Property & Casualty Insurance Flashcards
1
Q
Negligence is defined as
A. The intentional act that results in bodily injury or property damage to another person.
B. The failure to do what a reasonable prudent person would do under given circumstances.
C. An unbroken chain of events that results in bodily injury or property damage to another person.
D. Conduct that is so hazardous that the individual engaging in it will be held fully responsible for any resulting injury or damage.
A
B
2
Q
What type of insurance policy insures against all risks of loss that are not specifically excluded by the policy? A. Binder policy B. Named peril policy C. Open peril policy D. Specified peril policy
A
C
3
Q
Compared with other drivers in his age group, a driver has had more minor accidents and traffic violation. Which of the following rating types would most accurately reflect the driver’s true insurance risk? A. Experience B. Class C. Special D. Schedule
A
A
4
Q
All are true about the South Carolina Property and Casualty Insurance Guaranty Association EXCEPT
A. It will pay the full amount of any covered workers compensation claim
B. It pays claims for members’ insurers who have become insolvent
C. Its obligation is limited to claims between $250 and $300,000 for P&C claims
D. It does not cover workers compensation claims
A
D
5
Q
If the insurer renews a homeowners policy during the hurricane season, how many days’ notice must the insurer provide to the policyowner? A. 10 days B. 30 days C. 60 days D. 90 days
A
D
6
Q
The policy provision found in property insurance policies that prevents the insured from collecting twice for the same loss is called A. Consent to settle loss B. Right of salvage C. Appraisal D. Subrogation
A
D
7
Q
Which of the following does the term proximate cause refer to?
A. Reason for filing a lawsuit
B. Negligence that leads to an injury
C. Injury that leads to monetary compensation
D. Duty of the defendant to act
A
B
8
Q
A property insurance policy that is not subject to any coinsurance requirements but has a set amount of insurance scheduled for the property would use what loss valuation method? A. Actual cash value B. Replacement cost C. Reproduction cost D. Stated amount
A
D
9
Q
A person who is not named as an insured on the declarations page of a policy but is protected by the policy is known as the A. First named insured B. Additional insured C. Policyowner D. Named insured
A
B
10
Q
All of the following are found in the declarations section of a policy EXCEPT the A. Policy premiums B. Name of the insured C. Limits of insurance D. Exclusions
A
D
11
Q
In the event of an insurer’s insolvency, the South Carolina Life and Health Guaranty Association will
A. Conduct the business of the insolvent insurer from the Director’s office in the Department of Insurance
B. Reinsure policies of the insolvent insurer through other companies
C. Refuse to pay outstanding claims against the insolvent insurer
D. Fine the producers of the insolvent insurer
A
B
12
Q
Which of the following would modify the original insurance contract by either adding or removing coverage? A. Additional coverage form B. Conditions C. Flexible policy D. Endorsements
A
D
13
Q
The section of an insurance policy that details what perils are not insured against and what persons are not insured is known as the A. Declarations B. Endorsements C. Conditions D. Exclusions
A
D
14
Q
All are true of the South Carolina Valued Policy law EXCEPT
A. It applies only to the peril of fire
B. It applies to both real and personal property
C. It protects the insured after loss from being subjected to the agreement that the property was overinsured, resulting in a payment lower than the face amount of the property
D. It helps prevent insurers from writing policies with amounts of coverage significantly in excess of actual value
A
B
15
Q
What are the two types of compensatory damages? A. Pure and speculative B. Tort and general C. Normal and punitive D. Special and general
A
D
16
Q
When an insurance policy does not offer a continuation or replacement at its expiration date, it is considered a A. Suspension B. Cessation C. Cancellation D. Nonrenewal
A
D
17
Q
Which of these is defined as the maximum limit of coverage available under a liability policy during a policy year, regardless of the number of claims that may be made or the number of accidents that may occur? A. Aggregate limit of liability B. Combined single limit of liability C. Per occurrence limit of liability D. Split limit of liability
A
A
18
Q
The SC valued policy law is effective for which loss?
A. When the appraisers cannot agree
B. Total loss by fire
C. Partial loss if the company does not appeal within 30 days
D. When the Director so rules
A
B
19
Q
Payment for medical expenses, loss of wages, funeral expenses, or the cost to repair or replace damaged property are known as what type of compensatory damages? A. Special B. Tort C. Normal D. General
A
A
20
Q
Claim related expenses, reasonable expenses incurred by an insured to protect damaged property from further loss, or defense expenses are covered by which part of a policy? A. Insuring Agreement B. Additional Coverage C. Exclusions D. Declarations
A
B
21
Q
Which of the following policy provisions would automatically broaden coverage under a policy without requiring additional premium? A. Assignment B. Liberalization C. Other insurance D. Subrogation
A
B
22
Q
All of the following statements concerning coinsurance are true EXCEPT
A. The coinsurance formula will also be applied to total losses
B. It is used to help adequacy and equity in rates
C. The insured agrees to maintain insurance equal to some specified percentage of the value of the property.
D. If the insurance carried is less than required, the insurance may not cover the whole loss.
A
A
23
Q
Termination of an in-force insurance policy prior to the expiration date shown in the policy is known as A. Cessation B. Cancellation C. Rescission D. Nonrenewal
A
B
24
Q
A policy that insures all property at multiple locations for single amount is referred to as A. Specific B. Blanket C. Reporting D. Special
A
B
25
At the time of loss insured against in a property and casualty policy, the insurer’s claim settlement options include all of the following EXCEPT
A. Paying the value of the lost or damaged property
B. Replacing the property with other property of a lesser kind or quality
C. Paying the cost of repairing or replacing the lost or damaged property
D. Taking all or part of the property at an agreed or appraised value
B
26
```
What fundamental principle in property insurance holds that when there is an unbroken connection between an occurrence and damage that grows out of the occurrence, then the resultant damage is all a part of the occurrence?
A. Common cause
B. Proximate cause
C. Concurrent causation
D. Indemnity
```
B
27
```
A building is insured, but no one has lived or worked in it for 10 years. The building is completely empty of any furniture or personal belongings. From an insurance standpoint, the building is considered
A. Unoccupied
B. Condemned
C. Closed
D. Vacant
```
D
28
```
What term includes damage where the insured peril was the proximate cause of loss?
A. Negligent loss
B. Direct loss
C. Indirect loss
D. Consequential loss
```
B
29
An insured has four separate but identical policies written by different insurers to cover her $100,000 building. Each policy is written for $100,000, and each has the pro rata liability other insurance clause. IN the event of a total loss to the building, what would each insurer pay?
A. Each policy will pay $25,000 of the loss
B. Each policy will pay the total policy limits of $100,000
C. The first policy written will pay $75,000, and the other three policies will contribute proportionately to pay for the remaining $25,000.
D. The policy with the earliest effective date will pay the entire loss, and the other policies will pay nothing.
A
30
```
Which of the following describes the transfer of a legal right or interest in an insurance policy?
A. Obligation
B. Legal Purpose
C. Assignment
D. Abandonment
```
C
31
Who are required to be members of the SC Property and Casualty Insurance Guaranty Association?
A. All admitted P&C insurers
B. All admitted P&C insurers and nonadmitted P&C insurers doing business in SC
C. All admitted insurers
D. Only insurers selling workers compensation in SC
A
32
An insured’s fire policy has been in force for over 120 days. For which of the following reasons may the insurer cancel the policy?
A. The insured filed the second claim this year for a careless fire
B. The insured has filed for bankruptcy
C. The insured now owns a large dog
D. The producer photographed the wrong house; the insured’s house would not pass underwriting standards
D
33
All of the following statements describe the concept of strict liability EXCEPT
A. Claimants may need to provide proof that a product defect caused an injury
B. It is imposed regardless of fault
C. It is applied in product liability cases
D. It is imposed on defendants engaged in hazardous activities
D
34
```
Property insurance that provides $100,000 coverage for a building and $50,000 coverage for personal property at a single location is called
A. Described coverage
B. Specific coverage
C. Schedule coverage
D. Blanket coverage
```
B
35
```
A beauty parlor burns to the ground. What type of loss is this to the owner?
A. Consecutive
B. Direct
C. Consequential
D. Specific
```
B
36
The declarations page of the homeowners policy provides all of the following information EXCEPT
A. A statement that earthquake damage is not covered
B. The amount of premium charged for each coverage
C. The insured’s address
D. What deductible amount applies to each loss covered by the policy
A
37
```
All of the following are considered parts of the policy structure EXCEPT
A. Provisions
B. Exclusions
C. Insuring clause
D. Conditions
```
A
38
What is the purpose of the coinsurance clause found in property insurance policies?
A. Ensure that insureds do not overinsure their property
B. Prevent insureds from profiting from a loss
C. Encourage the insured to insure the property closer to its full value
D. Encourage higher standards of care by requiring the insured to pay a portion of every loss
C
39
```
The legal process that gives the insurer, after payment of a loss, the right to seek recovery from a third party that was responsible for the loss is known as
A. Adverse selection
B. Right of rescission
C. Principle of indemnity
D. Subrogation
```
D
40
```
Which of the following would be named on the declarations page of a property or liability policy?
A. Beneficiaries
B. All insureds
C. Additional insureds
D. First named insured
```
D
41
```
The part of the insurance contract that describes the covered perils and the nature of coverage of the contractual agreement between the insurer and the insured is called the
A. Exclusions
B. Declarations
C. Insuring agreement
D. Conditions
```
C
42
```
The policy that pays first in the event of a covered loss is known as the
A. Open peril policy
B. Primary policy
C. Excess policy
D. Pro rata policy
```
B
43
```
Which of the following coverages in dwelling and homeowners policies is for indirect losses?
A. Contents
B. Loss of use
C. Dwelling
D. Structures
```
B
44
```
When the insured’s car was totaled in a recent accident, the ownership of the car was transferred to the insurer. The insurer then sold off the wrecked car to recover some of the loss it paid to the insured. What is the term for this action?
A. Duty to defend
B. Subrogation
C. Salvage
D. Liberalization
```
C
45
```
If a liability policy had split limits of 50/100/30, what is the maximum amount that would be payable in the event of injury to a single person?
A. 30,000
B. 50,000
C. 100,000
D. 180,000
```
B
46
What will happen if a house covered by a standard mortgage clause is a total loss?
A. The insurer pays the mortgagee according to the mortgagee’s interest in the property.
B. The mortgagee retains no rights to any contracts involving the policy
C. The insured receives the full benefit and passes the mortgagee’s share to the mortgagee
D. The mortgagee receives the full benefit and passes the insured’s share to the insured.
A
47
The abandonment provision in property insurance policies states that
A. The legal rights in the insured property may be transferred
B. The insured may not relinquish ownership of damaged property to claim a total loss, but must protect damaged property from further loss
C. The insurance is for the benefit of the insured, and not for someone else who has temporary custody of the insured property
D. The insurer may take all or any part of lost or damaged property at an agreed or appraised value.
B
48
```
Liability imposed on one party as a result of actions of another person is known as
A. Absolute liability
B. Vicarious liability
C. Comparative negligence
D. Strict liability
```
B
49
```
An insured owns several buildings, each at a different location and insured on a separate policy. What type of coverages does the insured have?
A. Specific
B. Schedule
C. Blanket
D. Special
```
A
50
```
When a direct chain of events resulting from a negligent act causes injury or damage, that act is considered to be
A. The proximate cause
B. The direct cause
C. Strict liability
D. An intervening cause
```
A
51
```
An insured is driving her car through a residential area when she loses control and crashes into her neighbor’s front porch. The neighbor, who was sitting on the porch, is injured. The insured’s liability policy has a limit of $500,000. This amount applies to the total damages for any bodily injury and property damage resulting from one accident. Which type of limit liability does the insured have?
A. Aggregate
B. Per occurrence
C. Combined single
D. Split
```
C
52
```
Which of the following policy provisions would automatically broaden coverage under a policy without requiring additional premium?
A. Other insurance
B. Subrogation
C. Assignment
D. Liberalization
```
D
53
```
Which of the following would NOT be classified as personal property for insurance purposes?
A. Furniture
B. A house
C. A vehicle
D. Equipment
```
B
54
```
All of the following are conditions commonly found in the insurance policy EXCEPT
A. Insuring agreement
B. Cancellation and nonrenewal
C. Subrogation
D. Appraisal
```
A
55
```
The pro rata liability clause is designed to protect the principle of
A. Insurable interest
B. Waiver and estoppel
C. Indemnity
D. Subrogration
```
C
56
Replacement cost is defined as
A. The market value of property of like kind and quality
B. Full replacement of property with like kind and quality, less an allowance for physical deterioration and depreciation
C. Payment of the full policy limits in the event of a total loss
D. Full replacement of property at its current cost, new and without reduction for depreciation
D
57
```
Which of the following policy provisions would automatically broaden coverage under a policy without requiring additional premium?
A. Other insurance
B. Subrogation
C. Assignment
D. Liberalization
```
D
58
```
The insured owns an older home with lath and plaster walls. Following a kitchen fire, the insurance company pays to have the wall replaced with drywall that is just as functional, but costs less than lath and plaster. Which loss valuation allows the insurance company to have plaster replaced with drywall?
A. Market value
B. Actual cash value
C. Functional replacement cost
D. Replacement cost
```
C
59
An insured owns a building that is valued at $400,000. To comply with the 80% coinsurance provision of his insurance policy, how much should he insure the property for?
A. 100% of the market value
B. $400,000
C. $32,000
D. 80% of the property’s replacement cost or more
D (The coinsurance clause states that in consideration of a reduced rate, the insured agrees to maintain a certain minimum amount of insurance on the insured property. In the event of a covered loss, insurance is designed to pay replacement cost minus depreciation.)
60
If a member insurer of the SC Property and Casualty Insurance Guaranty Association becomes insolvent, the association will pay
A. The full amount of any covered Workers Compensation claim
B. The portion of a covered claim between $250 and $300,000 for claims other than Workers Compensation
C. All obligations of the insolvent insurer
D. Both A & B are correct.
D
61
```
The policy conditions define
A. The amount of coverage
B. How parties to the contract must act following a loss
C. The basic underwriting information
D. The excluded perils
```
B
62
```
The property condition that precludes the insured from simply turning over damaged property to the insurer and claiming a total loss is called
A. Abandonment
B. Assignment
C. Appraisal
D. Arbitration
```
A
63
```
Persons covered under an insurance policy, whether named or not, are known as
A. First named insureds
B. Additional insureds
C. Insureds
D. Named insureds
```
C
64
```
In insurance terms, what are components?
A. The penalties paid for unfair trade practices
B. The prices charged for policies
C. The factors that determine rates
D. The amounts paid out in benefits
```
C
65
```
An insured’s 9-year-old son threw a ball, accidentally breaking a neighbor’s plate glass window. The insured was found legally liable for the cost of replacing the window. This is an example of
A. Vicarious liability
B. Intervening cause
C. Juvenile delinquency
D. Absolute liability
```
A
66
The SC valued policy law is effective for which loss?
A. Total loss by fire
B. Partial loss if the company does not appeal within 30 days
C. When the Director so rules
D. When the appraisers cannot agree
A
67
```
A building is insured, but no one has lived or worked in it for 10 years. The building is completely empty of any furniture or personal belongings. From an insurance standpoint, the building is considered
A. Condemned
B. Closed
C. Vacant
D. Unoccupied
```
C
68
```
A contractor who builds homes has never made a claim on his business insurance policy. His agent discovers that his policy is written on a scheduled rating. If the contractor changes to an experience rating policy, which is most likely?
A. Coinsurance would be necessary
B. Premiums would go down
C. Premiums would go up
D. Premiums would be unchanged
```
B
69
```
An insured relocated to another state for work. However, she still owns and insures a house in this state but has had no one living in it for 3 months. She is also storing some furniture and clothes in the house. From an insurance standpoint, the insured’s house is considered
A. Condemned
B. Under repair
C. Vacant
D. Unoccupied
```
D
70
```
What type of damages may be awarded by the court to create disincentives that discourage behavior that is deemed highly desirable by society?
A. Compensatory
B. Specific
C. Punitive
D. General
```
C
71
```
The transfer of an insured’s right to seek damages from a negligent party to the insurer is found in which of the following clauses?
A. Subrogation
B. Arbitration
C. Salvage
D. Appraisal
```
A
72
```
The policy conditions define
A. The amount of coverage
B. How parties to the contract must act following a loss
C. The basic underwriting information
D. The excluded perils
```
B
73
```
An insured’s building has an actual cash value of $200,000 and he has insured the property for $120,000 with an 80% coinsurance clause. A $40,000 loss occurs. How much will the policy pay?
A. $0
B. $30,000
C. $32,000
D. $40,000
```
B (The insured only carried 75% of the amount of insurance he had agreed to carry ($120,000 of the agreed $160,000 which would have been 80%, so the insurer will only pay 75% of the loss, or $30,000. If the insured had carried the required amount of insurance, partial losses would be paid in full. In the event of a total loss, the face of the policy would be paid. If the full amount is not carried, divide the actual amount carried by the amount that should be carried (the coinsurance amount), and multiply it by the loss.)
74
```
The part of a policy that clarifies terms in the policy is the
A. Conditions
B. Exclusions
C. Definitions
D. Insuring agreement
```
C
75
```
The part of the policy that sets forth the rules of conduct, duties, and obligations of the parties is called the
A. Conditions
B. Exclusions
C. Declarations
D. Insuring clause
```
A
76
Physical Damage to buildings or personal property; includes other damage where the insured peril is the proximate cause of loss
A. Direct Loss
B. Indirect Loss
A
77
Economic Loss; coverage is usually added to property policies.
A. Direct Loss
B. Indirect Loss
B
78
A condition of the subject of insurance that creates or increases the chance of loss. Example: Structural defects
A. Physical Hazard
B. Moral Hazard
C. Morale Hazard
A
79
A dishonest predisposition on the part of an insured which increases the chance of loss. Example: Previous conviction for arson
A. Physical Hazard
B. Moral Hazard
C. Morale Hazard
B
80
Applicant demonstrates a careless attitude that could increase the chance of loss. Example: Speeding in unsafe conditions
A. Physical Hazard
B. Moral Hazard
C. Morale Hazard
C
81
Cost to replace with like kind and quality at today's prices.
```
A. Replacement Cost
B. Actual Cash Value
C. Functional Replacement
D. Market Value
E. Agreed Value
F. Stated Value
```
A
82
Replacement cost minus depreciation.
```
A. Replacement Cost
B. Actual Cash Value
C. Functional Replacement
D. Market Value
E. Agreed Value
F. Stated Value
```
B
83
Cost to replace with modern, less expensive construction or materials.
```
A. Replacement Cost
B. Actual Cash Value
C. Functional Replacement
D. Market Value
E. Agreed Value
F. Stated Value
```
C
84
Fair valuation based on the amount of insurance agreed upon.
```
A. Replacement Cost
B. Actual Cash Value
C. Functional Replacement
D. Market Value
E. Agreed Value
F. Stated Value
```
E
85
What a willing buyer will pay a willing seller.
```
A. Replacement Cost
B. Actual Cash Value
C. Functional Replacement
D. Market Value
E. Agreed Value
F. Stated Value
```
D
86
Scheduled amount of insurance and the maximum the insurer will pay.
```
A. Replacement Cost
B. Actual Cash Value
C. Functional Replacement
D. Market Value
E. Agreed Value
F. Stated Value
```
F
87
Obviously hazardous activities; Injured party does not need to prove negligence.
A. Absolute Liability
B. Strict Liability
C. Vicarious Liability
A
88
Product liability; liable for defective products regardless of fault or negligence.
A. Absolute Liability
B. Strict Liability
C. Vicarious Liability
B
89
Liable for the acts of others.
A. Absolute Liability
B. Strict Liability
C. Vicarious Liability
C
