P&C ExamFX Study Set

An insurer has just cancelled an insured's policy. How long does the insurer have to explain this cancellation?

6 months

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 replacement cost or more

The declarations page of the homeowners policy provides all of the following information EXCEPT

A statement that earthquake damage is not covered.

Which of the following produces evaluations of insurers' financial status often used by state departments of insurance?

AM Best

What documentation grants express authority to an agent?

Agent's contract with the principal

Termination of an in-force policy prior to the expiration date shown in the policy is known as

Cancellation

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 (Indirect)

Which of the following is NOT an essential element of an insurance contract?

Counteroffer

An insured has four separate but identical policies written by different insurers to cover her $100,000 building. Each policy is written for $100,000, and each has the pro rata liability other insurance clause. In the event of a total loss to the building, what would each insurer pay?

Each policy will pay $25,000 of the loss

The limits of insurance, policy premiums, and the name of the insured are all found in the declarations section, but what is not?

Exclusions

The requirement that agents not commingle insurance monies with their own funds is known as

Fiduciary responsibility

In insurance transactions, fiduciary responsibility means

Handling insurer funds in a trust capacity

Events or conditions that increase the chances of an insured loss occurring are referred to as

Hazards

The policy conditions define

How parties to the contract must act following a loss

Which statement regarding insurable risks is NOT correct?

Insureds cannot be randomly selected.

Using an air-cooled engine, a proposed insured has developed a new, experimental aircraft. If the inventor applies for liability insurance, what rating type will the insurer most likely use?

Judgment

Untrue statements on the application unintentionally made by insureds that, if discovered, would alter the underwriting decision of the insurance company, are called

Material misrepresentations

An insured has a liability policy that sets the amount for all claims that arise from a single incident at $50,000. Which types of limit of liability does this insured's policy have?

Per occurrence

Which of the following is not required to be printed at the head of a Standard Fire Policy

Policy Exclusions

Which of the following statements is an accurate comparison between private and government insurers?

Private insurers may be authorized to transact insurance by state insurance departments.

A standard fire policy may be written to cover all of the following EXCEPT

Reinsurance

Insurance is the transfer of

Risk

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

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?

Subrogation

Which of the following is NOT the consideration in a policy?

The application given to a prospective insured

In the event that an insurance company is going to cancel an insurance policy, which of the following must receive written notice of their intent to cancel?

The named insured, a mortgagee (if any), and any person shown on the policy as having a financial interest in any loss insured against.

An individual applies for a life policy. Two years ago he suffered a head injury from an accident, so he cannot remember parts of his past, but is otherwise competent. He has also been hospitalized for drug abuse, but does not remember this when applying for insurance. The insurer issues the policy and learns of his history one year later. What will probably happen?

The policy will not be affected.

In insurance policies, contract ambiguities are automatically ruled in favor of the insured. What privilege does the insurer have in order to balance this?

The right to determine the wording of the policy.