Arkansas Property and Casualty

Question 1

Elements of a legal contract

Answer 1

1. Agreement
2. Consideration
3. Competent Parties
4. Legal Purpose

Question 2

Agreement

Answer 2

Known as offer and acceptance.

Question 3

Consideration

Answer 3

Both parties must bring value.
-Insured brings the application and the premium.
-Insurer brings promise to pay claims.

Question 4

Competent Parties

Answer 4

Must be old enough (18 years or older).
Must be of sound mind.
Must NOT be under the influence of drugs or alcohol.

Question 5

Offer

Answer 5

The Customer (insured) submits an application asking to transfer their risks to the insurance company (insurer).

Question 6

Acceptance

Answer 6

The insurer (insurance company) agrees to accept the transfer of the risks of the insured (customer) and a policy is issued.

Question 7

Representation vs. Warranty

Answer 7

Representation- a statement that is true TO THE BEST OF ONE’S KNOWLEDGE. It can be true or not true.

ex. Do you have cancer? To the best of my knowledge, no.

Warranty- MUST be a true statement. Cannot be false.

ex. What is the make and model of your vehicle? A 1999 Hyundai Sonata.

Question 8

Binder

Answer 8

A temporary, oral agreement someone is covered by insurance RIGHT NOW, until the policy is issued.

A Binder expires when the policy is issued.

THERE IS NO BINDER FOR FLOOD!

Question 9

What are the 7 parts of a policy’s structure?

Answer 9

1. Declarations Page
2. Definitions
3. Insuring Agreement
4. Additional or Supplementary Coverages
5. Conditions
6. Exclusions
7. Endorsements

Question 10

What does the Declarations Page of a policy include?

Answer 10

1. Name of the Insurer
2. Name of the insured
3. Location (address)
4. Amount of Coverage
5. Premium
6. Period

Question 11

What is the purpose of the definitions page of a policy?

Answer 11

Defines specific terms used in the policy

Question 12

What is the purpose of the Insuring Agreement?

Answer 12

This is a summary of the major promises of the insurance company and states what is covered. In the Insuring Agreement, the insurer agrees to do certain things such as paying losses for covered perils, providing certain services, or agreeing to defend the insured in a liability lawsuit.

Promise to Pay
Lists the Perils
Lists the Parties
Lists the covered period

Question 13

Additional or Supplementary Coverages

Answer 13

Coverages that automatically come with the policy.
They cannot be removed or changed.
Automatically built into every policy at no additional cost

Question 14

Conditions

Answer 14

The rules, duties, obligations and ways of behaving for both the insured and the insurer.

Question 15

Exclusions

Answer 15

What is not covered
Earth movement and Water Damage

Question 16

Endorsements

Answer 16

Extra coverages with extra premiums
Are written to change the policy.

Question 17

Insureds

Answer 17

Anyone who can be covered by your insurance.

Question 18

Named Insureds

Answer 18

The person(s) who bought the policy and is named on the Declarations Page.

Question 19

First Named Insureds

Answer 19

On Commercial Policies, this is the designated person who can make changes to the insurance policy, whose name appears on the policy.

Question 20

Additional Insured

Answer 20

Generally, mortgage or lien holders.
an individual or business NOT listed as insured but protected by the policy in regard to a specific interest.

Question 21

Assignments

Answer 21

Transfer of the legal rights of the policy.
Usually, the policy is cancelled, and policy is re-written.

Question 22

Arbitration

Answer 22

When insured doesn’t agree with the claim payout. This occurs when one is covered by someone else’s policy.

Question 23

Appraisal

Answer 23

When the named insured doesn’t agree with the claim payout specifically for a property claim.

Question 24

Other Insurance

Answer 24

A provision that says if you have more than one policy, all policies will pay a fair share.

The fair share is determined by “Pro-Rata”.

Question 25

Notice of Claim vs. Proof of Loss

Answer 25

Notice of Claim - “Letting the insurer know “The fire happened.”

Proof of Loss - Informing the insurer “I swear to and sign I lost this specific property in the fire.”

Question 26

Cancellation

Answer 26

Termination of an “in force” policy.

Question 27

Non-Renewal

Answer 27

Termination at the expiration of a policy period.

Question 28

Mortgage Clause / Standard Mortgage

Answer 28

States the insurance company will never pay the mortgage holder if money is not owed the mortgage holder.

ex. Stacy pays off her home and forgets to inform the insurer to remove the lien holder. Stacy’s house burns down. The bank will NOT receive any claim payment, even though they are listed as additional insured.

Question 29

Fair Credit Reporting Act

Answer 29

The purpose of FCRA is to protect consumers against the circulation of inaccurate or obsolete personal or financial information. Including negative information over 7 years old and bankruptcies over 10 years old.

Question 30

What is insurance?

Answer 30

The transfer of risk.