Property Casualty

Which of the following persons would be considered legally competent to apply for an insurance policy?

A valid contract requires competent parties. To be considered legally competent, a person must be mentally sound, not under the influence of drugs or alcohol, and of legal age. However, some states permit minors over a certain age to enter into a binding contract for auto, life, and health insurance.

When she applied for auto insurance, Delphia's agent asked if she'd ever had any at-fault accidents or traffic violation convictions. Delphia answered 'no' because she hadn't yet been convicted. When the insurer learns about the DUI citation, how will it view Delphia's withholding of information?

Concealment is the deliberate withholding of material facts, even if the insurer didn't specifically ask for information

Denzel's insurance policy requires him to notify his insurer of a loss within 20 days of the date of loss and to cooperate with the insurer in settling a loss. His policy is a(n)

An insurance contract is conditional. This means that its force and effect (and often, its continuation) depend on certain actions of the policyholder, such as making premium payments when due, reporting losses promptly, and cooperating with the insurer in settling any loss.

Alice is an insurance agent who telephones her underwriter and asks to discuss a particular piece of property she'd like to insure. What term does Alice use to refer to the subject of insurance?

The term, risk, is used to refer to the person, property, or activity that is insured.

Hilda lives in a high crime area but does not always lock the door to her apartment when she goes out. What type of hazard does this represent?

This is an example of a morale hazard. Morale hazards are individual tendencies that arise from a state of mind, attitude, or indifference to loss. not locking one's car or driving recklessly are other examples of morale hazards.

Mrs. Kellogg works on behalf of the Lambert Corporation according to the authority it describes in a written contract. Under the Law of Agency, what term is used to refer to the Lambert Corporation in this agency relationship with Mrs. Kellogg?

Under the Law of Agency, the principal authorizes an agent to act on its behalf.

Brad purchased an auto insurance policy to insure his new car. An insurer might consider Brad, his car, or both to be a(n)

Risk can be defined in different ways, depending on the context in which the word is used. When used in insurance, risk means the chance of loss. The term risk is also sometimes used to refer to the person, property, or activity that is insured. For example, an insurer may refer to the insured under an auto insurance policy as a 'risk.'

George, an agent, sold an annuity policy to Sara and told her there was a small fee for the annuity even though he knew the fees were substantial. How would you describe George's actions in selling this annuity?

George clearly violated his duties or responsibilities to the prospective insured by misrepresenting the annuity product and failing to disclose all pertinent information about the policy.

Main Street Corp. owns a shopping center. It buys liability and property insurance to cover losses stemming from its business. It also requires tenants of the shopping center to hold Main Street harmless from injuries sustained on tenant property. This is an example of which method of handling risk?

In risk transfer, an individual or business transfers the risk of loss to another party. By buying insurance, a person or business transfers certain risks to an insurance company in return for the payment of a premium. Businesses can also transfer risk through a provision within a contract or agreement, such as a hold harmless clause.

Bernie's driving history contains several convictions for driving under the influence. When he applies for auto insurance, the insurance company declines to write Bernie's insurance. What type of hazard does Bernie's drunken driving present to the insurer?

Moral hazards are the tendencies or traits an individual possesses that increase the chance of a loss.