Insurance: Often Missed Questions
What method of loss valuation is contrary to the basic concept of indemnity?
Replacement (following a loss it may provide the insured with more than the ACV)
Automatic increase in dwelling policies does not require additional premium?
Correct - it is added by endorsement
For an additional premium, the extended coverages written on the basic form dwelling policy would cover?
Riot (6 others)
When a homeowners policy is cancelled at the request of the insured unearned premium is returned on what basis?
Short-rate basis
What is the purpose of an insuring agreement?
To establish the obligation of the insurance company - which is to provide the insurance coverages as stated in the policy
Uninsured Motorist Coverage and Underinsured Motorist Coverage must be written for the same limits of liability?
True
Only the person named on the policy is covered by nonowned coverage.
True - there is no automatic coverage for spouse and other family members.
Is guaranteeing future dividends considered misrepresentation?
Yes - false/misleading statements
How much coverage is provided in the homeowners policy for damage to watercraft, accessories, equipment, and trailers?
$2000
The penalty for willfully violating the Fair Credit Reporting Act cannot exceed how much?
$2500
Homeowners policies excludes medical payments for the insured?
Correct
What are the essential parts of the policy's structure?
declarations, insuring clause, conditions, and exclusions (also may include other insurance)
Define replacement cost
full replacement of property at its current cost, new and without reduction for depreciation
What type of contract puts any ambiguities in favor of the insured?
Adhesion
What is reinsurance?
An agreement between a ceding insurer and assuming insurer (used by insurers to protect against catastrophic losses)
How long can a licensed person be imprisoned after their activities affect interstate commerce and who knows who makes false material?
10 years
On a short-rate basis, how much is retained by the insurer?
10%
Limit of coverage for personal property off-premises extension is?
10% of coverage c anywhere in the world
Members of the Ohio Mine subsidence Underwriting Insurance Associate all have reinsurance agreements with the Association that cedes what percent of the coverage that the members write?
100%
Under HO Section II - what is the limit of coverage for damage done to other's property?
2000 - no deductible necessary
What is the maximum penalty for habitual willful noncompliance with the Fair Credit Reporting Act?
2500
How long does removal coverage apply for when the property has been removed to be protected?
30 days
How long is the waiting period after the application has been accepted before flood coverage goes into effect?
30 days
Coverage C of an HO policy will cover business property on premises for up to? (what's the limit)
3000
Material Misrepresentation
A statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company
What do provisions communicate?
Communicate a policy's benefits, conditions, etc. (they are not a part of the policy's structure)
What type of insurance contract requires both the insured and the insurer to meet certain conditions in order for the contract to be enforceable?
Conditional
On a DP3 what is the coverage for personal property?
Named peril or specified peril basis (same as DP2/Broad Form)
Are vehicles with less than 4 wheels covered under the PAP?
No
Can a person be sued for reporting suspected fraudulent practices carried out by an insurance company/producer?
No
In the event of a total loss will the coinsurance clause operate and will the face amount of the policy be paid?
No
Is legal liability additional coverage on a homeowners policy?
No - it is primary coverage
Is burglary and theft insurance covered under the TRIA?
No - it is specifically excluded
If you injure yourself, will medical payments to others in Section II of your HO policy cover the expenses?
No - it will cover invitees, residence employees not covered by workers compensation, and injury to others cause by animals in your control
Is it considered illegal inducement to offer rate reductions to policyholders of the same class?
No - must be related to the type of insurance and offered to like policyholders
Are landslides considered a cause for flood conditions covered by the NFIP?
No - overflow of inland or tidal water, mudflow and collapse, and unusual/rapid accumulation or runoff of surface waters from any source are covered
The deductible under earthquake coverage is stated as what?
Percentage of loss
What liability coverage can be added to a homeowners policy?
Personal injury
What is negligence?
The failure to do what a reasonable prudent person would do under given circumstances?
Is workers compensation insurance covered under the TRIA?
Yes - the TRIA applies to commercial property and liability insurance
What is a valued policy?
a policy that pays the face amount of insurance if a total loss occurs (when it is desirable to agree on a specific value in advance)
what is a stated amount?
an amount of insurance scheduled in a property policy that is not subject to any coinsurance requirements in the event of a covered loss.
What is unoccupancy?
an insured structure in which no people have been living or working within the required period of time, but some property is stored
What is rebating?
an offering of any inducement in the sale of insurance products that is not specified in the policy
What is absolute liability?
any conduct which is inherently dangerous (ex. swimming pools, using explosives, and keeping wild animals)
What is fraud?
any oral or written statements by any person engaged in the business of insurance that are false or any omissions of material fact are considered unlawful fraud
How does insurance distribute the financial consequences of individual losses?
it transfers the risk to all persons insured
Who funds the Insurance Guaranty Associate?
it's members - authorized insurers
What process determines the premium charged and how much insurance is required for a particular loss?
loss valuation
what does specific insurance cover?
provides a specific amount of coverage for each property. (remember: specific = separate)
What does the insuring agreement describe?
the insured perils and the method of indemnification
What are the 3 basic desires of an insured engaging in risk-retention?
to reduce expenses and improve cash flow, to increase control of claim reserving and claims settlements, and to fund losses that cannot be insured
What is defamation?
when an oral or written statement is made that is intended to INJURE a person engaged in the insurance business
