Chapters 1-4 Review Flashcards
What loss valuation would you recommend to someone that wants protection for an expensive painting?
Agreed Value
What gives immediate temporary insurance?
Binder
The rate is too low for the risk
Adverse Selection
Which of the following describes the concept of risk?
Cause of loss
Amount of the loss
Uncertainty of loss
Increase in chance of a loss
Uncertainty of loss
The 4 elements that prove negligence
Duty to Act
Breach of Duty
Damages
Proximate Cause
What are the 4 parts of the policy?
Declarations
Insuring Agreement
Conditions
Exclusions
What coverage pays when the Insured damages someone’s reputation?
Personal Injury
What valuation pays the full cost of replacing a home even if it exceeds the policy limit?
Guaranteed Replacement Cost
AKA Indirect Loss
Consequential Loss
The characteristic where an insurer must stick to the language in a contract and any ambiguity is found in favor of the policyholder
Contract of Adhesion
The formula for Actual Cash Value
Replacement Cost
Minus (or less)
Depreciation
Where in a named peril policy would the Insured read the perils that will be covered?
Insuring Agreement
Time frame credit data is used for underwriting for any adverse action
7 years
A loss that is sudden and unexpected or an unforeseen event
Accident
Who can cancel the policy at any time for any reason?
Named Insured
A customer’s response to the best of their knowledge
Representation
The 1st peril in an unbroken chain of events
Proximate Cause
Which type of damages does NOT indemnify the injured party?
Punitive Damages
Withholding/hiding information
Concealment
A lie or incorrect response
Misrepresentation
The pizzeria tells their delivery drivers if they have an accident while making a delivery, the pizzeria will not be responsible. What will make them responsible anyway?
Vicarious Liability
What clause describes an insurer’s right to sue an at-fault party after reimbursing their own insured?
Subrogation
Absolute or guaranteed truth
Warranty
How will the unearned premium be returned if the policy is cancelled by the policyholder?
Short Rate
The 3 categories of exclusions
Predictable
Catastrophic
Covered by Another Policy
What is the MOST important piece of underwriting?
Policy Application
Where in the contract would the Named Insured be able to read their deductibles?
Declarations
A new homeowner fails to install a security system on their expensive home. Which hazard would this be considered?
Morale Hazard
What is it called when an insurer voluntarily gives up a known right in the contract?
Waiver
Where in the policy would the insured read the rules, duties, and clauses?
Conditions
How will the unearned premium be returned if the policy is cancelled by the insurance company?
Pro-Rata
Unequal transfer of value
Aleatory
A policy should cover what a reasonable Policyholder would expect it to cover
Doctrine of Reasonable Expectation
In which part of the policy would the Insured find the Insurance Company’s promise to pay?
Insuring Agreement
Trying to prevent someone from exercising a known right based on their previous actions is called
Estoppel
What is the consideration of the Policyholder?
Truthful statements and paying the premium
Legal wrongs between individuals
Tort Law
Selecting, classifying, pricing and insuring a risk
Underwriting
What are the consequences of a material misrepresentation?
The policy can be voided
The 4 defenses against negligence
Contributory Fault
Intervening Cause
Statue of Limitations
Assumption of Risk
Which part of the policy contains the Insurance Companies consideration?
Insuring Agreement
A one sided contract written by an insurer where they are making a promise
Unilateral
The failure to do what a reasonable and prudent person would do – being imprudent
Negligence
Paying the value of the lost or damaged property, repairing the property, or taking the property at agreed value are examples of this
Claims Settlement Options
A building is covered by two policies. Policy A covers $200,000 and Policy B covers $100,000. Under pro-rata, what would each company pay towards a $45,000 loss?
Co A 2/3 $30,000
Co B 1/3 $15,000
All of these will appear on the Declarations Page, EXCEPT?
Policyholder
Effective Dates
Policyholder’s date of birth
Deductible
Date of Birth
What is the pro-rata formula?
(Limit of Policy A/ Total Limit of All Policies ) x Loss
What is the coinsurance formula?
(Limit of Insurance/80% of Property Value) x loss