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Jonesy CFP > Insurance > Flashcards

Insurance Flashcards

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1
Q

When must there be an insurable interest for property and casualty?

A

At time of policy and loss

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2
Q

You only need an insurable interest at the time of issuance for life insurance.

A

True

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3
Q

Reformation

A

When the contract fails to express original intent, contract can be amended. “I didn’t have the intention to spend $1,000 at Reformation…”

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4
Q

Should the measure of damage be mitigated by payments received from sources other than the negligent party?

A

No

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5
Q

Subrogation - Insurer pays claim and takes over legal rights the insured had against the negligent

A

If you think SUBway is good food, you no longer have legal rights to eat anywhere else.

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6
Q

Is there a possibility of higher income taxes with self-insurance?

A

Yes, because contributions to the self-insurance fund are not deductible during the tax year.

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7
Q

High deductibles are an example of what?

A

Risk retention

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8
Q

What are the four principles of indemnity?

A
  1. Insurable interest
  2. The concept of actual cash value
  3. Other insurance (limit the ability to profit from a loss)
  4. Subrogation
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9
Q

Why can’t an employer purchase or own a policy in a cross-purchase agreement?

A

In a cross-purchase agreement, no insurable interest exists for the company (stockholder buys another stockholder’s interest)

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9
Q

Is insurance unilateral or bilateral?

A

Unilateral; one of the parties (insurer) makes a binding promise, that if broken, breaches the contract

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10
Q

What increases either frequency or severity of loss?

A

Hazards

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11
Q

What are the requirements for an insurable risk?

A

Accidental
Plenty of homogenous exposure units
Must not be catastrophic
Definite and Measurable

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12
Q

Loss exposure is _______ by having a _____ pool of insured people share in the financial losses suffered by members of the pool

A

Reduced; Large
Law of Large Numbers

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13
Q

Stop-loss coverage to partially self-insure its employee medical insurance program might be used by?

A

Companies with as few as 100 employees

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14
Q

Peril

A

Cause of a loss

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15
Q

Indemnified

A

Made whole

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16
Q

Under the insuring agreement(s),…

A

the insurance company promises to pay for the loss if the loss should result from the covered perils

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17
Q

Factual statements identifying the specific person, property, or activity being insured; descriptive information about the insurance being provided

A

Declarations; D.I.C.E

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18
Q

Attractive Nuissance

A

High degree of care is imposed on the land occupier for certain conditions on the land (pool that isn’t screened or fenced, vacant land where children play, land with access to water)
The lifeguard is so ATTRACTIVE…there’s easy access to him because there’s no fence!

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19
Q

Negligence per se

A

situation where the standard of care is set by a statute (school zones, cross walks)

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20
Q

Strict Liability

A

Generally limited to manufacturers and distributors of defective products (e. coli)

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21
Q

Absolute Liability

A

Extra hazardous condition which results in losses to others (keeping of wild animals)

22
Q

Vicarious Liability (respondeat superior)

A

when one person is held responsible for negligent behavior of another person (branch manager of a B/D)

23
Q

Assumption of risk

A

Ski lift ticket with assumption of risk disclosure, voluntarily choosing to encounter risk

24
Q

Contributory Negligence

A

Any negligence on the injured party defeats the claim (jay walking, drunk driving)

25
Q

Comparative Negligence

A

Doesn’t fully defeat the claim but is used to mitigate damages payable by the other party (damages are proportional)

26
Q

Last Clear Chance

A

Any contributory negligence of the injured party will not bear recovery of damages if the other party, immediately prior to the accident, had a last clear chance to prevent the accident but failed to do so (road rage)

27
Q

Do you use real rate of return calculation for capital retention questions?

A

No; Return - inflation. Amount of $ needed annually/(return - inflation)

28
Q

Most unintentional acts can be covered by liability insurance.

A

True

29
Q

A.M. Best is the BEST for giving what level of detail on insurance carriers?

A

Detailed, historical data (15 classes, A++ to F)

30
Q

Loss Adjustment

A

Notice of loss
Investigation
Proof of loss
Payment or denial

31
Q

Do you need to add one year of needed income to capital retention questions?

A

Yes!

32
Q

Capital retention calculation: If there is no time element, is it a TVM question?

A

No!

33
Q

Participating Policies __________ the premium.

A

Overcharge; if costs are low or returns are high, participants can receive a dividend of premiums unused.

34
Q

Personal Property in a Homeowner’s policy specifically excludes:

A

animals, motor vehicles/aircraft, property of roomers or boarders, property in an apartment rented to others (can buy an endorsement, Landlord’s Furnishings, that can cover property in the rented room

35
Q

Homeowner’s Part E (Personal Liability) - what is excluded?

A

Business/professional activities

Use of motorized land vehicles (except RV or motorized golf carts USED ON PROPERTY)

Watercraft <50hp or 26 ft

Aircraft

BI to any person who is eligible for worker’s comp

36
Q

Basic Perils

A

WHARVES/FLT
Windstorm
Hail
Aircraft
Riot
Vandalism or Vehicles
Explosion
Smoke
Fire
Lightning
Theft

37
Q

Exclusions to all Homeowner’s policies

A

OPEN WIF
Ordinance of Law
Power failure
Earth movement (Earthquake)
Neglect, Nuclear hazard
War
Intentional Loss
Flood

38
Q

Broad Perils

A

Basic + RAF
Rupture of a system
Artificially generated electricity
Falling objects
Freezing of plumbing

39
Q

Fine art/antiques under HO policy by an endorsement

A

Easily stolen items usually insured on an agreed-value basis

40
Q

Actual Cash Value ________ depreciation.
___________ ____ does not include a deduction for depreciation.

A

includes; Replacement value

41
Q

Is land included in property loss calculations?

A

No

42
Q

Insurance required = replacement cost * coinsurance % (90% for commercial)

A

insurance carried / insurance required * loss - deductible

43
Q

when the amount of insurance is _ 80% of the dwelling’s replacement cost, the insurer will pay the greater of:

A

< less than; ACV or replacement cost formula
insurance carried / insurance required * loss - deductible

44
Q

What are requirements for a vehicle to be eligible for coverage under a PAP?

A

Owned by an individual

must be private passenger automobile

must not be used as livery conveyance such as taxi or limo

no business purposes

Must not be rented to others

45
Q

When someone moves out of a HH, PAP coverage ends at the earliest of:

A

The end of 90 days following the spouse’s change of residency

the effective date for the spouse’s own new policy

the end of the policy period

46
Q

Part A (PAP) - liability or BI/PD coverage

A

provides protection against judgements and covered exposures resulting from bodily injury deemed to have been caused by the insured

47
Q

What kind of coverage does a business owner policy provide?

A

liability protection, property damage, and medical payment coverage

48
Q

What is worker’s compensation an example of?

A

Absolute liability

49
Q

What is covered under worker’s compensation insurance?

A

Disability benefits (tax-free)
Rehabilitation (tax free)
Survivor’s death benefit (tax-free)
Medical expense (no limit; reimbursement is tax free)

Sick leave benefits are not provided

50
Q

Is unemployment compensation taxable?

A

Yes

51
Q

group disability insurance premiums are generally paid for by the ER so group disability payments are taxable.

A

True. Note that worker’s comp pays disability benefits tax free.

sick pay is a disability insurance benefit that is taxable.

52
Q

what kind of business insurance are the premiums deductible for an ER?

A

Worker’s comp, unemployment, commercial umbrella, BOP

Jonesy CFP (20 decks)

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