Property and Casualty Policy Provisions and Contract Law

Question 1

What does an ENDORSEMENT do to an insurance contract?

Answer 1

It MODIFIES the policy’s ORIGINAL TERMS.

Question 2

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 2

Additional 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

What is a BINDER?

Answer 4

A TEMPORARY INSURANCE CONTRACT that goes in effect PRIOR to the POLICY ISSUE

Question 5

What does the EXCLUSIONS section of a policy specify?

Answer 5

What PERILS are NOT insured against, or WHAT PERSONS are NOT covered in a policy

Question 6

What is CONSIDERATION on the part of the INSURER?

Answer 6

A PROMISE TO PAY in the EVENT OF A LOSS

Question 7

WHEN is an APPRAISAL NEEDED and HOW can it be REQUESTED?

Answer 7

WHEN:
If an insured and an insurer DISAGREE about the value of a property loss

HOW:
either party can make a WRITTEN DEMAND for an APPRAISAL.

Question 8

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

Answer 8

Declarations

Question 9

In property and casualty policies, what is REQUIRED for an ASSIGNMENT to be VALID?

Answer 9

A WRITTEN CONSENT of the INSURER

Question 10

WHERE is the POLICY PERIOD stated in an insurance policy?

Answer 10

On the DECLARATIONS PAGE

Question 11

Information about CHANGES TO THE POLICY or RETURN OF PREMIUM can be found in what SECTION of a policy?

Answer 11

Conditions

Question 12

What is CONSIDERATION in an insurance contract?

Answer 12

Consideration is SOMETHING OF VALUE that EACH PARTY gives to the other.

Consideration on the part of the INSURER is BINDING.

Question 13

In insurance contracts, WHEN does ACCEPTANCE usually occur?

Answer 13

WHEN the insurer APPROVES a PREPAID APPLICATION

Question 14

In COMMERCIAL PROPERTY POLICIES, who has CONTROL OF THE POLICY, and who can CANCEL it?

Answer 14

First named insured

Question 15

When does PRO RATA LIABILITY apply?

Answer 15

When an insured has MORE THAN ONE POLICY covering a loss

Question 16

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

Answer 16

Arbitration

Question 17

What section personalizes an insurance policy?

Answer 17

Declarations

Question 18

What does the term unilateral contract mean?

Answer 18

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

Question 19

What part of an INSURANCE POLICY contains the insurer’s PROMISE TO PAY A CLAIM?

Answer 19

Insuring agreement

Question 20

What is a WARRANTY in an insurance contract?

Answer 20

An ABSOLUTELY TRUE statement upon which the validity of the policy depends

Question 21

Who is an insured in property and casualty insurance?

Answer 21

Anyone covered under the policy, even if not specifically named

Question 22

Which METHOD of LOSS VALUATION is CONTRARY to the PRINCIPLE OF INDEMNITY?

Answer 22

Replacement cost

Question 23

In insurance contracts, when is the OFFER usually made?

Answer 23

When the INSURANCE APPLICATION is SUBMITTED

Question 24

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 24

Conditions

Question 25

What is the difference between cancellation and nonrenewal?

Answer 25

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 26

What are an insured’s duties after loss?

Answer 26

PROTECT the damaged property from further damage,

PREPARE an inventory of damaged property,

COOPERATE with the insurer in settling a loss,

NOTIFY police in case of theft;

and SUBMIT proof of loss

Question 27

What PROVISION defines how a policy will respond if there is MORE THAN ONE insurance policy written on the same risk?

Answer 27

Other insurance

Question 28

What is proof of loss?

Answer 28

A SWORN STATEMENT from an insured notifying the insurer about a loss

Question 29

What insurance principle does pro rata liability protect?

Answer 29

Indemnity

Question 30

What is additional coverage in an insurance policy?

Answer 30

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