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