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Property & Casualty > Property & Casualty Insurance > Flashcards

Property & Casualty Insurance Flashcards

0
Q

The process whereby a stock insurer becomes a mutual insurer is called:

A

Mutualization

•stock insurers decides to be privately owned by policyholders is known as Mutualization

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1
Q

The process whereby a mutual insurer becomes a stock company is called:

A

Demutualization

•Mutualization changes to demutualization, now the company is owned by the stock/share owners

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2
Q

The provision in a property policy which states that the insured has been paid up to their insurable interest is:

  1. Actual cash value
  2. Stated value
  3. Guaranteed replacement
  4. Valuation clause
A

Valuation clause

•valuation cause determines the formula used to pay up to the insureds insurance interest

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3
Q

The part of the policy that states the amount of coverage, the insured property, policy period is:

  1. Conditions
  2. Insuring agreements
  3. Exclusions
  4. Declarations
A

Declaration

•declaration section identifies who, what, how long, and how much (amount) property is insured for

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4
Q

Part of the policy that establishes limits upon the insurer and the insured within the insurance policy is:

  1. Conditions
  2. Declarations
  3. Exclusions
  4. Insuring agreement
A

Conditions

•conditions outline the rights and duties of the insured and insurer. AKA provisions, agreements, and clauses

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5
Q

Which are characteristics of negligence?

  1. Breach and proximate cause
  2. Duty and breach of the duty
  3. Duty, breach, proximate cause, damages
  4. Breach of duty and damages cause
A

Duty, breach, proximate cause, damages

•all four characteristics must be present

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6
Q

Which of the following is not a federal program?

A

Workers’ compensation

•statement of fact

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7
Q

Absolute risk (liability) is imposed:

  1. When there is intent to cause injury
  2. When the insure party intend the risk
  3. When there is negligence whether proven or not
  4. None of the above
A

When there is negligence whether proven or not

•absolute risk or liability is aka liability without regard to fault or strict liability

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8
Q

X is in an accident with Y. X suffers $5000 of damage but it is determined that x is 60% responsible for the accident. How much would x receive under contributory negligence rules?

A

$0

• if the injured party is partly responsible for their own injuries, contributory negligence rules eliminate liability.

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9
Q

What is the main purpose of tort law?

A

To determines financial responsibility of the damages.

.•a tort is a civil wrong.

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10
Q

The insurer decides not to renew an insureds personal auto policy. How much notice must the insurer provide to the insured?

  1. 5 days
  2. 30 days
  3. 20 days
  4. 10 days
A

30 days

•30 days required for notice of non-renewal of auto & home

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11
Q

Which of the question is usually true regarding compensatory damages?

  1. General damages have specific economic value
  2. Special damages do not have a specific economic value
  3. There is usually no direct correlation between the amount of general and special damages awarded to the v
  4. Punitive damages are award to a person for actual pain and suffering
A

There is usually no direct correlation between the amount of general and special damages awarded to the victim

Frequently there is no direct correlation between general damages (e.g. Pain and suffering) and specific/special damages.

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12
Q

An insurer’s loss reserve for a claim is:

  1. The exact amount the insurer will have to pay to close the claim
  2. The maximum amount the insurer will have to pay to close the claim
  3. An estimate of the amount the insurer will pay for present and future loss.
  4. Equal to claim paid divided by earned premium reserve, not including loss of adjustment expense
A

An estimate of the amount the insurer will pay for present and future loss.

Insurer’s reserve is the amount required to pay current claims, upon submission of claim forms, and estimate of future claims.

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13
Q

Which of the following is an example of loss prevention?

  1. A homeowner decides not to install a pool in the backyard
  2. Homeowner install a security system
  3. Homeowner install a sprinkler system
  4. Decide not to restore water damage to basement
A

A homeowner decides not to install a pool in the backyard

Loss prevention-avoidance of loss (not reduction)

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14
Q

Which of the following describes the act of making a false entry in any book, statement of report of any insurer with the intent to deceive any examiner lawfully appointed to examine the insurers affairs?

  1. An unfair practice
  2. An error or omission
  3. An exclusionary act
  4. An aleatory
A

An unfair insurance trade practice

California insurance code 790.03.d,e

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15
Q

A person cab base his/her claim for legal liability on the basis if all the following, except:

  1. Breach of liability
  2. Negligence
    3 intentional tort
  3. Absolute liability
A

Breach of liability

Breach of contract falls under contract law

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16
Q

The terms “assignment” refers to:

  1. The insurers right to collect damages from a 3rd party
  2. The insurance policy applying to each insure
  3. The insured’s right to receive broad new coverage from the insurer at no change
  4. The transfer of the insured’s interest in a policy to another
A

The transfer of the insured’s interest in a policy to another

Aka transfer of ownership rights

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17
Q

The term subrogation refers to:

  1. The insurances policy applies separately to each insured
  2. The transfer of the insured’s interest in a policy to another policy
  3. The insured’s right to receive broad new coverage from the insurer at no charge
  4. The insurer’s right to recover postman from a responsible 3rd party
A

The insurer’s right to recover postman from a responsible 3rd party

The insurer “ subrogation” or “substitutes” itself for the insured in the suit I

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18
Q

Insurer’s right to recover the payment of a claim, after they paid the insured for their property losses from a negligent 3rd party is known is:

  1. Liberalization
  2. Subrogation
  3. Arbitration
  4. Assignment
A

Subrogation

Transfer of the insured’s right against a party at fault to the insurance company

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19
Q

An insurance deductible is:

  1. The insurance payment for health care that is not considered a coverage expense
  2. The portion of the insurance premium paid for coverage by the insurer
  3. The amount of covered expense that the insured pays before the insurer pays
  4. The cost of a covered expense minus a co-payment
A

The amount of covered expense that the insured pays before the insurer pays

Amount retained by policy owner to pay a lower premium

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20
Q

All of the following are requirements for a notice by mail to an insured by an insurer, except:

  1. Notice must be sent with return receipt required
  2. Notice must be addressed to the person being notified
  3. Postage must be prepaid
  4. Notice must be mailed to the resident or principal place of business
A

Notice must be sent with return receipt required

Policies sent through the mail require a return receipt. There is no such requirement for general notices

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21
Q

Which of the following is considered special damages?

  1. Compensation for time away from work
  2. Compensation for a persons emotional suffering
  3. Compensation for loss of a foot
  4. Compensation for a scar
A

Compensation for time away from work

Compensation for loss of quantifiable amounts (economical damages)

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22
Q

Which advisory organization(s) develop forms for the standard market?

  1. Insurance services office and American association of insurance service
  2. National association of insurance commissioners and the American association insurance services
  3. National association of insurance commissioners and the insurance services office
  4. Insurance services office and the American association of managing general agents
A

Insurance services office and American association of insurance service

ISO produces policy forms for the standard market. NAIC advises on regulation.

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23
Q

Which of the following would be considered special damages?

  1. Lost wages
  2. Pain and suffering
  3. Scarring
  4. Loss of an index finger
A

Lost wages

Special damage awards are tangible or measurable; the other answers are general damages.

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24
Q

Which of the following is an example of loss prevention?

A

A homeowner decides not to install a pool in the backyard

Loss prevention = avoidance of loss (not reduction)

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25
Q

An insurance deductible is:

A

The amount of covered expense that the insured pays before the insurer pays

Amount retained by policy owner to pay a lower premium

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26
Q

What do the initials S.T.A.R.R represent?

A

Methods of risk management

are: Sharing, transfer, avoid, retain, and reduce

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27
Q

All of the following would be considered benefits of insurance, except:

  1. Payment for the loss of coverages
  2. Redemption of the financial uncertainty of the insured
  3. They can be a source of investment funds
  4. Retention of the loss by the insured
A

Retention of the loss by the insured

This is the opposite of insurance

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28
Q

What gives an insured party the right to seek compensation if it is proven that another person with negligent contributed to the injury? @

  1. Tort law
  2. Case law
  3. Statutory law
  4. Criminal code
A

Tort law

A tort is a legal wrong other than a crime or breach if contract. Must common tort is Negligence.

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29
Q

Under a special cause of loss form, if a landslide is caused by an unnatural flow of water due to improper grading, the loss is:

  1. Excluded under the concurrent causation
  2. Covered; there are no exclusions for this type of loss
  3. Excluded under the governmental action exclusions
  4. Excluded under the utility service exclusion
A

Excluded under the concurrent causation

Concurrent means that there was more than one cause for the loss

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30
Q

An open peril policy protects against the loss from:

  1. Mainly, perils of the sea
  2. Perils found outside the open
  3. Only the perils openly named in the policy
  4. Any peril, other than those specifically excluded
A

Any peril, other than those specifically excluded

Definition for a peril is also referred to as All Risk and Special form

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31
Q

What factor supports the principle of indemnity?

  1. Utmost good faith
  2. Reasonable expectations
  3. Insurance interest
  4. Contract of adhesive
A

Insurable interest

An insured needs to have an insurable interest in order to be “made whole” by the policy proceeds

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32
Q

All of the following are characteristics of an ideally insurable loss exposure, except:

  1. Losses that are definite and measurable
  2. Losses that are catastrophic
  3. Losses that are accidental
  4. Large number of exposure units
A

Losses that are catastrophic

Catastrophic losses are a high severity (ex hurricane) which does not lend itself to accurate prediction, and thus is not an ideally insurable loss exposure

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33
Q

All of the following are considered intentional torts, except:

  1. Libel
  2. Ownership of a wild animal
  3. Slander
  4. Assault
A

Assault

Assault is a crime act and falls under criminal act

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34
Q

What is the difference between per accident limit in a split limits policy and the single limits?

  1. There is no difference
  2. The per accident limit applies to property damage, and the single limit applies to all the claims
  3. The per accident limit applies to all claims, and the single applies only to bodily injuries
  4. The per accident limit applies only to bodily injuries, and the single limit applies to all claims
A

There is no differences

Both split limit and single pilot pay for bodily injury and property damage

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35
Q

The intentional relinquished of a known right is:

  1. Concealment
  2. Waiver
  3. Estoppel
  4. Warranty
A

Waiver

In fire and casualty insurance, a waiver means the act of giving up or surrendering a right or privilege that is known to exist

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36
Q

Which type of loss is a business exposed to death, retirement or disability of a key employee?

  1. Workers’ compensation exposure
  2. Personal loss exposure
  3. Personnel loss exposure
  4. Human loss exposure
A

Personnel loss exposure

Another name for employee is “personnel”

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37
Q

The amount to replace an insured’s damaged property, less depreciation, is known as the:

  1. Stated amount
  2. Agreed amount
  3. Actual cash value
  4. Replacement value
A

AVC

Definition of AVC

Replacement cost - depreciation

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38
Q

The Commercial property conditions include a condition called “liberalization” the effect of this condition is: @

  1. To require the insurer to liberally construe the other commercial property conditions in case of disagreement between the insurer and the insured
  2. To protect the insured from policy c once
A

To automatically apply broader coverage to the commercial property coverage part if a policy form revision would broaden coverage without an additional premium

Definition

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39
Q

In a commercial lines program policy, common policy conditions do not include which if the following as a condition? @

A

Perils insured

The conditions part of a policy states the rights and duties of the insurance company and the insured

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40
Q

A possibility of financial loss resulting from the ownership of property is known as:

A

Insurable interest

Although insurable interest varies according to the type of policy, there is always an expectation is a monetary loss that can be covered by insurance.

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41
Q

Laura is driving her own car on behalf of her employer. Laura’s negligent operation of her car injures a member of the public. The employer may be held liable because of what is called: @

A

Vicarious liability

Vicarious liability imposed business owners for the actions of their employees

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42
Q

Type of exposure can be best defined as a condition or situation where the exposure to financial loss is presented to a business owner by the injury, disability, death, sickness, of a valuable employee?

A

Personnel loss exposure

Personnel losses relate to employees, personal property loss relates to property and liability loss relates to harm that insureds inflicted upon others

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43
Q

Which is the following is also know as human loss exposure?

  1. Liability loss exposure
  2. Indirect loss exposure
  3. Property loss exposure
  4. Personal loss exposure
A

Personal loss exposure

A type of exposure that can be defined as a condition or situation where the exposure to financial loss is presented to an individual or family from causes such as injury,

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44
Q

Which of the following best characterizes a speculative risk?

  1. Insuring a life with a policy that policy that provides double indemnity for accidental death
  2. A person who is careless and/or irresponsible
  3. Transferring the risk of loss to another party
  4. A situation that offers the possibility for a loss or a gain
A

A situation that offers the possibility for a loss or a gain

A good example would be gambling

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45
Q

In the state of CA, no rate will remain in effect if it is considered to be any of the following, Except:

  1. Inadequate
  2. Impartial
  3. Unfairly discriminatory
  4. Excessive
A

Impartial

The insurance department in each state regulate policy rates to ensure that they are fair, reasonable, and not discriminatory

46
Q

What course of action does a party to a contract have if the other party is found to be breach of that contract?

  1. Damages caused by the breach only
  2. Nothing, unless the injured party can prove the damages are substantial
  3. Reasonable attorney fees and costs only
  4. Damages for breach, reasonable attorney fees and costs
A

Damages for breach, reasonable attorney fees and costs

Breach of contract is a legal concept in which a binding agreement or bargained for exchange is not honored by one of the parties to the contract by non-performance or interference with the other party’s performance. A material breach is a breach so fundamental that it excuses the aggrieved party from further performance and entitles that party to sue for damages.

47
Q

Which part of the insurance contract summarizes the major promises of the insurer?

  1. Conditions
  2. Definitions
  3. Insuring agreement
  4. Declarations
A

Insuring agreement

This is what insuring agreement does

48
Q

Under tort law, a corporation can be subject to a claim for legal liability on the basis of:

  1. Contract liability
  2. Absolute liability
  3. Breach of warranty
  4. No-fault auto law
A

Absolute liability

Answer 2 is better than 1 which applies to contract law

49
Q

Risk management technique that eliminate a loss exposure and reduces the chance of loss to zero is:

  1. Avoidance
  2. Retention
  3. Loss exposure
  4. Loss prevention
A

Avoidance

If you can avoid a dangerous practice you reduce the risk of loss for that practice to zero. Although loss prevention is also avoidance the question is looking for the more precise term

50
Q

A situation is which there only the possibility of loss or no loss is considered a: @

  1. Speculative risk
  2. Pure risk
  3. Fundamental risk
  4. Particular risk
A

Pure risk

The phrase or no loss is included as a distraction and is irrelevant

51
Q

A reduction in a value of property that result immediately from damages to try property is known as:

  1. Extra expense
  2. Additional living expense
  3. Consequential loss
  4. Direct loss
A

Direct loss

This is because it is directly related to the damage of the property

52
Q

Items that are paid on a replacement cost is defined as the:

  1. Amount to replace the damaged property, less depreciation
  2. Amount equal to the value of damaged property on the market
  3. Amount to replace the damaged property without a deduction for depreciation
  4. Amount agreed between the insured and insurer at policy inception
A

Amount to replace the damaged property without a deduction for depreciation

Definition

53
Q

A wrongful act other than a crime or breach of contract is:

  1. Hazard
  2. Tort law
  3. Liability
  4. Proximate cause
A

Tort law

Definition of a tort… A civil wrong

54
Q

The amount to replace property with like property of the same quality and construction is the:

  1. State value
  2. Actual cash value
  3. Market value
  4. Replacement cost
A

Replacement cost

Remember market value is the price the property would have been sold, actual cash value is the replacement cost of the damaged property minus depreciation and obsolescence

55
Q

What is the process whereby insurers decide which customers to insure and what coverage to offer?

  1. Marketing
  2. Rate making
  3. Underwriting
  4. Adverse selection
A

Underwriting

Underwriting is risk selection

56
Q

Insurer’s right to recover the payment of a claim , after they paid the insured for their property losses from a negligent 3rd party is known as:

  1. Liberalization
  2. Subrogation
  3. Arbitration
  4. Assignment
A

Subrogation

Transfer of the insured’s rights against a party at fault to the insurance company

57
Q

An insurance deductible is:

  1. The insurance payment for health care that is not considered a covered expense
  2. The portion of the insurance premium paid for coverage by the insured
  3. The amount of covered expense that the insured pays before the insurer pays
  4. The cost of a covered expense minus a co-payment
A

The amount of covered expense that the insured pays before the insurer pays

Amount retained by policy owner to pay a lower premium

58
Q

All of the following are requirements for a notice by mail to an insured by an insurer, EXCEPT:

  1. Notice must be sent with return receipt required
  2. Notice must be addressed to try person being notified
  3. Postage must be prepaid
  4. Notice must be mailed to the residence or principal place of business
A

Notice must be sent with return receipt required

Polices sent through the mail require a return receipt. There is no such requirement for general notices.

59
Q

Which of the following is considered special damages?

  1. Compensation for time away from work
  2. Compensation for a person’s emotional suffering
  3. Compensation for loss of a foot
  4. Compensation for a scar
A

Compensation for time away from work

Compensation for loss of quantifiable amounts (economical damages)

60
Q

Which advisory organization(s) develop forms for the standard market?

  1. Insurance services office and American association of insurance services
  2. National association of insurance commissioners and the American association of insurance services
  3. National association of insurance commissioners and the insurance services office
  4. Insurance services office and the American association of managing general agents
A

Insurance services office and American association of insurance services

ISO produces policy forms for the standard market. NAIC advices on regulation

61
Q 
Which of the following would be considered special damages?
@
1. Lost wages 
2. Pain and suffering 
3. Scarring 
4. Loss of an index finger
A

Lost wages

Special damages awards are tangible or measurable the other answers are General Damages

62
Q

The amount to replace property with “like property of the same quality and construction” is the properties

  1. Market value
  2. Actual cash value
  3. State value
  4. Replacement value
A

Replacement value

The market value is what the property would sell for on the open market, whereas the replacement cost answer is the definition stated in the questions.

63
Q

All of the following are considered intentional torts, EXCEPT:

  1. Libel
  2. Ownership of a wild animal
  3. Slander
  4. Assult
A

Assault

Assault is a criminal act and falls under criminal law

64
Q

What is the difference between per accident limit in a split limits policy and the single limits?

  1. There is no difference
  2. The per accident limit applies to property damages, and the signals limit applies to all claims
  3. The per accident limit applies to all claims, and the single limit applied only to bodily injures
  4. The per accident limit applies only to bodily injures, and the single limit applies to all claims.
A

There is no difference

65
Q

The intentional relinquishment of a unknown right is:

  1. Concealment
  2. Waiver
  3. Estoppel
  4. Warranty
A

Waiver

In a fire and casualty insurance, a waiver means the act of giving up or surrendering a right of privilege that is known to exist.

66
Q

Which type of loss is a business exposed to death, retirement or disability of a key employee?

  1. Workers’ compensation exposure
  2. Personal loss exposure
  3. Personnel loss exposure
  4. Human loss exposure
A

Personnel loss exposure

Another name for employees is “ personnel”

67
Q

The amount to replace an insured’s damaged property, less depreciation, known as the

  1. Stated amount
  2. Agreed amount
  3. Actual cash value
  4. Replacement value
A

Actual cash value

Definition

68
Q

The commercial property conditions include a condition called “liberalization” the effect of this condition is:

  1. To require the insurer to liberally construe the other commercial property conditions in case of disagreement between the insured and the insurer
  2. To protect insurer from policy cancellation once the policy has been in effect for 90 days
  3. To automatically apply broader coverage to the commercial property coverage part if policy form revision would broaden coverage without an additional premium
  4. Allow the insurer to set up property value based upon current data as long as it does not reduce the lost if payment
A

To automatically apply broader coverage to the commercial property coverage part if policy form revision would broaden coverage without an additional premium

Definition

69
Q

In a commercial lines program policy, common policy conditions do not include with of the following as condition? @

  1. Cancellation
  2. Inspection and surveys
  3. Perils insured
  4. Examinations of your books and records
A

Perils insured

The conditions part of a policy states the rights and duties of insurance company and the insured

70
Q

A possibility of financial loss resulting from the ownership of property is known as:

  1. Legal liability
  2. Valuation
  3. Indemnity
  4. Insurable interest
A

Insurable interest

Although insurable interest varies according to the type of policy, there is always an expedition of a monetary loss that can be covered by insurance

71
Q

Laura is driving her own car on behalf of her employer. Laura’s negligent operation of her car injuries a member of the public. The employer may be held liable because of what is called: @

  1. Absolute liability
  2. Gross negligence
  3. Vicarious liability
  4. Contributory negligence
A

Vicarious liability

Vicarious liability imposed business owners for the actions of their employees

72
Q

Type of exposure can be best defined as a condition or situation where the exposure to financial loss is presented to a business owner by the injury, disability, death, sickness, of a valuation employee?

  1. Personal loss exposure
  2. Personal property loss exposure
  3. Personnel loss exposure
  4. Liability loss exposure
A

Personnel loss exposure

Personnel loss relate to employees; personal property loss relates to property and liability loss related to harm that insured’s inflicted upon others

73
Q

Which of the following is also known as a known as human loss exposure?

  1. Liability loss exposure
  2. Indirect loss exposure
  3. Property loss exposure
  4. Personal loss exposure
A

Personal loss exposure

Personal loss exposure

A type of exposure that can be defined as a condition or situation where the exposure to financial loss is presented to an individual or family from causes such as injury, disability, death, sickness, or unemployment

74
Q

Which of following best characterizes a speculative risk?

  1. Insuring a life with a policy that provides double indemnity for accidental death
  2. A person who is careless and/or irresponsible
  3. Transferring the risk of loss to another party
  4. A situation that offers the possibility for a loss or a gain
A

A situation that offers the possibility for a loss or a gain

A good example would be gambling

75
Q

In the state of CA, no rate will remain in effect if it is considered to be any of the following, EXCEPT:

  1. Inadequate
  2. Impartial
  3. Unfairly discrimination
  4. Excessive
A

Impartial

The insurance department in each state regulates policy rates to ensure that they are fair, reasonable, and not discrimination

76
Q

What course of action does a party to a contract have if the other party is found to be breach of that contract?

  1. Damages caused by the breach
  2. Nothing, unless the injured party can prove the damages are substantial
  3. Reasonable attorney fees and costs only
  4. Damages for breach, reasonable attorney fees and costs
A

Damages for breach, reasonable attorney fees and costs

Pg 18

77
Q

Which part of the insurance contract summarizes the major promises of the insurer?

  1. Conditions
  2. Definitions
  3. Insuring agreement
  4. Declarations
A

Insuring agreement

This is what the insuring agreement does

78
Q

Under tort law, a corporation can be subject to a claim for legal liability on the basis of: @

A

Absolute liability

Applies to contract law

79
Q

A policy may not be transferred to another without:

  1. Oran consent of the insurer
  2. Written consent of the insurer
  3. Oral consent of the insured
  4. Written consent of the insured
A

Written consent of the insurer

  1. You need the insurers permission in writing
80
Q

A situation is which there only the possibility of loss or no loss is considered a:

Pure risk

A

The phrase “or no loss” is included as a distraction and irrelevant

81
Q

A reduction in the value of property that results immediately from damage to the property known as:

A

Direct loss

This is because it is directly related to the damage of the property

82
Q

What is the process whereby insurers decide which customers to insure and what coverage to offer?

  1. Marketing
  2. Rate making
  3. Underwriting
  4. Adverse selection
A

Underwriting

Underwriting is risk selection

83
Q

The amount paid for damaged property, which is equal to the price for which it could have been sold is called:

  1. Market value
  2. Actual cash value
  3. Stated amount
  4. Replacement amount
A

Market value

Always equate the market value to the price at which it can be sold

84
Q

An insurer’s loss reserve for a claim is:

  1. The exact amount the insurer will have to pay to close the claim
  2. An estimate of the amount that the insurer will pay
  3. The maximum amount the insurer will have to pay to close the claim
  4. Equal to claims paid divided by earned premium reserve, not including loss adjustment expense
A

An estimate of the amount that the insurer will pay

The reserve is an estimate of losses that are expected for the year plus losses that have already occurred

85
Q

What is the type of loss exposure that would include land and property attached to it?

  1. Real property loss exposure
  2. Attached property loss exposure
  3. Personal property loss exposure
  4. Liability loss exposure
A

Liability loss exposure

Land risk exposure are covered under liability insurance

86
Q

What type of policy protects against loss from any peril except those that are specially excluded?

  1. Named perils
  2. All risk or open peril
  3. Stated value
  4. Specified peril
A

All risk or open peril

Definition of all risk

87
Q

Who is considered the first party to an insurance contract?

  1. The insurance company
  2. The insured
  3. The claimant
  4. The agent
A

The insured

88
Q

A written provision that modifies the provisions of the original contact is known is: @

  1. An Endorsement
  2. A condition
  3. A miscellaneous provision
  4. An insuring agreement
A

An endorsement

An endorsement is a legal modification of a contract

89
Q

In a commercial property, the insurance claim is denied because of the insured’s actions. The mortgage holder will in most cases:

  1. Not receive any compensation for the loss
  2. Receive a partial payment for the loss
  3. Still have the right to receive the full amount of the loss payment
  4. Receive compensation if the mortgage holder endorsement has been added and the additional premium paid
A

Still have the right to receive the full amount of the loss payment

Tricky questions: mortgage holder (lender) will still have the right to receive loss payment if the premium has been paid by either the policy holder or the lender

90
Q

Named insured on a commercial insurance policy is “Sam stone and dan Sullivan, DBA s&s bar and grill.” If the insurer cancels the policy, they are required to mail or deliver written notice to:

  1. Only sam stone
  2. Sam stone and Dan Sullivan, DBA s&s bar and grill
  3. Only dan Sullivan
  4. Any of the above is ok
A

Only Sam stone

The notice goes to the first one named on the declarations. That would be sam stone

91
Q

Which type of exposure can best be defined as a condition or situation for any exposure or financial loss is presented to an individual or family by such causes as injury, disability, death, or sickness?

  1. Personal loss exposure
  2. Personal property
  3. Liability loss exposure
  4. Personal loss exposure
A

Personal loss exposure

Loss to an individual or family is a personal loss

92
Q

What is the primary reason for co-insurance clauses in property polices?

  1. To create a means of sharing the risk with another company
  2. To require the insured to always pay a portion of every loss
  3. To establish a method for evaluating the value of the property
  4. To encourage insured’s to purchase coverage near the value of the property
A

To encourage insured’s to purchase coverage near the value of the property

If coinsurance requirement is met by the insured, co insurance penalty will not go into effect

93
Q

The state laws that regulate insurer practices regarding underwriting, sales, rate-making, and claims handling are called:

  1. Insurer policing
  2. Ethical standards surveillance
  3. Market conduct regulation
  4. Standard policing
A

Market conduct regulation

Statement of fact

94
Q

The possibility of financial loss resulting from the ownership of property is known as:

  1. Legal liability
  2. I durable interest
  3. Valuation
  4. Indemnity
A

Insurable interest

Pg 22

95
Q

Which of the following types of loss would result in a claim for monetary damaged due to injury to another or damage to another’s property?

  1. Real property loss
    2, physical loss
  2. Personal property loss
  3. Liability loss
A

Liability loss

Liability covers monetary losses suffered when a party is at fault

96
Q

Which of the following coverages is a property insurance coverage? @

  1. Property damage liability
  2. Personal injury
  3. Medical payments
  4. Other than collision
A

Other than collision

Aka comprehensive coverage

97
Q

Exclusive agents:

  1. Have exclusive ownership rights to their renewal
  2. Generally represent only one insurer
  3. Specialize exclusively in one class of business
  4. Make all sales by telephone
A

Generally represent only one insurer

Aka cAptive agents

98
Q

In an unendorsed claims-made generally liability policy, how long does an insured have to report a claim which occurred during the policy period?

  1. 30 days
  2. 6 months
  3. 60 days
  4. Indefinitely
A

60 days

Statement of fact

99
Q

To determine the actual cash value of a commercial building for co insurance purposes, use:

  1. The actual cash cost of replacing the building
  2. The price the client paid for the property, less the value of the land
  3. The county assessor’a office figures
  4. Fair market value
A

Fair market value

In California, insurers have the option of using fair market value instead of actual cash value

100
Q

What clause is commonly used to require insured’s to purchase insurance close to the value of the property?

  1. Valuation clause
  2. Deductible clause
  3. Coinurance clause
  4. Reinsurance clause
A

Co insurance clause

If the requirement is met by the insured, the coinsurance penalty will not go into effect

101
Q

A distinct feature if the alternative funding method known as self-funding is:

  1. It is designed for entrepreneurs
  2. No evidence of insurability is required
  3. The benefits are tailored to the group
  4. It only applies to large groups
A

The benefits are tailored to the group

Pg 23

102
Q

Actual cash value is defined as the:

  1. The amount to replace damaged property without a deduction for depreciation
  2. The value of the damaged property on the open market
  3. The amount to replace damaged property minus depreciation
  4. The amount agreed upon by the insured and the insurer at policy inception
A

The amount to replace damaged property minus depreciation

Definition

103
Q

Which of the following would be known as the process whereby an insurer determines appropriate charges for its policies?

  1. Underwriting
  2. Rate-making
  3. Premium factoring
  4. Marketing
A

Rate marketing

The process to determine the premium is called “rate-making”

104
Q

All of the following would be considered benefits of insurance, except:

  1. They can be a source of investment funds
  2. Retention of the loss by the insured
  3. Payment for the cost of covered losses
  4. Reduction of the financial uncertainty of the insured
A

Retention of the loss by the insured

Retention of the loss is the opposite of insurance

105
Q

Which of the following would ve classified as a proper insurance coverage?

  1. Other-than-collision coverage
  2. Property damage liability
  3. Personal injury coverage
  4. Medical payments coverage
A

Other-than-collision coverage

Pg 23

106
Q

What is the effect of the “concurrent causation” exclusion under the “causes of loss broad form in a commercial property policy?

  1. Only the primary peril causing the loss is covered
  2. No coverage if the loss is caused concurrently with multiple perils
  3. If there is a loss resulting from two or more perils that occur at the same time to cause a loss, then there is no coverage is any of the perils Excluded
A

If there is a loss resulting from two or more perils that occur at the same time to cause a loss, then there is no coverage is any of the perils Excluded

Pg 24

107
Q

What will the mortgage holder do in bfs event that an insurer does not pay a claim as the result of the actions of the insured? @

  1. Receive no payment for any loss
  2. Receive full payment for the loss, if the require premium has been paid
  3. Receive payment if an endorsement has been added to the policy known as mortgage holder endorsement and the additional required premium was paid
  4. Receive a co insured amount the loss
A

Receive full payment for the loss, if the require premium has been paid

This is a condition and therefore no additional premium is required

108
Q

What exactly does the policy known as “open perils” protect against?

  1. Perils that are named in the policy
  2. Perils of waterways, tributaries, or the sea.
  3. Perils not being inside any structure or containment
  4. Perils not specifically named as excluded
A

Perils not specifically named as excluded

Pg 24

109
Q

What does a pure risk consist of?

  1. The chance of loss only
  2. The chance of neither of these
  3. The chance of gain only
  4. The chance of both of these
A

Pure risk

110
Q

The term “proximate cause” is best defined by which of the following?

  1. A suspicious cauSe of a loss
  2. An unexplainable event or circumstances causing the loss
  3. A Negligent act that causes bodily injury or property damage that follows a sequence of interrupted and unrelated chain of events
  4. A negligent act that causes bodily injury or property damage that follows a sequence of uninterrupted, but related chain of events
A

A negligent act that causes bodily injury or property damage that follows a sequence of uninterrupted, but related chain of events

Pg 25

111
Q

Why would an employer be held legally liable for the negligent operation by an employee who is driving a vehicle on behalf of the employer and causes an injury to a pedestrian?

  1. The principle of vicarious liability
  2. The principle of contributory liability
  3. The principle of absolute liability
  4. The principe of of compensatory liability
A

The principle of vicarious liability

Pg 25

112
Q

How would a “peril” best be defined? @

  1. Required to increase the likelihood of a loss occurring
  2. Remaining hazards after a loSS occurs
  3. Reason for the loss event that leads up to a loss
  4. Result of the loss
A

Reason for the loss event that leads up to a loss

Property & Casualty (1 decks)

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