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Property And Casualty > Property And Casualty Test > Flashcards

Property And Casualty Test Flashcards

1
Q

Insurance

A

Transfer of risk from a person or business to an insurer

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2
Q

Risk

A

Uncertainty/possibility of a loss

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3
Q

Types of Risk

A

Speculative risk

Pure risk

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4
Q

Speculative risk

A

Chance of loss or gain ; not insurable

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5
Q

Pure risk

A

Chance of loss only; insurance companies will insure

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6
Q

Exdposure

A

Possibility that a loss will occur

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7
Q

Peril

A

Cause of loss

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8
Q

Direct

A

Physical loss

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9
Q

Indirect

A

Consequence of the direct loss

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10
Q

Hazard

A

Increases the chance of loss

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11
Q

Physical hazard

A

The hazard can be seen

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12
Q

Moral hazard

A

Dishonesty that intentionally causing a loss is acceptable

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13
Q

Morale hazard

A

Carelessness

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14
Q

STARR

A 
Sharing
Transfer
Avoidance
Retention
Reduction
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15
Q

Contract

A

An agreement between the insured and the insurer

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16
Q

1st party

A

Insured

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17
Q

2nd

A

Insurer

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18
Q

Law of large numbers

A

The larger the group, the more accurately future losses can be predicted

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19
Q

CANHAM

A 
Calculable
Affordable
Non-catastrophic
Homogeneous
Accidental
Measurable
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20
Q

Adverse selection

A

Risks that have a greater than average chance of loss

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21
Q

Reinsurance

A

An insurance company paying another insurance company to take some of the company’s risk

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22
Q

Facultative

A

The reinsurer evaluates each risk before allowing the transfer

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23
Q

Treaty

A

The reinsurer accepts the transfer according to an agreement called a treaty

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24
Q

Stock insurer

A 
Owned by stockholders
Dividend is not guaranteed
Dividend is paid to stockholder
Dividend is taxable to stockholders
Issues non-participating policies
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25
Q

Mutual insurer

A 
Owned by the policyholders
Dividend is not guaranteed
Dividend is paid to policyholder
Dividend is not taxable; considered refund of premium 
Issues participating policies
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26
Q

Fraternal insurer

A

Provides insurance and other benefits

Must be a member of the society to get the benefits

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27
Q

Reciprocal insurer

A

Unincorporated
Members are required to pay an assessed amount if a loss to any member of the group occurs
Managed by an attorney in fact

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28
Q

Lloyd’s association

A

insurance provided by individual underwriters not companies

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29
Q

Risk retention group

A

Liability insurance company created for policyholders from the same industry

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30
Q

Risk purchasing group

A

A group of businesses from the same industry joining together to buy liability insurance form an insurance company

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31
Q

Self insurance

A

A business that pays its own claims
Reserves funds to cover losses
Retains risk rather than transfers

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32
Q

Federal government provides residual market insurance

A 
Insurance form the state or federal government 
War risk insurance
Nuclear energy insurance 
Food insurance
Federal crop insurance
Unemployment insurance
Workers compensation
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33
Q

Insurance company location

A

Domestic
Foreign
Alien

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34
Q

Domestic

A

The state where a company is incorporated

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35
Q

Foreign

A

Company is incorporated in another state or US territory

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36
Q

Alien

A

Company is incorporated in another country

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37
Q

Certificate of authority

A

State license for an insurance company

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38
Q

Admitted or authority

A

State requires the insurance company to have a certificate of authority

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39
Q

No admitted or unauthorized

A

Insurance company not required to have a certificate of authority from the state

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40
Q

Surplus lines

A

Insurance sold by unauthorized/no admitted insurers if on the states approved list of surplus insurers
Can only be sold to certain high risk insured
Cannot be sold solely for a cheaper rate than licensed/admitted insurers

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41
Q

Financial strength rating

A

A report card of the company

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42
Q

Methods of marketing

A

Independent
Exclusive or captive
General agents or managing general agents
Direct-writing companies

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43
Q

Direct reponse

A

No agent/producer involved

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44
Q

Agency

A

The insurance agent acts on behalf of the principal

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45
Q

Agent authority

A

Express
Implied
Apparent

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46
Q

Express

A

What the agent’s written contract with the company says

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47
Q

Implied

A

Not written; activities an agent normally does to sell insurance

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48
Q

Apparent

A

Activities an agent does that a reasonable person would assume as authority, based on the agent’s actions and statements

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49
Q

Fiduciary trust

A

Promptly sends premiums to insurer
Has knowledge of products
complex with laws and regulations
Does not commingle funds

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50
Q

CLOAC

A 
Consideration
Legal purpose
Offer
Acceptance
Competent parties
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51
Q

Consideration

A

Giving something of value

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52
Q

Consideration

A

Premium and statements made on application

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53
Q

Legal purpose

A

The risk transfer doesn’t violate the law office, and acceptance

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54
Q

Offer and acceptance

A

Offer

  • insured submits application and first month premium to insurer
  • insurer accepts or insurer declines the risk

Counteroffer

  • agrees to issue policy but with higher premium or restrictions/exclusions
  • insured either accepts the conditions or withdraws their application
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55
Q

Competent parties

A

Legal age
Mentally sane
Sober

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56
Q

Adhesion

A

Policy written by the insurance company
Contract is like glue cannot be changed
Insured has no input
If ambiguous, court will take the side of the insured

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57
Q

Aleatory

A

Not equal value

Small premium for a large amount of coverage

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58
Q

Utmost good faith

A

The insured and insurance company have a right to expect honestly from each other

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59
Q

Unilateral

A

Only one legally enforceable promise made

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60
Q

Personal

A

Contract between the insurance company and the insured; cannot be changed to someone else

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61
Q

Conditional

A

Insured must pay the premium for coverage and file a claim if a loss occurs

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62
Q

Indemnity

A

Makes whole

  • restores the insured to a pre loss state
  • pays for the loss with no gain
  • no more! No less!
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63
Q

Representation

A

Believed to be true

- statements on application are considered representations

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64
Q

Misrepresentation

A

Information given that is not true but would not affect the insurance company’s decision

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65
Q

Material misrepresentation

A

Information given that is not true and DOES affect the insurer’s decision

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66
Q

Warranty

A

Always made by the insurance company
- breach of warranty may void the contract
May be made by the insured
- Breach of warranty may void the contract

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67
Q

Concealment

A

Failure to disclose, hiding information

  • if intentional and the information is material, coverage could be voided
  • if NOT intentional, coverage NOT be voided
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68
Q

Fraud

A

Intentional act to cheat another

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69
Q

Waiver

A

Voluntarily giving up a right

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70
Q

Estoppel

A

Once a waiver has been created, it can’t be reinserted

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71
Q

Property insurance

A

Covers buildings and personal belongings
Loss caused by covered peril
First party losses - insurer pays insured

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72
Q

Casualty insurance

A

Casualty = liability
Always pay the other guy, never me
Third party losses

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73
Q

DICEE

A 
Declarations 
Insuring agreements
Conditions
Endorsement
Exclusions
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74
Q

Declarations

A

Who, what, when, where, and how much

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75
Q

Insuring agreements

A

Promise to pay and perils covered

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76
Q

Conditions

A

Rules for the policy

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77
Q

Endorsement

A

Changes to original policy

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78
Q

Exclusions

A

Not covered

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79
Q

Supplementary coverage

A
  • payment for additional expenses not normally covered

- may have superheated limit of insurance

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80
Q

Named Insureds

A

In the declarations

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81
Q

First-named insured

A

First in the declarations

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82
Q

Insureds

A

By definition

83
Q

Additional insured

A

Added by endorsement

84
Q

Policy period

A

When the policy begins and ends

85
Q

Policy territory

A

Where a loss must occur

86
Q

Cancellations

A

Occurs before the policy expiration date

  • company cancellation requires advance notice
    • full refund of unearned premiums, pro rats
  • named insured cancellation - no advance notice
    • partial refund of unearned premium, short rate
87
Q

Nonrenewal

A

Occurs at the expiration date

  • company must give advance notice
  • no advance notice required by the insured
88
Q

Deductible

A

Amount of the loss paid by the insured

The higher the deductible, the lower the premium

89
Q

Other insurance provision

A

Multiple policies insuring the same loss

90
Q

Primary/excess

A

Primary policy pays first; excess pays what’s left

91
Q

Equal shares

A

Each policy pays the same up to the smallest policy’s limit

92
Q

Pro rata

A

Each policy pays its share according to the total insurance

93
Q

Named insured duties after loss

A 
Prompt notice to insurer
Protect property from further damage
Complete proof of loss
Make property available for inspection
Submit to examination under oath if required 
Cooperate with insurer
94
Q

Assignment

A

Policy cannot be transferred without written consent from the insurer

95
Q

Abandonment

A

Insured cannot abandon property that can be repaired and expect to be paid as if the loss was total

96
Q

Salvage

A

Insurer has the right of salvage, not the insured

Salvaged property can lower claim cost for the insurance company

97
Q

Liberalization

A

Extended coverage to insured
No additional premium changed
No action required by insured

98
Q

Subrogation

A

Insurer has the right to sue an at fault party for damages the insurer had to pay the insured
- common when at fault party does not have insurance

99
Q

Insurable interest

A

Financial risk of loss

Must be present at time of loss

100
Q

Underwriting

A

Process of evaluating a risk
Field underwriting is performed by the agent or producer
Application is the primary source of information
Company underwriters decide if a policy is to be issued

101
Q

Application

A

Primary source of underwriting information

102
Q

Binder

A

Temporary insurance
Usually given by the agents
Can be canceled by the company
Does not guarantee a policy will be issued
Automatically ends if a policy is issued by the underwriter

103
Q

Loss ratio

A

Compares company’s operations year over year

104
Q

Expense ratio

A

Cost of doing business

105
Q

Combined ratio

A

100% is break even point
Greater than 100% underwriting loss
Less than 100% underwriting gain

106
Q

Judgment

A

No set rates; based upon underwriters experience

107
Q

Manual

A

Set rates for specific risk classes

108
Q

Experience rating

A

Based on insured claim history. Increases or decreases premium.
- usually a three-year period

109
Q

Loss costs

A

Pure claims data

  • no operating expenses included
  • no profits included
110
Q

Rate components

A

Loss costs
Claims handling costs
Operating expenses
Profit

111
Q

Fair credit reporting act

A

All insurers and producers must comply
Notice to the applicant within three days after report was requested
Maximum penalty - $5,000, 1 year in prison, or both

112
Q

Terrorism risk insurance program reauthorization act of 2015

A

Result of 9/11 attacks on U.S.
Congress enacted in 2002
Limits exposure of insurers in case of another catastrophic event
Triggering event $100 million

113
Q

GRAMM LEACH BLILEY ACT

A

A consumer is anyone about whom information is collected
A customer is someone who has an ongoing relationship with a financial institution
The opportunity to opt out must be offered by financial institutions when an account is established and annually thereafter

114
Q

Fraud and False statements

A

It is illegal to make false statements
If guilty
- fine, up to 10 years in prison, or both
- up to 15 years in prison if false statements jeopardize insurer

115
Q

Types of property

A

Real property

Personal property

116
Q

Real property

A

Buildings

117
Q

Personal property

A

Moveable contents

118
Q

Covered property

A

Specific/scheduled

Blanket

119
Q

Specific/scheduled

A

Detailed list of covered items

120
Q

Blanket

A

All of a certain type of property

  • single limit of coverage
  • no detailed list
121
Q

Limits of insurance

A

Maximum coverage limits

- listed on declarations page

122
Q

Insured perils

A

Named peril

Open perils

123
Q

Named peril

A

Only perils on the list are covered

124
Q

Open perils

A

Covers all perils except those specifically excluded

125
Q

Basic perils

A

Fire, lightning, and internal explosion
Extended coverage
- WCSHAVVER
- vandalism and malicious mischief

126
Q

BIG AFFECT

A 
Burglary damage
Ice, sleet, and snow
Glass breakage
Accidental discharge of water
Freezing objects
Falling objects
Electrical current
Collapse
Tearing Asunder
127
Q

Broad peril exclusions

A

Weight of ice, snow, or falling objects on awnings, fences, patios, swimming pools, docks, and retaining walls
Accidental discharge over water from continuous leaking
Flooding from river or lake
Burglary if property vacant more than 60 consecutive days

128
Q

Special/open peril coverage

A

All risks of direct physical loss, except those specifically excluded
Common exclusions:
- flooding
- Earthquake
- intentional damage caused buy an insured
- losses due to enforcement of building codes
- damage caused by a power interruption occurring off premises
- governmental seizure

129
Q

Types of Loss

A

Direct

Indirect

130
Q

Direct

A

The immediate damage caused by the peril

131
Q

Indirect

A

Loss over time as a result of the direct loss

  • loss of income a business suffers when the building burns
  • cost of rental car because someone ran into your car
  • additional living expenses while the home is being repaired
132
Q

Classes of construction

A 
Class 1 - Frame
Class 2 - Joisted Masonry
Class 3 - Noncombustible
Class 4 - Masonry Noncombustible 
Class 5 - Modified Fire Resistive
Class 6 - Fire resistive
133
Q

Loss valuation

A

How the insurance company determines appropriate amount of loss to be paid

  • deductible reduces any amount after loss has been valued
  • insured to collect lesser of:
    • incurable interest
    • policy limits
    • actual cash value
    • cost to repair
    • replacement cost
134
Q

Actual Cash Value

A

Replacement cost based on today’s cost - not what was originally paid for item
- cost to replace it now!
ACV = replacement - depreciation

135
Q

Replacement cost

A

current replacement cost; no depreciation

- similar kind and quality

136
Q

Functional replacement

A

Replace with modern construction

137
Q

Market value

A

Selling price; seldom used

138
Q

Agreed value

A

Value of loss is determined before the policy is issued

139
Q

Stated amount

A

Insured up to this amount

140
Q

Pair and set

A

Value of the pair or set before the loss minus value of what remains

141
Q

Appraisal

A

Disagreement on the amount of the loss

  • company and insured pay their own appraisers
  • appraisers get an umpire if they can’t agree
  • agreement of any two of the three determines the amount
142
Q

Arbitration

A

Disagreement about other areas of the loss

143
Q

Coinsurance

A

The con insurance requirement is normally 80% of the replacement cost. If the minimum required amount is carried, then claims are paid in full up to policy limits. If the minimum is not carried partial losses are not paid in full.

  • step 1 determine insurance required.
  • step 2 do the carry at least this amount
  • step 3 if no, apply the following formula
144
Q

Vacant

A

Not property or people present at time of loss

- may affect covered perils and claim value

145
Q

Unoccupied

A

No people present at time of loss

- does not affect covered perils and claim value

146
Q

Standard mortgage or loss payable clause

A

Allows lender to pay the premium
Lender entitled to receive notice if policy is to canceled
Lender can file a claim
Lender protected from negligent or dishonest acts of the insured
Lender only entitled to receive payment up to the amount of the debt

147
Q

No benefit to Bailee

A

Bailee is a person or business that has temporary control of the insured’s property
Bailee Connacht Benefit from the property owner’s policy

148
Q

Propert

A

Covers personal belongings and buildings

149
Q

Casualty

A

Pays the “other guy”

150
Q

Third party losses

A

The first party is the insured
The second party is the insurance company legally representing or defending the insured
The third party is the “other guys”

151
Q

Tort

A

Civil wrong that causes someone else to suffer loss

152
Q

Negligence

A

Failure to act or not act reasonably

153
Q

Elements of negligence

A

Owe a duty
Breach the duty be the proximate cause damages
- a drunk driver is guilty of a crime but is not guilty of negligence unless he causes harm to another.

154
Q

Defenses against a claim of negligence by another

A 
Contributory 
Comparative 
Assumption of risk
Intervening cause 
Statute of limitations
Last clear chance
155
Q

Absolute/strict

A

Liability without negligence

156
Q

Vicarious Liability

A

Liability for the actions of another

157
Q

Compensatory

A

Special & General

158
Q

Limited tort

A

Provable monetary losses

159
Q

Full tort

A

No monetary losses

160
Q

Pint it every

A

Gross negligence

161
Q

Bodily injury

A

Injury to the body

- medical bills, lost wages, pain and suffering, and death

162
Q

Property damage

A

Injury to property

- cars, buildings, etc.

163
Q

Personal injury

A

Hurt feelings of a person or business

164
Q

Limits of liability

A 
Split
 - bodily injury 
 - property damage
Combined single 
Per person
Aggregate
165
Q

Restoration of limits/non-reduction of limits

A

Payment of a claim restores the occurrence limit for the next claim.
Payment of an occurrence reduces the aggregate limit
Aggregate limit is restored upon renewal

166
Q

Duties after a loss

A

Notify company promptly
Forward notices
Assist the company
Don’t assume liability

167
Q

Exclusions

A 
Damage to property of an insured
Bodily injury to an insured 
Bodily injury to an employee
Nuclear energy liability 
Intentional damage caused by an insured
168
Q

Dwelling

A

Unique from homeowners policy
Not required to be owner occupied
Covers risks like rental property, older homes, and hunting cabins

169
Q

Dwelling policy eligibility

A 
1 to 4 unit dwelling with boarders
Vacation dwellings
Rental dwellings
Dwellings under construction 
Mobile homes
Farm dwellings NOT eligible
170
Q

Dwelling Property Coverages

A 
Dwelling
Other structures
Personal property on premises; off premise covered at 10%
Fair rental value
Additional living expense
171
Q

Other coverages

A 
All basic other coverages
Trees, shrubs, and plants
 - maximum of $500 each
 - total - 5% of dwelling coverage
Collapse-cause by a covered peril
Glass
Ordinance or law
Removal-30 days
172
Q

Claim values

A

Personal property - ACV
Dwelling replacement
- required to carry 80%

173
Q

DP-1 Basic

A

Fire, lightning, and internal explosion
Only insures fire, lightning, and internal explosion automatically
EC-WCSHAVVER
V&MM - if has EC

174
Q

DP-2: Broad

A 
All of DP-1 available perils plus:
Burglar damage
Ice and snow weight
Glass breakage
Accidental discharge or overflow of water
Falling objects
Freezing pipes
Electrical damage 
Collapse 
Tearing asunder
175
Q

DP-2 Broad Exclusions

A

Weight of ice, snow, or falling objects on awnings, fences, patios, swimming pools, docks, and retaining walls
Accidental discharge of water from continuous leaking
Flood
Burglary if property vacant>60 consecutive days

176
Q

DP-3 Special

A 
Open perils
Broad perils
Excluded perils
 - intentional damage
 - theft
 - freezing of plumbing
 - wear and tear
 - foundations
177
Q

General exclusions in all dwelling policies

A 
Ordinance or law
Earthquake 
Flood
War 
Nuclear
Intentional losses 
Government seizure
178
Q

Loss Valuations

A 
Loss settlement
Our option
Deductible 
Pair or set 
Loss payment
Other insurance
Recovered property
179
Q

Personal liability supplements

A 
Coverage 
At fault 
Bodily injury to others
Property damage to others
On and off premises
180
Q

Coverage M

A

Medical payments
Medical and bills of others
No fault 3 years
On and off premises

181
Q

Additional Coverages - BAILED

A 
Bonds
Aid
Interest
Loss of earnings
Expenses
Defense
182
Q

Residential theft coverage

A

Not automatically included in dwelling policy
On and off premise
Broad - owner occupied
Limited - not owner occupied

183
Q

Exclusions

A 
Animals 
Credit cards
Property in mail 
Aircraft
Other insurance property 
Tenant’s property
Business property 
Property in custody of others 
Moron vehicles
184
Q

Special limits

A

Apply to certain classes of property

Limit is total of each category

185
Q

Endorsements

A

Automatic increase in insurance - automatically increases dwelling and other structure coverage at renewal
Dwelling under construction - named insured must be intended occupant
Mobile home - permanent foundation

186
Q

Homeowners policy

A

Package policy
Multi line
Includes both property and liability

187
Q

Homeowners eligibility

A 
Owner occupied
No more than 4 family dwelling
Primary purpose as a residence 
Dwellings under construction are eligible 
Mobile home
Farm dwellings NOT eligible
188
Q

Insureds

A

Named insured including a resident spouse
Resident relatives
Anyone under the age of 21 and in the care of an insured
Full-time student under age 24, relative, and prior resident
Representative of the name insured in the event of death

189
Q

Cancellation

A

Cancellation by the insurance company

  • during the forest 60 days for any reason minimum 10 days’ notice
  • other reasons after 60 days minimum 30 days’ notice
    • material misrepresentation
    • substantial change in the risk
  • nonpayment of premium 10 days’ advance notice
190
Q

Non-renewal by Insurer

A

Non-renewal by insurance company - 30 days’ advance notice

191
Q

Standard mortgagee clause

A

Can pay the premium
File a claim up to insurable interest
Receive advance notice of cancellation
Dishonesty of insured doesn’t prevent mortgagee from collecting

192
Q

Homeowner Policies

A 
HO-2 Broad Form: Owner Occupant
HO-3 Special Form: owner occupant
HO-4 Tenants or Renters
HO-5 Comprehensive Form: owner Occupant 
HO-6 Condominium Owners
HO-8 Modified Form
193
Q

Property Coverage - Dwelling

A

Including property attached
Materials on the premises used in construction
No coverage for a renter

194
Q

Property Coverages - other structures - separated by a clear space

A

Not attached to dwelling

Not used for business purposes

195
Q

Property Coverages - Personal property

A 
Not attached to the dwelling
Anywhere in the world 
Guest’s property
Excluded
 - pets 
 - motorized vehicles 
 - property of renters or boarders
196
Q

Loss of use

A

Indirect losses due to loss of use of home caused by a covered peril

  • additional living expenses
  • rental income
197
Q

Additional Coverages in All Homeowners - Debris removal

A
  • expenses paid if caused by covered peril
  • removal of fallen trees covered if they damaged a covered structure or blocking roadway
  • maximum of $1,000 for tree debris removal per occurrence and $500 per tree
198
Q

Additional Coverages in All Homeowners - reasonable repairs

A
  • pays cost for repairs necessary to protect from additional loss
199
Q

Additional Coverages in All Homeowners - trees, shrubs and other plants

A

Maximum of $500 per tree and $1,000 for all fallen shrubs and plants for debris removal
Maximum of 5% of coverage in addition to limit

200
Q

Additional Coverages in All Homeowners - Fire Department service charge

A

Maximum of $500

No deductible

201
Q

Additional Coverages in All Homeowners - Property removed

A

Protect from a sure and certain loss

ALL perils for 30 days

202
Q

Additional Coverages in All Homeowners - credit cards, forgery, and counterfeit money

A

Maximum of $500

No deductible

203
Q

Additional Coverages in All Homeowners

A

Broken Glass covered

Property And Casualty (1 decks)

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