Property and Casualty Basics

Concurrent causation occurs when...

A loss is caused by both a covered an an uncovered peril

Concurrent causation occurs when

A loss is caused by both a covered and an uncovered peril

Which of the following definitions best defines the term "accident?"

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

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

AM Best

For an individual claim, what is the loss reserve?

An estimate of what the insurer will ultimately pay out on a claim

Bob insists that the insurer owes him $10,000 for liability damages, while his insurer asserts that they owe him no more than $7,000. Which of the following would most likely describe the type of claim settlement that they might pursue?

Arbitration

Which of the following is a method of claim settlement used when the insured and insurer cannot agree on how to settle a claim?

Arbitration

When a disagreement occurs as to how to settle a loss in a "fender bender" between two cars, what procedure is followed?

Arbitration through the court

An unincorporated, nonprofit association representing all insurance companies in the State of California licensed to transact workers compensation insurance is known as...

California Workers Comp Inspection Rating Bureau (WCIRB)

Which of the following terms describes the act of revoking or terminating one's insurance policy?

Cancellation

Which of the following terms describes the ratio that is the percentage of each premium dollar a property/casualty insurer spends on claims and expenses?

Combined

In many circumstances, the action of more than one cause produces a particular harm or loss to an insured. The predominant legal rule is that if a loss is caused by both an insured peril and an uninsured peril, coverage is deemed to apply. This rule of law is called...

Concurrent causation

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

A beauty parlor burns to the ground. What type of loss is this to the owner?

Direct

What term includes damage where the insured peril was the proximate cause of loss?

Direct loss

Compared with other drivers in his age group, a driver has had more minor accidents and traffic violations. Which of the following rating types would most accurately reflect the driver's true insurance risk?

Experience

An individual purchased her own personal property insurance policy on her newly purchased dream home. This type of insurance coverage that applies to the insured's own property is known as...

First party risk protection

What insurance concept is associated with the names Weiss and Fitch?

Guides describing company financial integrity

All of the following are examples of insurable interest in property insurance EXCEPT...

Harry who is waiting for his distant cousin's beach-front property as part of his inheritance

In property and casualty insurance, insurable interest is defined as the right of a person or entity to property in that such a loss to that property would cause a direct monetary loss to the person or entity. Which of the following statements is TRUE regarding insurable interest in property and casualty insurance?

If the insured has no insurable interest, the contract is void

An additional loss that results from a direct loss of property is called a(n)...

Indirect loss

Which of the following organizations has the primary responsibility forms for the standard market?

Insurance Services Office

Val-U Insurance Company's main goal is to collect sufficient premiums to pay for the insured losses, to cover the costs of expenses and to make a reasonable profit. Val-U predicts the incurred expenses while still allowing for a margin of error. The ultimate premium charged will be reduced by which of the following?

Investment income

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

Adam is injured in a car accident caused by John. What kind of insurance would cover John's obligation to pay for Adam's injuries?

Liability insurance

The reduction, decrease, or disappearance of value of the person or property insured in a policy by a peril insured against is known as...

Loss

Which of the following is the basis for a claim against an insurance policy?

Loss

Which of the following coverages in dwelling and homeowners policies is for indirect losses?

Loss of use

The estimated amount that an insurer would have to pay on a claim is called the...

Loss reserve

Rates that are established based on the similarities of the risk with other risks are known as...

Manual rates

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?

Occurrence

What type of insurance policy insures against all risks of loss that are not specifically excluded by the policy?

Open peril policy

A contractor who builds homes has never made a claim on his business insurance policy. His agent discovers that his policy is written on a scheduled rating. If the contractor changes to an experience rating policy, which is most likely?

Premiums would go down

The termination of an insurance contract with the premium charge being adjusted in proportion to the exact time the protection has been in force is considered a...

Pro rata cancellation

The cost of a unit of insurance is known as the...

Rate

The premium is determined by multiplying the number of units of insurance purchased times the...

Rate

Which services are associated with Standard & Poor's and AM Best?

Rating the financial strength of insurance companies

All of the following would be considered an "expense" of an insurance company EXCEPT...

Revenues received from investments

Which of the following is a cancellation procedure in which the premium returned to the insured is NOT in direct proportion to the number of days remaining in the policy period?

Short rate

The legal process that gives the insurer, after payment of a loss, the right to seek recovery from a third party that was responsible for the loss is known as...

Subrogation

The policy provision found in property insurance policies that prevents the insured from collecting twice for the same loss is called...

Subrogation

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

The major expense category for most insurance companies is payment for losses arising from claims. All of the following statements regarding loss reserves are true EXCEPT...

The calculation of the loss reserves is always very accurate and predictable (It is always an estimate)