Policy Provisions & Contract Law

Question 1

In property and casualty policies, what is required for an assignment to be valid?

Answer 1

A written consent of the insurer

Question 2

In commercial property policies, who has control of the policy, and who can cancel it?

Answer 2

First named insured

Question 3

What are the four elements of an insurance contract?

Answer 3

Agreement (offer and acceptance)
Consideration
Competent parties
Legal Purpose

Question 4

When is an appraisal needed and how can it be requested?

Answer 4

If an insured and an insurer disagree about the value of a property loss, either party can make a written demand for an appraisal.

Question 5

What does the term unilateral contract mean?

Answer 5

A unilateral contract is a one-sided contract. This means only one party makes an enforceable promise.

Question 6

Information about changes to the policy or return of premium can be found in what section of a policy?

Answer 6

Conditions

Question 7

In insurance contracts, when does acceptance usually occur?

Answer 7

When the insurer approves a prepaid application

Question 8

What is additional coverage in an insurance policy?

Answer 8

A provision that adds more coverage for a specific loss at no additional premium.

Question 9

In insurance contracts, when is the offer usually made?

Answer 9

When the insurance application is submitted

Question 10

What is consideration in an insurance contract?

Answer 10

Consideration is something of value that each party gives to the other. Consideration on the part of the insurer is binding.

Question 11

What does the exclusions section of a policy specify?

Answer 11

What perils are not insured against, or what persons are not covered in a policy.

Question 12

What is a warranty in an insurance contract?

Answer 12

An absolutely true statement upon which the validity of the policy depends.

Question 13

What part of a policy shows the amount of insurance, premium, and policy terms?

Answer 13

Declarations

Question 14

What process is used to settle a casualty claim when the insured and the insurer cannot agree?

Answer 14

Arbitration

Question 15

What is a binder?

Answer 15

A temporary insurance contract that goes in effect prior to the policy issue

Question 16

What provision defines how a policy will respond if there is more than one insurance policy written on the same risk?

Answer 16

Other insurance

Question 17

What is the difference between cancellation and nonrenewal?

Answer 17

Cancellation is the termination of an insurance policy by either party prior to the policy’s expiration date. Nonrenewal is the termination of a policy at its expiration date by not offering a continuation of the existing policy.

Question 18

When does pro rata liability apply?

Answer 18

When an insured has more than one policy covering a loss

Question 19

What are an insured’s duties after loss?

Answer 19

Protect the damaged property from further damage, prepare an inventory of damaged property, cooperate with the insurer in settling loss, notify police in case of theft; and submit proof of loss.

Question 20

What is consideration on the part of the insurer?

Answer 20

A promise to play in the event of a loss

Question 21

What is proof of loss?

Answer 21

A sworn statement from an insured notifying the insurer about a loss

Question 22

Who is an insured in property and casualty insurance?

Answer 22

Anyone covered under the policy, even if not specifically named.

Question 23

Which method of loss valuation is contrary to the principle of indemnity?

Answer 23

Replacement cost

Question 24

Persons who are not named on the declaration page of a policy but who are protected by the policy are known as what type of insured?

Answer 24

Additional insured

Question 25

What part of an insurance policy indicates the general rules or procedures that the insurer and insured agree to follow under the terms of the policy?

Answer 25

Conditions

Question 26

What insurance principle does pro rata liability protect?

Answer 26

Indemnity

Question 27

What section personalizes an insurance policy?

Answer 27

Declarations

Question 28

What part of an insurance policy contains the insurer’s promise to pay a claim?

Answer 28

Insuring agreement

Question 29

What does an endorsement do to an insurance contract?

Answer 29

It modifies the policy’s original terms.

Question 30

Where is the policy period stated in an insurance policy?

Answer 30

On the declaration page