Property and Casualty/ Liability Insurance Basics

Question 1

Accident

Answer 1

an unplanned event resulting in injury or damage, not under the control of the insured

Question 2

Insurable Interest

Answer 2

financial interest in the insured property

Question 3

ISO
(Insurance Services Office)

Answer 3

a national entity that creates standardized property and casualty insurance policy forms

Question 4

Liability

Answer 4

responsibility under the law

Question 5

Named insured

Answer 5

the individual whose name appears on the policy’s declarations

Question 6

Named peril

Answer 6

a cause of loss specifically listed in and covered by the policy

Question 7

Negligence

Answer 7

failure to use the care that a reasonable and prudent person would use under the same circumstances

Question 8

Occurrence

Answer 8

loss caused by continuous exposure to hazardous conditions

Question 9

Open peril

Answer 9

any risk of loss that is not specifically excluded in the policy

Question 10

Proximate cause

Answer 10

an act or event that is the immediate cause of loss (one cause of loss sets off the other causes of loss)

Question 11

Rate

Answer 11

amount of premium charged for the specified amount of coverage (unit of cost)

Question 12

Underwriting

Answer 12

risk selection and classification

Question 13

UNDERWRITING AND RATES
Sources of Insurability Information:

Answer 13

-Application
-Consumer credit reports
-Motor vehicle records
-Physical inspections of property

Question 14

UNDERWRITING AND RATES
Rate Making:

Answer 14

-Judgement rating
-Schedule rating
-Experience rating
-Retrospective rating
-Merit rating

Question 15

PROPERTY INSURANCE CONCEPTS
Loss Valuation Options:
Actual cash value (ACV)

Answer 15

current replacement cost minus depreciation

Question 16

PROPERTY INSURANCE CONCEPTS
Loss Valuation Options:
Replacement

Answer 16

cost to replace damaged property with like kind and quality at current price, no deduction for depreciation

Question 17

PROPERTY INSURANCE CONCEPTS
Loss Valuation Options:
Functional replacement

Answer 17

cost to replace damaged property with less expensive but modernized construction or equipment

Question 18

PROPERTY INSURANCE CONCEPTS
Loss Valuation Options:
Market value

Answer 18

cost a buyer would pay for the property prior to loss, based on the value of location or land

Question 19

PROPERTY INSURANCE CONCEPTS
Loss Valuation Options:
Agreed value

Answer 19

cost agreed upon at the time the insurance is written

Question 20

PROPERTY INSURANCE CONCEPTS
Loss Valuation Options:
Stated amount

Answer 20

the maximum payable amount scheduled in the policy

Question 21

PROPERTY INSURANCE CONCEPTS
Loss Valuation Options:
Salvage value

Answer 21

estimated property recovery cost

Question 22

PROPERTY INSURANCE CONCEPTS
Loss Valuation Options:
Valued policy

Answer 22

payment of the full policy amount regardless of the actual value or depreciation

Question 23

Liability Insurance Concepts
ESTABLISHING NEGLIGENCE:

Answer 23

-legal duty (evidence that the defendant had a legal duty to act or not to act)
-standard of care/ breach of duty (evidence that the defendant breached the
legal duty)
-proximate cause (evidence that negligence has been the proximate cause of
the loss)
-actual loss or damage (evidence of actual injury or damage for a person to
seek recovery)

Question 24

Liability Insurance Concepts
TYPES OF LIABILITY:

Answer 24

-absolute (liability arising from hazardous conditions or activities)
-strict (liability applied to product manufacturing
-vicarious (transfer of the liability from one person to another: e.g. parents are vicariously liable for negligent acts of their children)

Question 25

Liability Insurance Concepts
LIMITS OF LIABILITY:

Answer 25

-per occurrence (limit on the payment for claims from a single accident)
-per person (limit on the payment for claims for a single person)
-aggregate (limit on the payment for claims during a policy period)
-split (limit of liability stated separately for different coverages)
-combined single (single limit of liability applying to the total damages)

Question 26

Liability Insurance Concepts
Types of Liability Damages:

Answer 26

-Compensatory
-Punitive
-Bodily injury (BI)
-Property damage (PD)
-Personal injury (PI)
-Advertising injury

Question 27

KNOW THIS

Answer 27

Property contracts are two-party contracts between the insured and the insurer.

Question 28

KNOW THIS

Answer 28

Casualty contracts are third-party contracts, involving the insured, the insurer, and an unknown third party.

Question 29

KNOW THIS

Answer 29

In property insurance, insurable interest must exist at the time of the loss.

Question 30

KNOW THIS

Answer 30

An insured is anyone covered under the policy, whether named or not.