Property & Casualty Exam Study Questions
Required limits of liability are
$15,000 for bodily injury to or death of 1 person in any 1 accident, %30,000 for bodily injury to or death of 2 or more persons in any 1 accident and; $25,000 for damage to or destruction of property of others in any 1 accident.
What are the three types of agent authority?
-Express, implied and apparent.
What is a risk?
-Is the uncertainty or chance of a loss occurring
Why does an insurance company discourage abandonment?
Abandoning a property may lead to further loss.
DP form structure is
Agreement, Definitions, Deductible, Coverages including other coverages, Perils insured against, General exclusions, Conditions
____ a unique homeowners form it is intended for use when replacement cost coverage is not practical
HO-8
What are additional or supplementary payments?
The additional coverage portion of a policy provides an additional amount of coverage for specific loss expense, at no additional premium.
What is covered under the HO-5?
The comprehensive form (HO-5) covers both the dwelling and other structures on an open peril basis.
What is included in the conditions section of a policy?
The conditions sections of a policy includes the general rules or procedures that the insurer and insured agree to follow under the terms of the policy.
What is the purpose of a homeowner's policy?
homeowners policies are designed to cover dwellings primarily used as private homes
What is a binder?
may be issued to bind insurance temporarily, pending the issuance of the insurance policy.
What is subrogation?
the insurers legal right to seek damages from third parties after it has reimbursed the insured for the loss. It is based on the principle of indemnity by preventing the insured from collecting on the loss twice
What is a primary policy?
the policy that pays first in the event of a covered loss or in a layered program of insurance, the policy that covers the first layer of loss.
How long is a producers license valid before a renewal?
two years
What situations occur for a dwelling property policy?
up to 5 roomers and boarders, up to 4 residential units, properties in the course of construction, owner occupied or tenant occupied, mobile homes on the basic form only, seasonal dwellings unoccupied for 3 or more months during a 12 month period, not designed as a farm property.
Workers compensation will pay up to _____ in addition to other benefits for reasonable expense for burial of an employee whose death results from a covered injury or occupational disease
$7,500
Coinsurance formula
(Insurance Carried / Insurance Required) x Loss Amount = Loss Payment
What is the difference between an admitted and non-admitted company?
-Admitted is a qualified insurance company that has received a certificate of authority. A non-admitted company is one that has not applied or has applied and been denied a certificate of authority.
What are the four elements of an insurance contract?
-Agreement, consideration, competent parties and legal purpose.
What is a peril?
-Are the causes of loss insured against in an insurance policy.
What is the difference between foreign, domestic, and alien insurance companies?
-Domestic is an insurance company that is incorporated in this state like a company charted in Louisiana would be considered a Louisiana domestic company. Foreign is an insurance company that is incorporated in another state or territory with possession, like a company charted in LA would be a foreign company within the state of SC. Alien is an insurance company that is incorporated outside the US
What are the elements of insurable risk?
-Due to chance, Definite and measurable, statistically predictable, Not catastrophic, Randomly selected and large loss exposure.
What does indemnify mean?
-To "restore" an insured to the same financial status as before the loss.
What does representation mean and how does it differ from a warranty?
-statements that are believed to be true to the best of ones knowledge, but not guaranteed to be true. A warranty is absolutely true statement upon which the validity of the insurance policy depends
Other structures is a basic amount of insurance equal to ___ of the Coverage A limit is included for other structures but a policy may be written with higher limits.
10%
What is the minimum age to apply for a producer license in this state?
18
What are the continuing education requirements for producers in this state?
24 Credit hours of continuing education every 2 years with atleast 3 CE hours in ethics.
Fire department service charge will pay up to $$$ for liability assumed by agreement for fire department charges to protect insured property.
500
In the lieu (instead of) of purchasing an automobile liability insurance policy and of the following may be used to guarantee financial security:
A bond issued by a surety authorized to transact business in the state, A certificate of the state treasurer stating that cash or securities have been deposited with the treasurer and a certificate of self insurance.
For how long and under what circumstances can a temporary license be issued?
A temporary license may be issued for 180 days for the continuation of business to the surviving spouse or personal rep of an agent who dies, or becomes disabled, an employee of a business entity upon death, disability or termination of a designated individual the designee of an agent entering active military service.
What is excluded from coverage?
Animals, birds, fish. Credit cards, Aircraft, property while in mail, property held as a sample or for sale.
What is intentional tort?
Any deliberate act that causes harm to another person
In claims handling, if the insurer and the insured are unable to reach an agreement as to the value of damaged property, either party may make a written request for ______
Appraisal
Forms available in dwelling program are
Basic DP 00 01 or DP1, Broad DP 00 02 or DP2, Special DP 00 03 or DP3 *Both basic and broad are named perils and Special is a named peril and open peril.*
What is the difference between cancellation and nonrenewal?
Cancellation is the termination of an insurance policy by the insured, nonrenewal is the termination of an insurance policy at it's expiration date by no offering a continuation of the existing policy or replacement policy
An abrupt falling down of the building or part of the building in which the building cannot be used for its intended purpose.
Collapse
What is the actual cash value formula?
Current replacement cost - Depreciation = Actual cash value
What are the three dwelling policy forms?
DP1 (basic), DP2 (Broad), DP3 (Special)
What information is included in a policy's declarations?
Declarations include the basic underwriting information and any supplemental representations by the insured.
What are the major components of policy structure?
Declarations, Definitions, Insuring agreement, Additional coverage, Conditions, Endorsements, Exclusions and policy limits.
Can be purchased to insure properties solely used for residential purposes
Dwelling property policy
How often must the Commissioner examine insurance companies?
Every 5 years
What type of behavior constitutes negligence?
Failure to behave in the same manner as would a reasonable and prudent person
___ Applies if property under Coverage A B C becomes damaged or destroyed by a peril covered in the policy
Fair Rental value (Coverage D)
___Provides protection for losses from named perils.
HO-2
____ Provides protection for dwelling and other structures on an open peril basis and personal property is covered only for broad perils.
HO-3
____ Also referred to as tenant broad form, insures personal property for broad perils
HO-4
Under HO-6, where may business property be stored?
HO-6 will cover a structure that contains business property solely owned by an insured or a tenant of the dwelling, provided that the business property does not include gaseous or liquid fuel, other than fuel in a permanently installed fuel tank of a vehicle or craft parked or stored in the structure.
What must an insured do if a loss occurs?
If a loss occurs, the insured is required to provide the insurer with prompt notice of the loss, notify the police if a loss is caused by theft, notify the credit card or fund transfer card company if the loss if covered under the credit card and fund transfer card coverage, protect the property from further damage and undamaged property, allow the insurer to inspect the property as often as reasonably necessary, if requested submit to an examination under oath and within 60 days of the insurers request, an send a signed sworn proof of loss.
What does fair rental value include?
If property under Coverage A, B or C becomes damaged or destroyed and unfit for normal use, the policy will pay the fair rental value of the described premises under Coverage D- Fair Rental Value, or part of it used as rental property.
What is a controlled business? and how much can be legally tranacted?
Insurance that covers the producer or the producers immediate family or employer. Producers are allowed no more than 25% of the aggregate commissions during a 12 month period earned on controlled business
What is insurance?
Is a contract in which one part (the insurance company) agrees to indemnify (make whole) the insured party against loss, damage or liability arising from an unknown event.
In which of the two types of damage- property damage and bodily injury- is it more difficult to determine the monetary value of the loss and why?
It is more difficult to determine the loss monetarily with bodily injury, since it may lead to claims by the injured party not only for medical expenses and lost wages, but also for disfigurement, pain and suffering, mental anguish, and loss of consortium.
What are the applicable penalties for non compliance with Louisiana Insurance Code?
License suspension, revocation or denial, and or monetary fines
All homeowners policies contain the ________ coverage, which is a combination of coverage D (Fair Rental Value) and Coverage E (Additional living expense) in the dwelling policy.
Loss of Use
What are extended covered perils?
On a basic policy. extended covered perils include windstorm or hail, explosion, smoke, aircraft and vehicles, riot or civil commotion, volcanic eruption and vandalism and malicious mischief.
___ Most notable coverage change from the dwelling property policy.
Personal Property coverage
What does the personal injury coverage endorsement provide?
Personal injury coverage includes injuries that result from false arrest, libel, slander, defamation of character, and invasion of privacy.
What are 3 types of hazards?
Physical, Moral, Morale
What is proximate cause?
Proximate cause is an act or event considered a natural and reasonably foreseeable cause of the damage to property or injures a plaintiff.
What constitutes rebating?
Rebating includes premiums payable on the policy, special favors or services, dividends, stocks, bonds and their profits
What are the broad powers and duties of the Commissioner of Insurance?
Regulate the affairs of the Insurance Department, prescribe forms and procedures aid in interpretations of laws.
If a product is unsafe, what kind of liability applies to the manufacturer?
Strict liability.
Define Subrogation
Subrogation is the acquisition by an insurer of an insured's rights against any third party for indemnification of loss or other payment, to the extent that the insurer pays the loss.
What coverage forms are available under the homeowners program?
The 6 coverage forms available under the homeowners program are HO-2 broad form, HO-3 special form, HO-4 contents broad form, HO-5 comprehensive form, HO-6 condominium unit owners, and HO-8 modified coverage form.
What are the rules regarding hearing and notice of hearing?
The Commissioner may hold a hearing for any purpose deemed necessary, or a hearing may be requested. The commissioner must hold the hearing within 30 days after receiving a request from the aggrieved party.
What homeowners form provides protection for losses from named perils?
The HO-2 broad form provides protection for losses from named perils.
What type of coverage does the HO-4 provide?
The HO-4 tenant broad form ensures personal property for the same perils as found in the broad form (HO-2)
When replacement coverage cost is not reasonable, what type of HO coverage is applicable?
The HO-8 modified homeowners form is intended for use when replacement cost coverage is not practical.
What is the purpose of the Fair Credit Reporting Act?
The act established procedures that consumer-reporting agencies must follow in order to ensure that records are confidential, accurate and relevant. It also protects consumers against the circulation of inaccurate or obsolete information.
What are the eligibility requirements for a dwelling property policy?
The dwelling policy can insure just the dwelling, only it's contents or both
What does the exclusions section of a policy specify?
The exclusions section of a policy details what perils are not insured against and what persons are not insured.
Define insured and insured location in a homeowners policy
The insured is the named insured and residents of the premises who are relatives or under age 21 and in the care of the insured. The insured location is the residence premises or any other premises at the same location, or part of it used by the insured as a home and described in the declarations
When does worldwide personal property coverage apply? What is not covered?
The insured may elect to apply up to 10% of the personal property limit to pay for losses to personal property away from the premises. There is no coverage for rowboats or canoes, or for property of guests or servants if away from the insured premises.
If more than one person has an insurable interest in the property, is the insurer liable for more than the insured's interest in the loss or damaged property?
The insurer will not be liable for more than the insured's interest in the loss or damaged property.
What is purpose of Coverage D- loss of use?
The loss of use coverage in the homeowners policy will pay for either additional living expenses related to maintaining the normal standard of living of the household or fair rental value if the premises become uninhabitable due to a covered loss.
Insured
The name insured, relatives of the name insured who reside with the named insured, nonrelative residents in the care of the named insured or resident relatives under the age of 21
What type of coverage is expanded upon from HO-2 to HO-3?
The peril of vehicles insured for the personal property is expanded from what is covered in the broad form (HO-2)
What is the purpose of removal and how long does coverage last in a dwelling policy?
The policy will pay for loss or damage to property removed from the insured premises when threatened by a peril insured against. The basic form policy provides coverage for 5 days, while the broad and special forms provide 30 days of coverage.
Insured location
The residence premises, part of other premises used by the name insured as a residence and described in the Declarations, or newly acquired during the policy period.
What perils are insured against in a special form policy?
The special form is an open peril form. All perils ae insured against except those specifically excluded.
What is the difference between contributory and comparative negligence?
Under contributory negligence, the injured party must be completely free of fault in order to collect. Any negligence on the part of the injured party that contributed to the injury however slight will normally defeat the claim.
what is an underwriter's function?
Underwriter's basic function is evaluating application submitted to the insurer and determining whether a policy should be issued.
When absolute liability is involved, does the injured party need to prove negligence?
With absolute liability, the injured party does not need to prove negligence.
If a producer changes his or her business or residential address, or phone number how soon must the producer notify the Commissioner?
Within 30 days of the change
What is coinsurance?
a clause that states in consideration of a reduced rate, the insured agrees to maintain a certain minimum amount of insurance on the insured property.
Bodily injury
includes bodily harm, sickness or disease, including required care, loss of services and death that results in bodily injury.
What is the loss ratio formula?
incurred losses + loss adjusting expense/earned premium = loss ratio.
What is salvage?
is the amount of money realized from the sale of damaged merchandise.
What is an excess policy?
is the policy that only pays loss after the primary policy or amount has paid its limit.
What is nonconcurrency?
refers to other insurance written on the same risk, but not on the same coverage basis.
Uninsured motorist is one of the following
someone driving a car with no auto liability insurance, someone with an auto liability policy issued by an insurer who has become insolvent, an unidentified hit and run driver or someone with an auto liability policy with limits lower than those required by law