Property & Casualty

Question 1

Abandonment condition

Answer 1

A condition often contained in property insurance politics that states that the insured cannot abandon damaged property to the insurer and demand to be reimbursed for its full value.

Question 2

Absolute liability

Answer 2

type of liability imposed by law on those participating in certain activities that are considered especially hazardous; a person involved in such operations may be held liable for the damages of another even though the individual was not negligent.

Question 3

Accident

Answer 3

a law that occurs at a specific time and place

Question 4

Accounts receivable insurance

Answer 4

Filed commercial inland marine form that insures against loss the insured suffers because of an inability to collect from customers when accounts receivable records are damaged or destroyed.

Question 5

Actual cash value (ACV)

Answer 5

The cost to replace an item of property at the time of loss, less an allowance for depreciation; often used to determine the amount of reimbursement for a loss

Question 6

Additional coverages

Answer 6

Supplemental insurance coverages that apply only in certain circumstance, have reduced or separate limits of liability, or require the insured to meet certain requirements before they are applicable.

Question 7

Additional insured

Answer 7

an individual or company, in addition to the insured, who is listed in the declarations; and example is a mortgage company that has an insurable interest in the property insured.

Question 8

adhesion contract

Answer 8

a contract where one party has more power than the other party in drafting the contract

Question 9

adverse selection

Answer 9

the tendency of insureds with a greater than average chance of loss to purchase insurance

Question 10

agency

Answer 10

principles governing the authority of any agent that represents a principal

Question 11

agent

Answer 11

an individual or organization that legally represents another

Question 12

aggregate limit

Answer 12

type of policy limit found in liability policies that limit coverage to a specified total amount for all losses occurring within the policy period

Question 13

agreed value condition

Answer 13

condition found in some property insurance policies that stipulates a certain value that will meet the coinsurance requirement

Question 14

aleatory contract

Answer 14

a contract that is contingent on an uncertain event (loss)

Question 15

alien company

Answer 15

an insurance company incorporated in a country other than the U.S. that is doing business in the U.S.

Question 16

A.M. Best Company

Answer 16

organization that rates the financial stability of insurance companies doing business in the United states

Question 17

annual transit policy

Answer 17

nonfiled commercial inland marine transportation form that insures a property owner’s incoming or outgoing shipments of goods during a year

Question 18

apparent authority

Answer 18

legal doctrine that states that an agent has whatever authority a reasonable person would assume she/he has

Question 19

application

Answer 19

questionnaire filled out by an agent and the prospect who is seeking insurance; form contains info used to underwrite and rate the policy

Question 20

appraisal condition

Answer 20

policy condition that outlines a procedure for when the insured and insurer cannot agree on the amount of a loss - the insured and the insured each select an appraiser; the two appraisers select and umpire; if the appraisers cannot agree on the amount of loss, the umpire is consulted; the amount agreed to by any two of the three parties is the amount paid for the loss

Question 21

appurtenant structures

Answer 21

buildings of lesser value that are on the same premises as the main building insured under a property policy; they’re usually covered by the policy

Question 22

arbitration condition

Answer 22

policy condition that is similar to the appraisal condition; may be used to resolve other areas of disagreement besides those regarding the value of loss

Question 23

assignment condition

Answer 23

condition in insurance policies that specifies that the policy cannot be transferred to another unless the company consents to the transfer in writing

Question 24

assumption of risk

Answer 24

defense against liability based on the common law principle that a person who knowingly exposes himself to danger or injury assumes the risk of loss and cannot hold another person responsible for the loss

Question 25

authorized insurer

Answer 25

company that meets a state insurance departments standards and is authorized to do business in that state

Question 26

aviation hull insurance

Answer 26

insurance that provides coverage for physical damage to aircraft

Question 27

aviation liability insurance

Answer 27

insurance provided for owners of aircraft that covers liability for bodily injury, injury to passengers, and property damage.

Question 28

bailee

Answer 28

a person or organization that has temporary possession of someone else's personal property

Question 29

bailment

Answer 29

delivery of property by the owner to someone else to be held for some special purpose and then returned to the owner.

Question 30

barratry

Answer 30

illegal acts committed willfully by a ship's master/crew for the purpose of damaging the ship or cargo - includes hijacking, abandonment and embezzlement.

Question 31

bill of lading

Answer 31

standardized contract of carriage issued by common carriers to the business for which it is shipping goods

Question 32

binder

Answer 32

oral/written stmt that provides immediate insurance protection for a specified period; designed to provide temporary coverage until a policy is issued/denied

Question 33

blanket insurance

Answer 33

type of insurance policy that covers more than one item of property at a single location or one or more items of property at multiple locations

Question 34

blanket position bond

Answer 34

fidelity bond that covers losses arising from the dishonesty of one or more employees acting separately or in collusion; provides a single limit of liability applicable to each employee involved in a loss

Question 35

bodily injury

Answer 35

defined in most policies to include injury, sickness, disease and death resulting from any of these at any time

Question 36

boiler + machinery insurance

Answer 36

insurance that covers the insured for losses arising out of the use of steam boilers or other machinery or equipment; may be included in the commercial package policy

Question 37

broad theft coverage endorsement

Answer 37

dwelling policy endorsement that covers theft, attempted theft and vandalism, and malicious mischief resulting from theft;property is covered while it is on or off the premises

Question 38

broker

Answer 38

individual who represents the prospect, instead of the insurance company, in the insurance transaction

Question 39

builders risk coverage form

Answer 39

one of the commercial property coverage forms; covers commercial, residential, or farm buildings that are under construction

Question 40

builders risk reporting form

Answer 40

optional form used with the commercial property builders risk coverage form; allows insured to purchase a smaller amount of insurance that gradually increases as the value of the building under construction increases.

Question 41

building and personal property coverage form

Answer 41

commercial property coverage form that covers buildings, the insured's business personal property, and the personal property of others located at the business premises.

Question 42

burglary

Answer 42

as defined in crime insurance forms, the taking of property by a person unlawfully entering or leaving the premises as evidenced by visible signs of forced entry or exit

Question 43

business auto coverage form

Answer 43

one of the commercial auto coverage forms; covers a business's owned, non-owned, and hired autos against liability and physical damage losses

Question 44

business auto physical damage coverage form

Answer 44

covers a business's owned or hired business autos for physical damage losses

Question 45

business income coverage form

Answer 45

pays for loss of income that the insured sustains due to a direct physical loss from a covered peril that forces the insured to suspend operations until the property can be repaired, rebuilt, or replaced with reasonable speed; available with or without extra expense coverage.

Question 46

business income from dependent properties

Answer 46

broad form commercial property coverage form designed for insureds whose business income is dependent on the ongoing operations of other businesses they do not own

Question 47

business liability

Answer 47

liability that arises out of the conduct of a business

Question 48

business pursuits endorsement

Answer 48

homeowners policy endorsement that provides liability coverage for a business conducted away from the residence premises

Question 49

business owners policy (BOP)

Answer 49

package policy designed to provide property and liability coverage for small businesses; eligibility requirements are more strict than the CPP's

Question 50

Risk:

Answer 50

the possibility that a loss will occur

Question 51

Insurance

Answer 51

a contract that transfers the risk of financial loss from an individual or business to an insurance company

Question 52

Exposure:

Answer 52

the potential for accidents and other losses.

Question 53

Peril

Answer 53

the cause of loss

Question 54

Direct Loss

Answer 54

physical loss to property with no intervening cause

Question 55

Indirect Loss

Answer 55

a consequential loss as the result from a direct loss.

Question 56

Physical Hazard

Answer 56

physically identifiable factors that increase the chance of loss

Question 57

Moral Hazards

Answer 57

hazard created by an individual who would be willing to create a loss situation on purpose just to collect from the insurance company

Question 58

Morale Hazard

Answer 58

Hazard created by an individual's tendency to contribute to a loss through his own irresponsible actions or carelessness

Question 59

Methods of handling risk:

Answer 59

Sharing Transfer Avoidance Retention Reduction

Question 60

Law of Large Numbers:

Answer 60

principle that states that the more examples used to develop any statistic, the more reliable the statistic will be.

Question 61

Adverse Selection

Answer 61

the tendency of insurers with a greater-than-average chance of loss to purchase insurance

Question 62

Reinsurance

Answer 62

acceptance by an insurer, called a reinsurer, of all or part of the risk of loss of another insurer

Question 63

Certificate of Authority

Answer 63

a license to sell insurance

Question 64

Principal

Answer 64

in bonds, the party who promises to do or not do a specific thing; in agency law, the person/company being represented

Question 65

Commingling

Answer 65

illegal act of mixing personal funds with the insured's or insurer's funds