P & C

Question 1

What is the GRAMM-LEACH BILLY ACT

Answer 1

Established protection for consumers and allowed mergers of banks, security co’s & insurance co’s

Question 2

Options for dealing with risk

Answer 2

Avoiding-
Transferring-
Retaining-

Question 3

Contract of Adhesion

Answer 3

P1 prepares contract & submits to P2 on “take-it-or-leave-it” basis - courts usually rule in favor or INSURED

Question 4

Aleatory Contract

Answer 4

Parties to a contract exchange unequal amounts of money. Premium paid is less than potential benefit.

Question 5

Conditional Contract

Answer 5

Both parties must perform. Insurer pays claims if insured complies w/ policy conditions

Question 6

Open Peril

Answer 6

Policies that cover risks of direct physical loss and the perils are not named

Question 7

A property purchased 10 years ago for $100,000 has a replacement value today of $200,000. It has depreciated 3% each year. What is today’s actual cash value

Answer 7

Current replacement cost of $200,000 minus 30% (3% x 10 years) depreciation = $140,000

Question 8

M owns a building that is insured for $200,000 with an 80% Coinsurance Clause. A loss of $12,000 occurs and the actual cash value of the property at the time of loss is $300,000. How much will be recovered?

Answer 8

First, determine the amount of coverage there should have been ($300,000 x .8 = $240,000). Divide what was insured by what should have been ($200,000/240,000 = 5/6) times the amount of loss ($12,000) = $10,000. (What was divided by what should have been times the loss)

Question 9

Other Insurance clause

Answer 9

The Other Insurance clause generally states that two policies covering the same loss will pay proportionally (Pro Rata).

Question 10

Subrogation

Answer 10

is inherent in indemnity contracts and allows the insurer to take legal action against the negligent third party (transfers the right of recovery from insured to insurer)

Question 11

Actual Cash Value

Answer 11

Actual Cash Value valuation provides that the policy will pay the cost to repair or replace the damaged property at the time of loss, less a depreciation factor based upon the age of the property

Question 12

Methods of writing property insurance limits

Answer 12

Specific, Scheduled and Blanket are all methods of writing property insurance limits

Question 13

What is covered in the Declarations

Answer 13

The Declarations section of the policy contains specific information about the insured, and thus would vary by policy

Question 14

The owner of clothing to be cleaned would be ?

Answer 14

The owner of clothing to be cleaned would be a bailor; the dry cleaner cleaning the clothes is a bailee

Question 15

Insuring Agreement includes:

Answer 15

The Insuring Agreement is the company’s commitment to protect the insured and includes a description of the perils

Question 16

Occurrence

Answer 16

An occurrence is an accident that includes continuous or repeated exposure to the same general harmful conditions

Question 17

Conditions include:

Answer 17

The Conditions part of the policy contains the general rules and duties under the policy

Question 18

Policy changes

Answer 18

All changes must be made by a written endorsement stating the change in the policy. The endorsement is to be attached to the policy

Question 19

What is a binder

Answer 19

A binder includes everything, except it does not specify the premium amount. The Declarations of an actual policy would include the premium.

Question 20

Limit of Liability

Answer 20

The Limit of Liability of the policy (in CONDITIONS) is the most the policy will pay in any one loss. However, if the insured’s insurable interest is less than the limit of liability, the most the policy will pay is the insured’s insurable interest

Question 21

No-fault Liability

Answer 21

Most no-fault laws restrict the rights of the injured party to sue unless the injuries are severe, such as paralysis or death, and meet a threshold

Question 22

Split Limits

Answer 22

The split limits of liability on an auto policy for bodily injury might be represented as 100/300 where $100,000 is the per person limit for bodily injury liability and $300,000 is the per occurrence limit for bodily injury

Question 23

How much will your insurance company pay you for wind damage to your roof resulting in $10,000 if you insure your house for $400,000 and the mortgage company also insured your house for $100,000?

Answer 23

Pro-rata liability requires that each policy pays no more than its share of the loss and if the method of sharing is based on the ratio of limits, your amount of insurance paid by your insurer is calculated as follows: $400,000 + $100,000 = $500,000 total insurance available; $400,000 ÷ $500,000 = 4/5 * $10,000 = $8,000

Question 24

Combined Single Limit

Answer 24

In a Combined Single Limit policy, the insurance is available to pay both bodily injury and property damage claims without regard to the number of claimants

Question 25

No Fault Policy

Answer 25

Most no-fault laws restrict the rights of the injured party to sue unless the injuries are severe, such as paralysis or death, and meet a threshold

Question 26

Split Limits

Answer 26

The split limits of liability on an auto policy for bodily injury might be represented as 100/300 where $100,000 is the per person limit for bodily injury liability and $300,000 is the per occurrence limit for bodily injury

Question 27

Damages

Answer 27

Special damages are paid for tangible loss or damage, and general damages are paid when losses cannot be calculated objectively

Question 28

Medical Payments

Answer 28

Payments up to the limit are made without regard to fault

Question 29

Dwelling Policy Coverage Forms

Answer 29

DP-1 (Basic)-ACV-Cov A, B, C & D (fire, lightning & exp. +)
DP-2 (Broad)-A&R-Cov A, B, C & D (inc. ECE & opt.VMM +)
DP-3 (Special)=A&R Cov A, B, C & D (open peril)
= insures private residential property that is not occupied by its owner (i.e., rental, or private residential occupied by owner that does not qualify for Homeowners due to age, value, location etc.

Question 30

Dwelling Coverages

Answer 30

A - Dwelling
B - Other Structures
C - Per. Prop.
D - Fair Rental Value
E - Add. Living Expense
Misc. other coverages: Debris removal; imp, alt & add; reasonable repairs; prop. removed; trees, shrubs; Fire D s/c; Collapse; Glass

Question 31

Modified Fire Resistive

Answer 31

The class of construction of a building greatly influences its insurance rate and insurability. Classes range from Framed Construction to Non-Combustible Construction. Modified Fire Resistive is defined as the materials used in the walls, floors, and roof of a structure must have a fire resistive rating of at least 1 hour, but less than 2 hours

Question 32

Market Value

Answer 32

the loss valuation method used to insure goods and commodities whose value fluctuates with market conditions such as agricultural products

Question 33

Comprehensive Limits

Answer 33

In a Combined Single Limit policy, the insurance is available to pay both bodily injury and property damage claims without regard to the number of claimants

Question 34

Homeowners Coverage Forms

Answer 34

HO-2 Broad Form
HO-3 Special Form
H0-4 Contents Broad Form (Renters)
H0-5 Comprehensive Form
H0-6 Unit Owners Form
H0-8 Modified Form

Question 35

Homeowners Property Coverages

Answer 35

SECTION I - PROPERTY COVERAGES
A - Dwelling
B - Other Structures
C - Personal Property
D - Loss of Use
SECTION II - LIABILITY COVERAGES
E - Personal Liability
F - Medical Payments to Others
SECTION II - ENDORSEMENTS
Home Day Care E; Personal Injury E; Home Business E; Additional Residence (rented to others) E; & Watercraft Liability E

Question 36

Severability of Insurance

Answer 36

The Severability of Insurance condition in a homeowners policy states that insurance applies separately to each ‘insured.’

Question 37

Personal Auto Policy

Answer 37

Part A - Liability Coverage
Part B - Medical Payments
Part C - Uninsured Motorist
Part D - Damage to Your Auto
Part E - Duties After an Accident/Loss
Part F - General Provisions
- - - Plus - - -
Selected Endorsements

Question 38

Umbrella policy coverage

Answer 38

Besides damage to property in the insured’s care, custody, or control, the umbrella also excludes automobile, watercraft, or personal liability without underlying coverage