Coverage Test

Question 1

Risk

Answer 1

Uncertainty of a financial loss

Question 2

Pure Risk

Answer 2

chance of loss or no loss but not a gain (insurable)

Question 3

Speculative Risk

Answer 3

chance of loss or gain (not insurable)
ex: playing the lottery

Question 4

Transference

Answer 4

transfer the risk of sustaining damage before it happens (insurance)

Question 5

Risk Sharing

Answer 5

having a deductible on collision coverage
(insured pays deductible) (company pays coverage)

Question 6

Physical Hazard

Answer 6

hazards that increase the chance of loss
ex:car is not properly maintained

Question 7

Moral Hazard

Answer 7

hazard of intentionally committing a risk
ex: setting something on fire

Question 8

Morale Hazard

Answer 8

hazard of being indifferent towards a risk
ex:leaving key in a running vehicle

Question 9

First Party

Answer 9

Person who is insured can be covered by
*Collision
*Comprehensive
*Med Pay
*Personal Injury
*UMBI
*UMPD
*Rental
*Towing and Labor

Question 10

Second Party

Answer 10

Insurance Company

Question 11

Third Party

Answer 11

Someone who makes a claim for the damages or injuries arising from the insured’s negligence (acts or omissions)
*Bodily Injury Liability
*Property Damage Liability

Question 12

Agreement

Answer 12

Offer and acceptance
By issuing the policy the insurance company is accepting the offer. Offer + Acceptance= Legally Binding Agreement

Question 13

Competent Parties

Answer 13

At least be 18
Be Sane
Be Sober

Question 14

Consideration

Answer 14

Each party of the contract gives up something.
The insured pays the premium, the carrier promises to pay claims.

Question 15

Indemnity

Answer 15

Act of making someone “whole” after a loss
*put someone back in the same financial position they were before the loss

Question 16

Duties and Conditions

Answer 16

Certain conditions that an insured must meet for the insurer to provide coverage
*Insures must cooperate with investigations
*Company must act in good faith and fair dealings

Question 17

Aleatory

Answer 17

Contract is one of unequal exchanges of promises.
Doesn’t matter the length of time the premium has been paid to provide coverage.

Question 18

Adhesion

Answer 18

The insured has limited opportunity to negotiate the carrier’s terms and conditions.
*If it is a gray area the company pays.

Question 19

Application

Answer 19

Part of the policy that the applicant provides the accurate information in response to the company’s questions
*Many states offer verbal a verbal application

Question 20

Representations

Answer 20

The answers the customer gives the company as the policy application
Drivers
Vehicles
Producer’s Statement
Applicant’s Signature (agree to not giving fraudulent information)
Financial
Coverages

Question 21

Declarations

Answer 21

Specifics the named insureds, coverages, vehicles, listed drivers, premiums owed, coverage types, policy limits, policy period

Question 22

Policy Jacket

Answer 22

Table of Contents for a Policy

Question 23

Endorsements

Answer 23

An attachment to the policy that modifies or replaces the policy jacket
*usually adds to the policy

Rental Reimbursement
Extended Transportation Expense
Towing and Labor (break down)
Customized Equipment

Question 24

Goal of an Investigation

Answer 24

Look for coverage afforded under the customer’s policy
*full, fair, timely, objective
*complete investigation within 30 days of notice
*when investigation is complete a fair and objective evaluation should occur.
*should new information come to light, we must re-evaluate our coverage, liability, and damages position

Question 25

Reservation of Rights

Answer 25

Keeping the person seeking coverage informed
*garaging issue
*unlisted house hold member
*uncooperative insured
Customer may not have coverage but we are going to continue our investigation.
*estimate, claimant statement, estimate of claimants vehicle

DOES NOT GO TO CLAIMANT

Question 26

Waiver

Answer 26

DO NOT DO
Intentional or voluntary relinquishment of a known right. A waiver may be expressed orally or in writing.
If a customer gets the car serviced before an inspection.

Question 27

Estoppel

Answer 27

Legal result of a waiver or conduct which implies a waiver. It prevents the party from asserting the original right.
1. A person intentionally or unintentionally creates the impression that a fact exists.
2. The innocent party relies on that impression.
3. The innocent party is harmed by the same reliance.

Question 28

Coverage Issues

Answer 28

Policy Out of Force, Material Misrepresentation MMR

Question 29

Policy of out Force

Answer 29

Was the policy active?
Any recent cancellations?
Any lapses in coverages?
TLNP- Take loss no policy

Question 30

Material Misrepresentation

Answer 30

*failure to list a member was 14 at the time of the application
*new house hold member
*garaging
*failure to report accidents

Question 31

MMR Investigation steps

Answer 31

1. Gather Statements
2. Signed application
3. Review the policy
4. Inform Underwriting
5. Underwriting Responds
6. Notify Manager
7. MMR Summary

Question 32

MMR Handling (per state)

Answer 32

Rescind the policy
Reformation
Denial of Claim
Cancellation

Question 33

Material to the Risk

Answer 33

The unlisted driver would not have to be involved in the accident to pursue MMR

Question 34

Material to the Loss

Answer 34

MMR is material to the loss when the misrepresented fact specifically impacts the particular claim. That is, the unlisted driver would have to be involved in the accident to proceed with the MMR.