dwelling forms provides limits of coverage up to...
10% of Coverage C anywhere in the world
How much of an HO policy may be paid for debris removal
5% of policy limit
The period of restoration for business income coverage begins...
72 hours after direct loss
Dwelling and other structures insured...
80% of replacement cost at time of loss, if insured for less than 80% then it is on an ACV basis
Fraud
A deliberate deception intended to secure an unfair or unlawful gain, imprisoned for up to 10 years
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.
Business Entity Producer: Each insurer that sells, solicits, or negotiates any form of limited line credit insurance must provide to each individual whose duties will include selling, soliciting, or negotiating limited line credit insurance
A program of instruction that may be approved by the Commisssioner
Specific Insurance
A property insurance policy that covers a specific kind or unit of property for a specific amount of insurance.
Blanket Insurance
A single property insurance policy that provides coverage for multiple property at one location or more
Insuring Agreement
A statement in an insurance policy that the insurer will, under described circumstances, make a loss payment or provide a service.
What is eligible under the BO policy?
Bank and condomiums
Earthquake Coverage
Can be purchased for an additional premium, excluded by most forms, added to endorsements. Not commonly provided through federally funded program
Stock Companies
Companies owned by the stockholders whose investments provide the capital necessary to establish and operate the insurance company. They issue nonparticipating policies in which do not share in profits or losses
Description of duties and obligations of the insured are included in...
Conditions
Coverage A
Dwelling, what is included for coverage as a dwelling
Owned Autos
Eligible vehicles titled by the insured or acquired during the policy period
Coverage D
Fair Rental Value, applies if property under coverage A, B or C becomes damaged or destroyed
Loss of Use
Fair rental value covered in dwelling policy is similar to HO form
False Financial Statements
Financial status of the insurer was withheld
Sewer Water backup is excluded from...
HO-4
Standard Mortgage Clause
Mortgagee recover is limited to the amount of remaining debt and doesn't receive more insurable interest
What is the term for the insureds business activities occurring at described premises?
Operations
Coverage B
Other Structures, separate structures at same locations
Coverage C
Personal Property
Valued Policy
Proper choice for a policy for a company that transports goods
Insurable Interest
Required in property. Would cause the interested party to suffer financial loss if an insured event occurred.
Subrogation
Right to seek changes from 3rd parties after reimbursed for loss, prevents from collecting twice
Law of Agency
The relationship between a principal and an agent wherein the agent is authorized to represent the principal in certain transactions.
What is not a cause of loss form for commercial property coverage?
Specific
Sue and Labor
The insured party is required to attempt to prevent further losses once damage occurs
What happens if premiums are collected by insurer in WYO Flood Program are insufficient to cover losses?
The insurer will be reimbursed for excess costs by the NFIP
Estoppel
The legal process of preventing one party from reclaiming a right that was waived.
Policy Limits
The maximum amount an insured may collect, or for which an insured is protected under the terms of the policy.
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
Financial Loss
a risk to have insurable interest in person or property
Apparent
actions/words
Express Authority
agent followers rules and terms of his agent contract
Agreed Value
agreed by insurer and insured
Contract
agreement between two or more parties. 4 elements include: 1. Agreement 2.Consideration 3.Competent parties 4. Legal purpose
Market Value
amount a buyer would pay to a seller for property prior to loss
Salvage
amount of $ realized from sale of damaged merchandise
Independent Agency System
an agent who represents multiple companies on non-exclusive basis/earns commission on sales
Reinsurance
an arrangement by which the primary insurer that initially writes the insurance transfers to another insurer part or all of the potential losses associated with such insurance. protects insurer from catastrophic loses.
Admitted
another term for authorized
Coinsurance
applies when amount of insurance on a business is less than 80% of ACV on date of loss
No Benefit to Bailee Clause excludes...
assignment or granting of policy provisions to any person who repairs property for a fee
In a DP-1, if the insured elects to apply Coverage B to a detached garage, Coverage A will
be reduced by 10%
Coercion
the practice of persuading someone to do something by using force or threats (ex. approval of loan on condition that homeowner purchases insurance from lender may be guilty)
Assignment
transfer of legal right or interest in insurance policy
Warranty
true statements upon which validity of insurance policy depends
Rates for earthquake coverage are determined by...
type of construction
Misrepresentations
untrue statements on the application
Exclusions
what losses are not covered
Declarations
who, what, when, where, and how much