Chapters 1 General Insurance Terms
If a liability policy had split limits of 50/100/30, what is the maximum amount that would be payable in the event of injury to a single person? - $30,000 - $50,000 - $100,000 - $180,000
$50,000
Terrorism Risk Insurance Program Reauthorization Act of 2015 has extended the TRIA to the year - 2015 - 2017 - 2020 - 2030
2020
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 - 100% of the market value - $400,000 - $32,000
80% of the property's replacement cost or more
What is a material misrepresentation? - any misstatement made by an applicant for insurance - any misstatement by the producer - concealment - a statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company
A statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company
The declarations page of the homeowners policy provides all of the following for information EXCEPT - what deductible amount applies to each loss covered by the policy - a statement that earthquake damage is not covered - the amount of premium charged for each coverage - the insured's address
A statement that earthquake damage is not covered
What is a Certificate of Insurance? - a written document obligating the insurer to the person to which the insurance was issued - a written document naming the insured's beneficiary - a written document allowing the insurer to inspect the insured's books - a written document showing the types and amounts of insurance that have been issued to the insured
A written document showing the types and amounts of insurance that have been issued to the insured
A person who is not named as an insured on the declarations page of a policy but is protected by the policy is known as the - first named insured - additional insured - policyowner - named insured
Additional insured
In insurance, an offer is usually made when? - the agents hands the policy to the policyholder - an agent explains a policy to a potential applicant - an applicant submits an application to the insurer - the insurer approves the application and receives the initial premium
An applicant submits an application to the insurer
With respect to the business of insurance, a hazard is - the risk taken when performing something dangerous - the tendency of poorer risks to seek insurance more often than better risks - the basic reason for an insured to purchase insurance - any condition or exposure that increases the possibility of loss
Any condition or exposure that increases the possibility of loss
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? - appraisal hearing - arbitration - small claims court - independent audit
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 court - a lawsuit is filed - appeal to the DOI - the adjuster's first opinion must be accepted
Arbitration through the court
Which of the following describes the transfer of a legal right or interest in an insurance policy? - abandonment - obligation - legal purpose - assignment
Assignment
Insurable interest in a property policy must be proven - when a claim is paid - at the time of application - at the time of loss - when a policyowner is changed
At the time of loss
An insurance contract must contain all of the following to be considered legally binding EXCEPT - competent parties - beneficiary's consent - offer and acceptance - consideration
Beneficiary's consent
The ABC Corporation has $100,000 of coverage on its building through insurance Company A, and $50,000 of identical coverage on the same building through insurance Company B. Assuming coinsurance is not an issue, when a $24,000 loss occurs and the pro rata method is used, how much will each insurer pay? - Company A will pay $24,000; Company B will pay $0 - Company A will pay $16,000; Company B will pay $8,000 - Company A will pay $20,000; Company B will pay $4,000 - Company A will pay $12,000; Company B will pay $12,000
Company A will pay $16,000; Company B will pay $8,000
Because an insurance policy is a legal contract, it must conform to the state laws governing contracts which require all of the following elements EXCEPT - consideration - legal purpose - offer and acceptance - conditions
Conditions
Because an insurance policy is a legal contract, it must conform to the state laws governing contracts which require all of the following elements EXCEPT - legal purpose - offer and acceptance - conditions - consideration
Conditions
The part of the policy that sets forth the rules of conduct, duties, and obligations of the parties is called the - exclusions - declarations - insuring clause - conditions
Conditions
When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following? - consideration - legal purpose - contract of adhesion - acceptance
Consideration
Representations are written or oral statements made by the applicant that are - guaranteed to be true - found to be false after further investigation - immaterial to the actual acceptability of the insurance contract - considered true to the best of the applicant's knowledge
Considered true to the best of the applicant's knowledge
The part of a property policy that shows the amount of insurance, premium, and policy term is the - conditions - endorsements - declarations - insuring clause
Declarations
Which of the following is a mandatory part of an insurance policy that varies with each individual policy? - insuring agreement - declarations - conditions - exclusions
Declarations
What term includes damage where the insured peril was the proximate cause of loss? - negligent loss - direct loss - indirect loss - consequential loss
Direct loss
Which of the following provisions requires that the insured protects the damaged property from further damage, cooperates with the insurer in settling the loss, and submits to the insurer signed proof of loss within a specified period of time? - loss settlement - proof of loss - duties after loss - legal action
Duties after loss
Which of the following would modify the original insurance contract by either adding or removing coverage? - endorsements - additional coverage form - conditions - flexible policy
Endorsements
The section of an insurance policy that details what perils are not insured against and what persons are not insured is known as the - declarations - endorsements - conditions - exclusions
Exclusions
What type of compensatory damages will pay for pain and suffering and disfigurement? - special (specific) - tort - normal - general
General
Under the professional liability loss settlement provision, what must an insurer do before offering to pay a claimant to settle a claim? - refuse new business - get the insured's consent - sue the claimant - cancel the insured's policy
Get the insured's consent
Events or conditions that increase the chances of an insured loss occurring are referred to as - exposures - risks - perils - hazards
Hazards
The policy conditions define - the amount of coverage - how parties to the contract must act following a loss - the basic underwriting information - the excluded perils
How parties to the contract must act following a loss
When would a misrepresentation on an insurance application be considered fraud? - never: statements by the applicant are only representations - when the application is incomplete - any misrepresentation is considered fraud - it its intentional and material
If it is intentional and material
Who is responsible for filling out a notice of claim form? - agent - insurer - insured - adjuster
Insured
Persons covered under an insurance policy, whether named or not, are known as the - named insureds - first named insureds - additional insureds - insureds
Insureds
All of the following are conditions commonly found in the insurance policy EXCEPT - appraisal - insuring agreement - cancellation and nonrenewal - subrogation
Insuring agreement
All of the following are conditions commonly found in the insurance policy EXCEPT: - appraisal - insuring agreement - cancellation and nonrenewal - subrogation
Insuring agreement
The part of the insurance contract that describes the covered perils and the nature of coverage of the contractual agreement between the insurer and the insured is called the - conditions - exclusions - declarations - insuring agreement
Insuring agreement
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 - exposure - hazard - risk
Loss
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. Which of the following will explain the reason a death benefit claim is denied? - material misrepresentation - waiver - utmost good faith - estoppel
Material misrepresentation
Which of the following does the term proximate cause refer to? - injury that leads to monetary compensation - duty of the defendant to act - reason for filing a lawsuit - negligence that leads to an injury
Negligence that leads to an injury
When an insurance policy does not offer a continuation or replacement at its expiration date, it is considered a - nonrenewal - suspension - cessation - cancellation
Nonrenewal
Duties of the insurer found in property policy conditions include all of the following EXCEPT - provide advance notice of cancellation - return any premiums to the insured - notify the insured in the event of financial difficulty - pay for covered losses
Notify the insured in the event of financial difficulty
What insurance policy provision defines how the policy will respond if there is more than one insurance policy written on the same risk? - primary and excess - other insurance - valid insurance - nonconcurrency
Other insurance
An insured has a liability policy that sets the amount for all claims that arise from a single incident at $50,000. Which type of limit of liability does this insured's policy have? - aggregate - split - per occurrence - per person
Per occurrence
The other insurance provision that limits the liability of the insurer to a portion of the loss no greater than the amount the insurer bears to all the insurance covering the property is called - excess - pro rata liability - contributing - proportionate
Pro rata liability
Before an insurer will pay any loss under a policy, what is usually required from the insured? - a claims-made form - proof of loss - notice of claim - a binder
Proof of Loss
A sworn written statement that must be furnished by the insured to the insurer before any loss under a policy can be paid is called? - binder - proof of loss - notice of claim - claim report
Proof of loss
Which of the following is defined as the legal liability arising from physical damage to the belongings of others caused by the negligence of an insured? - property damage liability - accident liability - personal injury liability - bodily injury liability
Property Damage Liability
The Gramm-Leach-Bliley Act was passed to - allow consumers access to credit and private consumer reports - allow insurance companies access to medical information for underwriting purposes - protect private customer information filed with a financial institution - define insurance as interstate commerce
Protect private customer information filed with a financial institution
What type of information would be found in a policy's insuring agreement? - location of premises - policy limits - insurer's address - renewal dates
Renewal dates
Which method of loss valuation is contrary to the basic concept of indemnity? - agreed value - replacement cost - functional replacement cost - market value
Replacement cost
Which of the following is used in the formula for calculating the actual cash value of a property? - stated value - fair market value - agreed value - replacement cost
Replacement cost
Robbery is - taking of property by use of force, violence, or fear - taking of property without causing property damage or bodily harm - any act of stealing - taking of property from within the premises leaving visible signs of forced entry
Taking of property by use of force, violence, or fear
Which of the following would NOT be considered a source of insurability information by an insurer? - the applicant's marital status - interviews with the applicant's neighbors and friends - motor vehicle records - insurance history
The applicant's marital status
Which of the following is NOT the consideration in a policy? - the application given to a prospective insured - something of value exchanged between parties - the premium amount paid at the time of application - the promise to pay covered losses
The application given to a prospective insured
Liability imposed on one party as a result of the actions of another person is known as - strict liability - absolute liability - vicarious liability - comparative negligence
Vicarious liability
In forming an insurance contract, when does acceptance usually occur? - when an insurer's underwriter approves coverage - when an insurer delivers the policy - when an insurer receives an application - when an insured submits an application
When an insurer's underwriter approves coverage