Property & Casualty Basics

Question 1

What is Insurable Interest?

Answer 1

You must have interest in the item/person you are insuring, such as cars or houses you own. For a person, you need to be related or married.

Memory trick: BB$ (BLOOD, BUSINESS, or MONEY). Friends are NOT considered insurable interest.

Question 2

What is Underwriting?

Answer 2

Underwriting is known as the Risk Selection Process, assessing how much risk a person has to transfer.

Question 3

What are Perils?

Answer 3

Perils are the Causes of Loss, the reasons you file a claim, such as fire, lightning, and wind. Insurance does not cover all possible perils.

Question 4

What is a Named Peril policy?

Answer 4

A policy that only covers perils that are named/listed on the policy.

Question 5

What is an Open Peril policy?

Answer 5

A policy that covers any perils except what’s excluded, listing out what is NOT covered.

Question 6

What defines Vacancy?

Answer 6

A house is vacant when there are NO people and NO stuff. After 61 days of being vacant, a house will begin to lose coverage.

Question 7

What is Unoccupancy?

Answer 7

A house that has stuff but NO people, with the intention of the people returning, like going on vacation.

Question 8

What is Direct Loss?

Answer 8

The direct physical damage to property, which includes Proximate Cause of Loss.

Question 9

What is Indirect Loss?

Answer 9

The losses that happen because of the direct loss; for example, the cost of staying at a hotel after a house burns down.

Question 10

What is Blanket Insurance?

Answer 10

A single policy that covers multiple classes.

Question 11

What is Specific Insurance?

Answer 11

A policy that covers a certain thing or its own amount of coverage.

Question 12

What is Fire Resistive construction?

Answer 12

A house built with materials that can resist burning down for up to 2 hours. It has the best rating.

Question 13

What is Frame construction?

Answer 13

A building made of wood, which is flammable. It has the worst rating.

Question 14

What is Loss Valuation?

Answer 14

A factor in determining the premium.

Question 15

What is Replacement value?

Answer 15

The brand-new price to replace with a similar or same kind or quality at today’s prices.

Question 16

What is Actual Cash Value?

Answer 16

The used value to replace things, calculated by knowing the Replacement value and subtracting wear and tear (depreciation).

Question 17

What is Market Value?

Answer 17

What a willing buyer would pay a willing seller.

Question 18

What is Functional Replacement?

Answer 18

The modern, less expensive price to make repairs, like using drywall instead of plaster.

Question 19

What is Agreed value?

Answer 19

A policy that sets the replacement price of an item based on a fair valuation of the item.

Question 20

What is Stated value?

Answer 20

A policy that sets a maximum limit that the insurer will pay up to if the item suffers a covered peril.

Question 21

What is Property Damage?

Answer 21

Direct damages to property.

Question 22

What is Bodily Injury?

Answer 22

Direct damage to a person’s body.

Question 23

What are $pecial Damages?

Answer 23

Medical bills and loss of wages after an accident.

Question 24

What are General Damages?

Answer 24

Pain and suffering, mental anguish; very subjective.

Question 25

What are Punitive damages?

Answer 25

Damages awarded for punishment.

Question 26

What is Absolute Liability?

Answer 26

Liability for obviously dangerous activities, such as swimming pools and pet tigers.

Question 27

What is Strict Liability?

Answer 27

Liability strictly related to products.

Question 28

What is Vicarious Liability?

Answer 28

The parent is responsible for the acts of the child, and the employer is responsible for the acts of the employee.

Question 29

What are Declarations in a policy?

Answer 29

The first page of the policy, summarizing who and what is covered, by which company, and for what amount.

Question 30

What do Definitions in a policy explain?

Answer 30

They explain certain meanings of words used in the policy.

Question 31

What is the Insuring Agreement/Clause?

Answer 31

Lists the perils insured against and contains the promise to pay and the parties of the contract.

Question 32

What is Additional/Supplementary Coverage?

Answer 32

Built-in extra coverage to all policies at no additional cost.

Question 33

What are Conditions in a policy?

Answer 33

Rules, duties, obligations, and ways of behaving for both the insured and insurer.

Question 34

What are Exclusions in a policy?

Answer 34

Lists what is NOT covered.

Question 35

What are Endorsements?

Answer 35

Written changes made to amend the policy; added coverage via an endorsement raises the premium.

Question 36

What is a Certificate of Insurance?

Answer 36

A document that states the insured has coverage.

Question 37

Who is considered Insured?

Answer 37

Anyone covered by the policy.

Question 38

What is the First Named Insured?

Answer 38

In a commercial policy, the designated person who manages the policy for the business.

Question 39

Who is the Named Insured?

Answer 39

The person who bought the policy and is listed on the Declaration Page.

Question 40

What is an Additional Insured?

Answer 40

A mortgage/lien holder added via an endorsement regarding a specific interest.

Question 41

What is the Policy Period?

Answer 41

States how long a policy covers an insured.

Question 42

What is the Policy Territory?

Answer 42

States where the coverage is active (e.g., US, Canada, US territories).

Question 43

What are Policy Limits?

Answer 43

The maximum amount of money the insured can collect under the policy.

Question 44

What are Limits of Liability?

Answer 44

The maximum amount of money the insurer is liable to pay.

Question 45

What is Cancellation?

Answer 45

Terminating an in-force policy.

Question 46

What is Nonrenewal?

Answer 46

Termination of a policy at expiration.

Question 47

What are Deductibles?

Answer 47

The amount of money the insured pays first before the insurer pays.

Question 48

What is Coinsurance?

Answer 48

A rule that states an insured needs to carry at least 80% of the replacement cost of the home to have the full claim covered.

Question 49

What is Other Insurance?

Answer 49

A provision in the policy explaining that if there is more than one policy covering a loss, they will all need to pay a fair share.

Question 50

What is Aggregate Limit?

Answer 50

The maximum available money on the policy for all claims.

Question 51

What is Per Occurrence?

Answer 51

The sublimit of liability that sets a maximum for all claims arising from one accident/occurrence.

Question 52

What is Per Person?

Answer 52

The maximum available limit in an accident for one person.

Question 53

What is Split Limit?

Answer 53

Separately stated limits of liability - Per person/per accident.

Question 54

What is Combined Single Limit?

Answer 54

A single dollar limit available for all claims from one accident without breaking it up by person, bodily, or property.

Question 55

What is Theft?

Answer 55

The act of stealing.

Question 56

What is Burglary?

Answer 56

Breaking and entering, forced entry causing damage.

Question 57

What is Robbery?

Answer 57

Stealing while a person is a witness/victim.