Property and Casualty Arizona
The loss is payable to the insured and the mortgagee
A Mortgage company is named as a loss payee on the insureds homeowners policy, under the standard mortgage clause. If the insured suffers a loss due to a fire, which of the following is true?
Direct
A beauty parlor burns to the ground. What type of loss is this to the owner?
Pay to defend the policyowner in the lawsuit because liability coverage contains a duty-to-defend provision
A deli owner has a businessowners liability policy. When a customer slipped and hurt herself at the deli, the liability policy paid for medical expenses. The customer, however, is now suing the business owner because she claims there was no caution sign warning her that the floor was wet. What is the insurer obligated to do?
Blanket
A policy that insures all property at multiple locations for a single amount is referred to as
Pure Risk
A situation in which a person can only lose or have no change
Exclusions
All of the following are found in the declarations section of a policy EXCEPT the
Apparent
An agent is using a stationary with the logo of an insurance company, applicants for insurance assume that the agent is authorized to transact on behalf of that insurer. what type of agent authority does this describe?
Each policy will pay $25,000
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?
The application given to a prospective insured
Which of the following is NOT the consideration in a policy?
Declarations
Which of the following is a mandatory part of an insurance policy that varies with each individual policy
Driving recklessly
Which of the following is considered to be a morale hazard?
Counteroffer
Which of the following is not an essential element of an insurance contract
nonconcurrency
Which of the following terms refers to other insurance that is written on the same risk, but not on the same coverage basis
Insureds
Persons covered under an insurance policy, whether named or not, are known as the
Insuring agreement
all of the following are conditions commonly found in the insurance policy EXCEPT
Legal duty owed, breach of legal duty owed, proximate cause, damages
Which of the following lists all the required elements for establishing a charge of negligence
Liberalization
Which of the following policy provisions would automatically broaden coverage under a policy without requiring additional premium?
A house
Which of the following would NOT be classified as personal property for insurance purposes?
A mutual insurer
Insurance companies may be classified according to the legal form of their ownership. This type of company organized to return any surplus money to their policyholder is
Libel
Melt away diet, INC circulates a flyer that falsely reports that is competitor, See Food Diet, markets a product that causes hair loss and skin rashes. This is an example of
Purchase of insurance
Most common way to transfer risk
The failure to do what a reasonable prudent person would do under given circumstances
Negligence is defined as
The failure to use reasonable and prudent care
Negligence may be defined as
His policy has been in effect for at least 60 days
Otto fails to pay the premium on a personal lines property policy. Ottos policy can be canceled if
His policy has been in effect for 60 days
Otto fails to pay the premium on a personal lines property policy. Ottos policy can be cancelled if
Special
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?
The policy that pays first in the event of a covered loss is known as the
Primary policy
Specific Coverage
Property insurance that provides $100,000 coverage for a building and $50,000 coverage for personal property at a single location is called
A statement that earthquake damage is not covered
The declarations page of the homeowners policy provides all of the following information EXCEPT
The insured cannot collect but the mortgage holder will still be paid
The insured has violated the contract without the knowledge of the mortgage holder. After a loss
Unilateral
The insured is not legally bound to any particular action in the insurance contract, but the insurer is legally obligated to pay losses covered by the policy. What contract element does this describe?
Declarations
The part of a property policy that shows the amount of insurance, premium, and the policy term is
Conditions
The part of the policy that sets forth the rules of conduct, duties, and obligations of the parties is called the
Subrogation
The policy provision found in property insurance policies that prevents the insured from collecting twice for the same loss is called
Indemnity
The pro rata liability clause is designed to protect the principal of
Loss valuation
The process of determining the premium charged and how much insurance is required for a particular loss is called
Abandonment
The property condition that precludes the insured from simply turning over damaged property to the insurer and claiming a total loss is called
Avoidance
The risk management technique that is used to prevent a specific loss by not exposing oneself to that activity is called
Exclusions
The section of an insurance policy that details what perils are not insured against and what persons are not insured is known as the
Cancellation
The termination of an in-force insurance policy by either the insured or the insurer prior to the expiration date shown in the policy is known as
Adhesion
Type of contract that is prepared bu only the insurer causing the insureds only options to accept or reject the policy
Special and general
What are the two types of compensatory damages
Insurance
What do individuals use to transfer their risk of loss to a larger group
Other insurance
What insurance policy provision defines how the policy will respond if there is more than one insurance policy written on the same risk?
A statement by the applicant that upon discovery, would affect the underwriting decision of the insurance company
What is material misrepresentation?
to encourage insureds to insure property close to its value
What is the purpose of the coinsurance clause found in property insurance policies
Reinsurance
What method do insurers use to protect themselves against catastrophic losses?
renewal dates
What type of information would be found in a policys insuring agreement
Renewal dates
What type of information would be found in a policys insuring agreement?
Open peril policy
What type of insurance policy insures against all risks of loss that are not specifically excluded by the policy?
Vicarious liability
When a parent is required to pay for damages caused by his or her children, this is an example of
Nonrenewal
When an insurance policy does not offer a continuation at its expiration date, it is considered a
Stated Amount
When the amount of insurance written in a property policy is not subject to any coinsurance provision and that amount is paid in the event of a covered loss, the coverage is said to be written as
On the declarations page of the policy
Where is the policy period stated?
replacement cost
Which method of loss valuation is contrary to the basic concept of indemnity
Domestic
Which of the following best describes an insurance company that has been formed under the laws of this state
Exchange of unequal values
Which of the following best describes the aleatory nature of an insurance contract?
Negligence that leads to an injury
Which of the following does the term proximate cause refer to
Insurance Guaranty Association
Which of the following entities protects policyowners, insureds, and beneficiaries under insurance contracts when insurers fail to perform contractual obligations due to financial impairment?
The loss must be catastrophic.
Which of the following is NOT a characteristic of an insurable risk?
Replacement cost
Which of the following is used in the formula for calculating the actual cash value of a property
Agreed Value
Which of the following types of valuation works best for property whose value does not fluctuate much
First name insured
Which of the following would be named on the declarations of a property or liability policy?
Endorsements
Which of the following would modify the original insurance
additional coverage
Which part of an insurance policy covers claims-related expenses, reasonable expenses incurred by an insured to protect damaged property from further loss, or defense expenses?
Policyholders
Who might receive dividends from a mutual insurer?
$100,000
Bobs home is insured for $100,000 under a dwelling policy. Yesterday his home suffered $20,000 damage from a fire. Today the home was struck by lighting, starting another fire that completely destroyed the structure. Bobs policy will pay
Contracts of Adhesion
Contracts that are prepared by one party and submitted to the other party on a take it or leave it basis are classified as
Hazards
Events or conditions that increase the chances of an insured loss occurring are referred to as
The uncertainty or chance of loss
For the purpose of insurance, risk is defined as
Larger
For the reported losses of an insured group to become more likely to equal the statistical probability of loss for that particular class, the insured group must become
Loss
Reduction, decrease, or disappearance of value of the property insured in a policy by a peril insured against is known as
The insured may not relinquish ownership of damaged property to claim a total loss, but must protect damaged property from further loss
The abandonment provision in property insurance policies states that
No benefit to bailee clause
specifies that the insurer will not recognize any assignment or grant any coverage that benefits a person or organization holding, story, or moving the insured property for a fee.
indemnity
the pro rata liability clause is designed to protect the principal of
Replacing the property with other property of a lesser kind or quality
At the time of loss insured against in a property and casualty policy, the insurers claim settlement options include all of the following EXCEPT:
Consideration
An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which insurance principles has the insurer violated?
Mortgagee
According to the standard mortgage clause, who has the right to bring in a suit in their own name to recover damages, pay policy premiums, and submit a proof of loss?
Concealment
Act of withholding material information that would be crucial to an underwriting decision
Provisions
All of the following are considered parts of the policy structure EXCEPT
Insurance premium paid
All of the following are factors in determination of actual cash value EXCEPT
Combined single
An insured is driving her car through a residential area when she loses control and crashes into a neighbors front porch, The neighbor who was sitting on the porch, is injured. The insured's liability policy has a limit of $500,000. This amount applies to the total of damages for any bodily injury and property damage resulting from one accident. Which type of limit of liability does the insured have?
Material Misrepresentation
An insured stated on her application for life insurance that she had never had a heart attack, when in fact she had a series of minor heart attacks last year for which she sought medical attention. What explains the reason a death benefit claim is denied?
Losses will be paid to the mortgagee and mortgagor as their interest appears
An insureds home is mortgaged by the local bank. The insured is required to carry insurance on the home, showing the bank as the mortgagee. If the home is damaged by a covered peril, which of the following is true?
By their members - authorized insurers
How are state Insurance Guaranty Associations funded?
10
How many days' notice are required for cancellation on a commercial lines property and casualty policy for reason of nonpayment of premium
At a time of loss
INSURABLE INTEREST IN THE PROPERTY COVERED IN A POLICY MUST BE PROVEN WHEN?
Restores an insured person to the same financial state as before the loss
In case of a loss, the indemnity provision in insurance policies
When an insurers underwriter approves coverage
In forming an insurance contract, when does acceptance usually occur?
The completed application is submitted
In insurance, an offer is usually made when
Deductible
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
Replacement cost at the time of the loss, less depreciation
In property insurance, actual cash value is defined as which of the following
Moral Hazard
Individuals tendency to be dishonest would be indicative of a
Risk
Insurance is the transfer of
Ownership
Major difference between a stock company and a mutual company
Market value
The insureds house is located one mile from the counties new landfill and across the road to the entrance of a rock quarry. It would cost $150,000 to rebuild the house if something happened to it, but when the insured tried to sell it, the best offer he received was $80,000. The insurance company will insure the house for $80,000. What method of valuation is used to insure this property?
Utmost Good Faith
The insurer must be able to rely on the statements in the application, and the insured must be able to rely on the insurer to pay valid claims. In the forming of an insurance contract, this is referred to as
Aggregate limit of liability
The maximum limit of coverage available under a liability policy during a policy year regardless of the number of claims that may be made or the number of accidents that may occur.