Insurance Terms and Related Concepts

Question 1

What provision states that if a policy allows for greater benefits than the financial loss incurred, the insured may be compensated only for the amount lost?

Answer 1

Indemnity

Question 2

An insured’s business is damaged by a fire, and temp. shut down for repairs. As a result, the insured suffers loss of income. What type of loss is the loss of income?

Answer 2

Indirect

Question 3

What term describes a loss caused by continuous exposure to a condition ?

Answer 3

Occurrence

Question 4

What are the two types of compensatory damages?

Answer 4

General and Special

Question 5

If an insured peril was the proximate cause of loss, what type of loss is it?

Answer 5

Direct

Question 6

A situation in which a person can experience only a loss and no gain presents what type of risk?

Answer 6

Pure risk

Question 7

In property insurance, what is the purpose of a coinsurance clause?

Answer 7

To encourage insureds to insure property close to its value

Question 8

What type of policy insures all property at multiple locations for a single amount?

Answer 8

Blanket

Question 9

A person who does not lock the doors to his/her house shows an indifferent attitude. What type of hazard does this represent?

Answer 9

Morale

Question 10

What is negligence?

Answer 10

When someone cannot act reasonable

Question 11

A tornado that destroys a property would be an example of what?

Answer 11

Peril

Question 12

How is the actual cash value of property calculated?

Answer 12

Current replacement cost minus depreciation

Question 13

How are direct and indirect losses related?

Answer 13

Direct losses can cause indirect losses

Question 14

Wagering on a sporting event is known as what type of risk?

Answer 14

Speculative

Question 15

What is subrogation?

Answer 15

Its when you go after the 3rd party (An insurer’s legal right to seek damages from the 3rd parties after reimbursing insureds for loss)

Question 16

What do individuals use to transfer their risk of loss to a larger group?

Answer 16

Insurance

Question 17

What term defines an exact, direct, and uninterrupted cause of loss?

Answer 17

Proximate cause

Question 18

What is the difference between vacancy and unocupancy?

Answer 18

Vacancy is when they’re GONE, Unocupancy is when they still have property in their territory.

Question 19

The reduction, decrease, or disappearance of value of the person or property insured in a policy is known as what?

Answer 19

Loss

Question 20

What is burglary?

Answer 20

Breaking in (forced entry) with intent of hurting

Question 21

What type of limits of liability has the limits separately stated for different coverages?

Answer 21

Spit limits

Question 22

In property insurance, what is actual cash value?

Answer 22

Replacement cost at time of loss - Depreciation cost

Question 23

Insurance is a contract that protects the insured from what?

Answer 23

Loss

Question 24

What provision found in property policies prevents an insured from collecting twice for the same loss: once from the insurer and again from a third party?

Answer 24

Subrogation

Question 25

A policy that covers all causes of loss except for those specifically excluded is known as what type of policy?

Answer 25

Open Peril

Question 26

What is a deductible in an insurance policy?

Answer 26

when you pay X amount to get policy benefits

Question 27

What are the 3 types of hazards?

Answer 27

Physical, Moral, Morale

Question 28

What is a risk?

Answer 28

Uncertainty of loss

Question 29

What does indemnify mean in insurance?

Answer 29

To restore an insured to the same financial status as before a loss

Question 30

What is the term for the causes of loss insured against in an insurance policy?

Answer 30

Peril

Question 31

Conditions that increase the chance of a loss are known as what?

Answer 31

Hazards

Question 32

What determines an insurer’s responsibility for payment, as stated in an insurance policy?

Answer 32

Limits of Liability

Question 33

In property insurance, when must insurable interest exist?

Answer 33

At the time of lost

Question 34

Under absolute liability, does an injured party need to prove negligence?

Answer 34

No, Absolute liability exists when a condition or conduct is inherently dangerous, so proof of negligence is not required.

Question 35

(Insurance Carried / Insurance Required) x Loss Amount =

Answer 35

Loss payment

Question 36

What sublimit in a liability policy puts a ceiling on the payment for all claims that arise from a single accident?

Answer 36

Per occurrence

Question 37

Both robbery and burglary can be considered what?

Answer 37

Theft

Question 38

An insurer discovers that an applicant for a policy has submitted a fraudulent insurance claim in the past. What type of hazard does this represent?

Answer 38

Moral

Question 39

What law protects consumers from the circulation of inaccurate or obsolete information?

Answer 39

The Fair Credit Reporting Act

Question 40

If a manufactured product is unsafe, what type of liability applies to the manufacturer?

Answer 40

Strict Liability