General Insurance Principles

With respect to the business of insurance, a hazard is A. The basic reason for an insured to purchase insurance. B. Any condition or exposure that increases the possibility of loss. C. The risk taken when performing something dangerous. D. The tendency of poorer risks to seek insurance more often than better risks.

Any condition or exposure that increases the possibility of loss.

In property insurance, what is actual cash value? A. Stated value of the property as shown on the declaration B. The actual amount of a loss payable, less the policy deductible C. Replacement cost at the time of the loss, less depreciation D. Market value of the property at the time of the loss

replacement cost at the time of the loss, less depreciation

A situation in which a person can only lose or have no change represents A. Adverse selection B. Hazard C. Pure Risk D. Speculative risk

pure risk

For insurance purposes, when an insured loses property to another because the person used violence or threat of violence to gain the property, this is defined as A. Market value B. Stated Amount C. Inflation guard D. Agreed value

Agreed Value

Insurable interest in a property policy must be proven A. When a policyowner is changed B. When a claim is paid C. At the time of application D. At the time of loss

At the time of loss

A policy that insures all property at multiple locations for a single amount is referred to as A. Blanket. B. Reporting. C. Special. D. Specific.

Blanket

The crime of forced entry into the premises of another by a person or persons with felonious intent is defined as a A. Burglary. B. Breaking and entering. C. Theft. D. Robbery.

Burglary.

A beauty parlor burns to the ground. What type of loss is this to the owner? A. Specific B. Consecutive C. Direct D. Consequential

Direct

An additional loss that results from a direct loss of property is called a/an A. Punitive loss. B. Indirect loss. C. Proximate loss. D. Liability loss.

Indirect loss

A tornado that destroys property would be an example of which of the following? A. Peril B. Pure Risk C. Loss D. Physical hazard

Peril

Which of the following is used in the formula for calculating the actual cash value of a property? A. Fair market value B. Agreed value C. Replacement cost D. Stated value

Replacement Cost

For insurance purposes, when an insured loses property to another because the person used violence or threat of violence to gain the property, this is defined as A. Robbery B. Theft C. Burglary D. False pretense

Robbery

Events in which a person has both the chance of winning or losing are classified as A. Insurable. B. Pure risk. C. Retained risk. D. Speculative risk.

Speculative risk.

Which of the following is most likely to occur if it is determined by the audit that the deposit premium was too high? A. Nothing: the premium cannot be adjusted B. The insured will receive a return premium C. Additional benefits will be added D. The insurer will have to pay a fine

The insured will receive a return premium

When a direct chain of events resulting from a negligent act causes injury or damage, that act is considered to be A. An intervening cause. B. The proximate cause. C. The direct cause. D. Strict liability.

The proximate cause

Which of the following best expresses the purpose of a stated value contract? A. To provide a maximum limit for which the insurance company may become liable in casualty losses B. To pre-establish the amount of coverage available for property items that are difficult to value C. To ensure that the principle of indemnification applies D. To establish the value of property subject to loss by theft or robbery

To pre-establish the amount of coverage available for property items that are difficult to value

An insured's 9-year-old son threw a ball, accidentally breaking a neighbor's plate glass window. The insured was found legally liable for the cost of replacing the window. This is an example of A. Intervening cause. B. Juvenile delinquency. C. Absolute liability. D. Vicarious liability.

Vicarious liability

When a parent is required to pay for damages caused by his or her children, this is an example of A. Strict liability B. Intervening cause C. Assumption of risk D. Vicarious liability

Vicarious liability

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? A. Excess liability coverage B. Contract Bond C. Errors and Omissions insurance D. Deposit premium audit

Deposit premium audit

The process of determining the premium charged and how much insurance is required for a particular loss is called A. Loss valuation. B. Agreed value. C. Loss payment. D. Coinsurance.

Loss Valuation

Losses caused by continuous or repeated exposure to conditions resulting in injury to persons or damage to property that is neither intended nor expected is the definition of which of the following terms? A. Occurrence B. Peril C. Hazard D. Accident

Occurrence

Property insurance that provides $100,000 coverage for a building and $50,000 coverage for personal property at a single location is called A. Blanket coverage. B. Described coverage. C. Specific coverage. D. Schedule coverage.

Specific coverage

The transfer of an insured's right to seek damages from a negligent party to the insurer is found in which of the following clauses? A. Subrogation B. Arbitration C. Salvage D. Appraisal

Subrogation

Robbery is A. Taking of property without causing property damage or bodily harm. B. Any act of stealing. C. Taking of property from within the premises leaving visible signs of forced entry. D. Taking of property by use of force, violence, or fear.

Taking of property by use of force, violence, or fear.

Which of the following definitions best defines the term "accident"? A. Injury to the character of another person caused by libel, slander, false arrest, invasion of privacy and other acts B. Physical damage to tangible property of others caused by the negligence of an insured C. The negligent or purposeful act or omission by an insured that results in physical trauma or death to a person D. A sudden, unplanned and unexpected event, not under the control of the insured, resulting in injury or damage neither expected nor intended

A sudden, unplanned and unexpected event, not under the control of the insured, resulting in injury or damage neither expected nor intended

In property and casualty insurance, what is the term for the amount of a loss that the insured must cover out of pocket, and the insurer will only pay for the additional amount of the loss above this limit? A. Premium B. Deductible C. Self-insured retention D. Coinsurance

Deductible

Negligence is defined as A. An unbroken chain of events that results in bodily injury or property damage to another person. B. Conduct that is so hazardous that the individual engaging in it will be held fully responsible for any resulting injury or damage. C. An intentional act that results in bodily injury or property damage to another person. D. The failure to do what a reasonable prudent person would do under given circumstances.

The failure to do what a reasonable prudent person would do under given circumstances.

Which of the following best describes negligence? A. The inability to meet the burden of proof. B. The failure to use reasonable and prudent care. C. A situation that creates a probability of loss. D. A latent defect or fault in property.

The failure to use reasonable and prudent care

Liability imposed on one party as a result of the actions of another person is known as A. Strict liability. B. Absolute liability. C. Vicarious liability. D. Comparative negligence.

Vicarious liability.

When a parent is required to pay for damages caused by their children, this is an example of A. Strict liability. B. Intervening cause. C. Assumption of risk. D. Vicarious liability.

Vicarious liability: When one party is held liable for the act of another party