PC chapter 1

Question 1

Indemnify

Answer 1

to restore an insured, as much as possible, to his or her pre-loss financial conditions

Question 2

Admitted Company

Answer 2

a company that has sought admission and had been approved to conduct the business of insurance within a particular state

Question 3

Alien Company

Answer 3

a company started or chartered in a country other than the US

Question 4

Authorized Company

Answer 4

also known as admitted company, an authorized company receives a certificate of authority as proof they are admitted to do business in a particular state

Question 5

Cancellation

Answer 5

termination of an insurance contract during a policy period. either the insurance company or the insured may effect cancellation

Question 6

captive agency

Answer 6

an agency agreement in which the agency agree to exclusively represent one insurance company

Question 7

casualty

Answer 7

the side of P&C insurance business concerned with protecting you pocketbook should you become legally liable for injuring a third parties body or property

Question 8

Catastrophic Loss

Answer 8

a loss that caused damage to a significant number of people at the same time. Catastrophic losses include flood, wars, earthquakes and are typically excluded

Question 9

Certificate of insurance

Answer 9

proof of in force insurance

Question 10

Commercial Lines

Answer 10

the P&C policies sold to businesses

Question 11

DIrect Loss

Answer 11

a physical loss to covered property caused by a covered peril. A home destroyed by a tornado or a commercial building destroyed by a fire are two examples

Question 12

Direct Response

Answer 12

a insurance distribution system in which the company advertises via the internet, radio or tv to solicit inquires and business is then conducted by licensed telemarketers

Question 13

Direct Writer

Answer 13

an insurance distribution system involving producers who write policies representing only one company

Question 14

endorsement

Answer 14

an extra coverage that can be purchased for the benefit of the policy owner

Question 15

exclusive agency

Answer 15

an agency agreement whereby the agency will represent only one insurance company

Question 16

exposure

Answer 16

that which is subject to a possible loss, if you own a store there is a possibility a customer could fall down on your premise thus you have a premises liability exposure

Question 17

First Named Insured

Answer 17

in commercial policies the first named insured is the first person listed on the dec. sheet. the first named insured is the individual with who the insurance company will deal with in connection the policy

Question 18

Foreign company

Answer 18

an insurance company from another state, washington DC or from a territory of the US

Question 19

Fortuitous

Answer 19

happening by accident or chance

Question 20

Fraternal

Answer 20

an insurance company structure rather similar to a mutual insurance company. the evolution of social and religious fraternities providing insurance for their membership

Question 21

Implied Authority

Answer 21

the authority of a producer had that is not explicity spelled out in an agency contract, but that can be assumed must exist. the authority to have a telephone , a computer or to hire a receptionist would all be implied

Question 22

Independent Agent

Answer 22

an insurance distribution system utilizing agencies that represent multiple companies

Question 23

indirect loss

Answer 23

indirect loss or loss of use is a loss that follows a direct loss and which causes the insured to suffer further financial consequence. examples include renting a car after an accident rendered the insureds car inoperable

Question 24

inherent vice

Answer 24

a naturally occuring defect or characteristic that is never covered by a property policy. a property claim filed because of an insured historic condiment has turned yellow would be denied because paper naturally turns yellow over time

Question 25

insurable interest

Answer 25

having a financial stake in the property

Question 26

insurance

Answer 26

the transfer of risk from an individual or business to an insurance company

Question 27

insurance producer (agent)

Answer 27

an individual licensed to sell insurance

Question 28

insured

Answer 28

person or entity for whom insurance is provided

Question 29

Law of Large Numbers

Answer 29

the concept that states when a large number of similar risk are examined it is usually possible to accurately predict losses

Question 30

Llyods of London

Answer 30

a place where several hundred insurance syndicates issuer insurance policies within syndicate members personally guaranteeing payment for losses. worlds biggest source of reinsurance

Question 31

Loss

Answer 31

a financial injury

Question 32

loss of use

Answer 32

an indirect loss following a covered direct loss

Question 33

mutual insurance company

Answer 33

a company operated for the benefit of policy-owners

Question 34

named insured

Answer 34

an insured have the legal rights to modify coverage, negotiate and accept claim settlement and to cancel coverage

Question 35

non admitted company

Answer 35

a foreign or alien insurance company not authorized do business your state

Question 36

non renewal

Answer 36

non renewal simply means a policy will not be renewed at the end of the policy period

Question 37

Personal Lines

Answer 37

the p&c policies sold to individuals or families, homeowners, autos, boat-owners, as examples

Question 38

Predictable Losses

Answer 38

predictable losses are just that, predictable. losses that are reasonably foreseeable or anticipated such as deterioration, wear and tear ect. would be predictable and therefor excluded from coverage

Question 39

Pro Rata

Answer 39

means in proportion

Question 40

Property

Answer 40

property is real or personal, tangible items that can be owned, possessed, or occupied. your home. your business building, your car, your clothing and your dog are just a few examples of property

Question 41

Pure Risk

Answer 41

the risk offset by insurance. Pure risk means you have no change to win but only a chance to lose. insurance allows you to stay even

Question 42

Reinsurance

Answer 42

reinsurance is the practice of transferring a portion of na insurance companies risk to another company

Question 43

Risk

Answer 43

chance of loss, offs that a loss will occur. insurance offsets pure risk. only the posiblity of loss. gambling is speculative risk. possibility of loss or gain

Question 44

Risk Retention Group

Answer 44

a form of group self insurance allowed by any states enabling businesses to insure commercial liability exposures

Question 45

Rule of 4 Rs

Answer 45

the company will pay the lower of the loss or the limit up to the level of insurable interest

Question 46

Speculative Risk

Answer 46

a risk representing a chance to either win or lose

Question 47

Stock Company

Answer 47

an insurance company operated for the benefit of stockholders or shareholders alos known as a non participating company

Question 48

1 d 7c 
2 d 8
3 a 9 b
4 c 10 d
5 b 11 d
6 c 12 b

Answer 48

13 c 14 d 15 d 16 c 17 c 18 d 19 d
20 d 21 b 22b 24 c 25 a 28 b 29d
30 d 32 c 33 a 34 b 35 a 36 a 37 c 38 b 39 a 40 d 41 b 42 c 43 b 44b 46 a 47 d 48 d 50 d

Question 48

Surplus Lines

Answer 48

the type of insurance transaction in which a specially licensed producer is able to procure insurance from an non admitted company