Property Insurance

Question 1

Abandonment Condition

Answer 1

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

Question 2

Accident

Answer 2

A loss that occurs at a specific time and place.

Question 3

Actual Cash Value (ACV)

Answer 3

Today’s replacement cost minus depreciation. Depreciation from wear and tear, or obsolescence.

Question 4

Adverse Selection

Answer 4

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

Question 5

Admitted Insurer; Authorized Insurer

Answer 5

Company that meets a state insurance department’s standard and is allowed to do business in that state.

Question 6

Annual Transit Policy

Answer 6

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

Question 7

Appraisal Clause

Answer 7

A survey of property to determine the insurable value of the property or the value of the loss sustained.

Question 8

Appraisal Condition

Answer 8

Policy condition that outlines a procedure for when the insured and insurer disagree on the amount of a loss. Each party selects an appraiser, and two appraisers select an umpire. If the appraisers cannot agree on the amount of loss, then the umpire is consulted. Umpire decision is final.

Question 9

Appurtenant Structures

Answer 9

Buildings of lesser value that are on the same premises as the main building insured under a property policy.

Question 10

Assignment

Answer 10

The legal transfer of one’s interest in an insurance policy to the other person.

Question 11

Aviation Hul Insurance

Answer 11

Provides coverage for physical damage to an aircraft.

Question 12

Bailee’s Customer Policy

Answer 12

Nonfiled commercial inland marine form obtained by a bailee to cover loss or damage to customers’ property in the bailee’s custody without regard to liability.

Question 13

Assignment Condition

Answer 13

Condition in insurance polices that specifies that the policy cannot be transfers to another unless the company consents to the transfer in writing.

Question 14

Bailee

Answer 14

A person or organization that has temporary possession (care, custody or control) of someone else’s personal property.

Question 15

Basic perils in homeowners policy

Answer 15

There are 14 perils. Fire, lightning, riot, explosion, vehicles, volcanic eruption, civil commotion, smoke, hail, aircraft, windstorm, vandalism, malicious mischief, theft.

Question 16

Cargo Insurance

Answer 16

Tye of ocean marine insurance that covers goods while they are in transit over water.

Question 17

Builders risk coverage form

Answer 17

Commercial property coverage forms that cover commercial, residential, or farm buildings that are under construction or during remodeling.

Question 18

Blanket Insurance

Answer 18

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 19

Basic property policy structure (DICEE)

Answer 19

D-Declarations
I-Insuring agreement
C-Conditions
E-Exclusions
E-Endorsements

Question 20

Cause of loss form

Answer 20

Separate form used with the commercial property coverage part of the commercial package policy that lists covered perils and exclusions; several different versions provide increasingly broader coverage from basic to broad to special.

Question 21

Business Income Policy

Answer 21

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 22

BOP

Answer 22

Package policy designed to provide broad property and liability coverage for small businesses; eligibility requirements are stricter than the CPP.

Question 23

Binder

Answer 23

Oral or written statement that provides immediate insurance protection for a special period; designed to provide temporary coverage until a policy is issued or denied.

Question 24

Coverage B of homeowner’s policy

Answer 24

Other structures; covers building and structures on the premises other than the dwelling set apart by a clear space from the dwelling; 10%of coverage A.

Question 25

Coverages excluded on dwelling policy.

Answer 25

Theft, vandalism and malicious mischief excluded on basic policy. Liability excluded on all policies.

Question 26

Coverage D on a HO policy-Loss of Use

Answer 26

If property loss makes the residence premises uninhabitable, the additional living expenses are covered; or if a covered loss to the insured’s property makes a part of the residence premises uninhabitable that is rented to others or held for rental by the insured, this coverage will pay the fair rental value.

Question 27

Condominium association coverage form

Answer 27

Commercial property coverage form that covers the buildings in a condo complex, does not cover the condo owner’s personal property.

Question 28

Coverage F on HO policy

Answer 28

Medical payments to others; pays all necessary medical expenses for up to three years after an accident.

Question 29

Coinsurance clause on property

Answer 29

Insurance Carried
___________________ x amount of loss
Insurance required

Question 30

Coverage limit on money in HO

Answer 30

$200 limit on personal property with special limits

Question 31

Coverage D on a dwelling policy

Answer 31

Fair rental value is covered on a dwelling policy.

Question 32

Excess Insurance

Answer 32

When two or more polices or coverage apply to the same loss, the one that applies only after the limits of the primary coverage have been exhausted.

Question 33

Equipment breakdown coverage; boiler and machinery coverage

Answer 33

Part of the commercial package policy that covers a loss due to breakdown of business equipment due to direct or indirect loss.

Question 34

Direct Loss

Answer 34

Financial loss resulting directly from a loss of property.

Question 35

Deductible

Answer 35

The amount of expenses that must be paid out of pocket before the insurer will pay any expenses from a covered loss.

Question 36

Extra Expense

Answer 36

Commercial Property coverage form that covers additional expenses incurred by the insured business to continue operations following a direct loss by a peril insured against.

Question 37

Estoppel

Answer 37

Principle that states that if one intentionally or unintentionally creates the impression that a certain fact exists, and an innocent party relies on that impression and is injured as a result, the guilty party may be legally prohibited from asserting that the fact does not exist.

Question 38

Eligible for dwelling policy

Answer 38

Provides coverage for the following:
- up to 5 boarders
- up to 4 apartments
- mobile home
- residence rented to others
- vacation home
- townhouse/rowhouse
- home under construction

Question 39

Difference in conditions insurance (DIC)

Answer 39

Type of commercial property policy that covers most insurable perils but excludes basic fire and extended coverage perils.

Question 40

Freight Insurance

Answer 40

Type of ocean marine insurance that protects the insured against the loss of shipping costs.

Question 41

Flood

Answer 41

• an overflow of inland or tidal waves
• usual and rapid accumulation or runoff of surface water from any source, unless general flooding exists.
• mudslides caused by accumulations of water on the ground or underground
• collapse of land as a result of excessive erosion due to flood

Question 42

Fiduciary

Answer 42

Someone who has undertaken to act for and on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence.

Question 43

Fair Access to Insurance Requirements (FAIR)

Answer 43

Program established by law that makes property insurance available to insureds who might otherwise be uninsurable in the standard market.

Question 44

Farm Policy Coverages

Answer 44

Farm Property
Coverage A - Dwelling
Coverage B- other structures non-farming
Coverage C- household personal property
Coverage D - loss of use
Farm Property Coverages
Coverage E - scheduled farm personal property
Coverage F - unscheduled farm personal property
Coverage G - barns, outbuildings, other farm structures
Farm Liability Coverages
Coverage H - BI and PD
Coverage I - personal and advertising injury
Coverage J - medical payments to others

Question 45

Floater

Answer 45

AN insurance policy, or an addition to another insurance policy, covering personal property deemed to be easily movable. It covers property lost, damaged or destroyed. (e.g., jewelry, electronics and furs)

Question 46

Fraud

Answer 46

A deliberate misrepresentation that causes harm; an all-out effort by one party to deceive and cheat the other; must have intent.

Question 47

Functional replacement cost

Answer 47

Damaged property is repaired or replaced with less expensive, but functionally equivalent, materials.

Question 48

Inland Marine Insurance

Answer 48

Property insurance coverage designed to insure exposures that cannot be conveniently or reasonably confined to a fixed location or insured under a standard form. Includes coverage for property in transit, overland, movable property, instruments of transportation and communication (bridges, roads, and television/radio towers), legal liability for bailees coverage and computerized equipment.

Question 49

Indirect loss

Answer 49

Loss that is the result or consequense of a direct loss.

Question 50

Implied Warranties

Answer 50

In ocean marine insurance, warranties that are not written into the policy, but have become a part of the policy by custom.

Question 51

Inherent Vice

Answer 51

Characteristic in property itself causing it to depreciate, spoil, break, become defective, disintegrate or destroy itself.

Question 52

Indemnity

Answer 52

Restores an insured to the approximate condition before the loss, no better or worse.

Question 53

HO - 4 Policy

Answer 53

Renter’s policy. Personal property covered under broad perils.

Question 54

HO - 3 Policy Perils

Answer 54

Dwelling covered for open perils and personal property covered for broad perils in this HO policy.

Question 55

HO - 3 Policy Perils

Answer 55

Dwelling covered for open perils and personal property covered for broad perils in this HO policy.

Question 56

Named Insured

Answer 56

Person, business or other entity named in the declarations to whom the policy is issued.

Question 57

MCS - 90

Answer 57

Endorsement attached to the trucker’s coverage form to provide public liability coverage.

Question 58

Liberalization Clause

Answer 58

Condition found in property insurance contracts that provides that if the insurer broadens coverage under a policy form or endorsement without requiring an additional premium, then all existing similar policies or endorsements will be construed to contain the broadened coverage.

Question 59

Jettison

Answer 59

A voluntary action to rid a ship of cargo to prevent further damage or peril.

Question 60

Insuring agreement

Answer 60

Section in the policy that describes what property is covered and the perils the policy insures against.

Question 61

Messenger

Answer 61

In a crime policy, defined as an insured, partner or employee who has care and custody of insured property outside the premises.

Question 62

Market Value

Answer 62

The amount property could be sold for at the time of loss. May be used to determine the amount of reimbursement for a loss.

Question 63

Legal Liability Coverage

Answer 63

Commercial property coverage form that covers the insured for liability arising out of negligent damage to the property of others while it is in the insured’s care.

Question 64

Intervening Cause

Answer 64

An independent action that breaks the chain of causation and sets in motion a new chain of events; when this occurs, it becomes the new proximate cause.

Question 65

National Flood Insurance Program (NFIP)

Answer 65

Program run by the federal government that makes flood insurance available to eligible communities at subsidized rate; includes coverage for both building and personal property with separate deductible for each.

Question 66

Named (specified) peril policy

Answer 66

Insurance policy that insures only against perils specifically listed in the policy.

Question 67

Motor truck cargo policy

Answer 67

Commercial inland marine policy that protects a carrier against it liability for damage to domestic shipments in its custody.

Question 68

Morale Hazard

Answer 68

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

Question 69

Mysterious disapperance

Answer 69

Loss of property due to unknown cause; theft must be ruled out.

Question 70

Motor carrier coverage form

Answer 70

Commercial auto coverage form that is an alternate to the trucker’s coverage form; it can be used to cover anyone who transports property by auto in a commercial enterprise.

Question 71

Personal effects form

Answer 71

Inland marine for that covers an insured’s personal belongings, such as baggage, while traveling.

Question 72

Parts of a legal contract (CLOC/CLAC)

Answer 72

• competent parties
• lawful objective
• offer and acceptance
• considertaion

Question 73

pair and set provision

Answer 73

Found in some property and inland marine policies stating the company will pay for loss of part of a set by either repairing or replacing the damaged article or paying the difference between the ACV of the intact set and the ACV of the articles remaining after the loss.

Question 74

Ocean marine insurance

Answer 74

Insurance designed to provide broad coverage for cargo and ships in transit over sea; includes cargo insurance, hull insurance, freight insurance and protection and indemnity insurance.

Question 75

Open peril; all risk; special coverage

Answer 75

Insurance policy that protects the insured from losses caused by any peril that is not specifically excluded by the policy.

Question 76

parts of a HO policy

Answer 76

Coverage A - dwelling
Coverage B - other structures
Coverage C - personal property/contents
Coverage D - loss of use/additional living expenses
Coverage E - personal liability
Coverage F - medical payments to others

Question 77

personal articles form

Answer 77

Inland marine form that provides scheduled coverage for nine optional classes of personal property: jewelry, furs, cameras, musical instruments, silverware, golf equipment, fine arts, stamp collections and coin collections.

Question 78

Primary insurance

Answer 78

When two or more coverages or policies apply to the same loss, primary insurance is the one that pays first, up to its limit of liability or the amount of the loss, whichever is less.

Question 79

Repair Cost

Answer 79

The cost to fix a damaged or destroyed item of property; may be the basis of reimbursement for a loss.

Question 80

Pure risk

Answer 80

A risk in which there is no chance of gain, only loss; only risk that is insurable.

Question 81

Protection and indemnity

Answer 81

Form of ocean marine liability insurance that covers variety of types of liability, such as damage to other property or another boat resulting from collision.

Question 82

Pro rata basis

Answer 82

Insurance company cancels the policy; unearned premium is returned to the insured. No penalty is applied to this method of cancellation.

Question 83

Pro rata other insurance; contribution by limits

Answer 83

Method of handling insurance when more than one coverage applies to a loss; each coverage pays a portion of the loss in proportion to the relationship its limit of liability bears to the total limit of liability under all applicable insurance.

Question 84

Proximate Cause

Answer 84

An action that, in natural and continuous sequence, produces a loss, “if it had not been for …”

Question 85

Replacement cost

Answer 85

The cost to replace the lost or damaged property with property of like kind and quality, without a deduction for depreciation.

Question 86

Recovery Clause

Answer 86

In a property form, if the property is recovered after the insured have received payment for the loss the insured must notify the insurance company. The insured must make a decision either to keep property or the settlement amount but not both.

Question 87

Representaion

Answer 87

Statements on an insurance application that the applicant believes are true; not considered a matter to which the parties contract, so a policy cannot be voided on this basis.

Question 88

Scheduled coverage

Answer 88

Property that is specifically listed in the declarations and covered for a specific amount; also called specific insurance.

Question 89

Short Rate

Answer 89

When an insured cancels a policy before the expiration date, the insurance company keeps the premium for insurance already provided (called earned premium), but also keeps an allowance (Called penalty or surcharge) for expenses on the unearned premium.

Question 90

Subrogation

Answer 90

Prevents double recovery by assigning or substituting the right of one party (insured) to another (insurer) to collect damages from another party.

Question 91

Salvage

Answer 91

Insured property that is damaged by a covered peril; the insured is paid by the insurance company who may take possession of the property.

Question 92

Self-Insurance

Answer 92

Alternative to purchasing insurance where a company or individual assumes the risk of paying for its losses and sets aside the necessary funds to pay for such a loss.

Question 93

Stated - value policy

Answer 93

Insurance contract written to insure property or a piece of property for specific amount, Fine arts, collectibles and other hard-to-value assets may be valued this way.

Question 94

Terrorism Risk Insurance Act (TRIA)

Answer 94

Federal law designed to ensure that insurance coverage for terrorism losses under commercial line polices will be available and affordable; it requires insurers to pay a specified amount for terrorism losses in a given calendar year; once that limit is reached, the federal government will reimburse insurers 85% of insured losses that exceed the limit.

Act of terrorism to be certified by the Secretary of the Treasury in concurrence with Secretary of State and Attorney General of the United States.

Question 95

Time Element Coverage

Answer 95

Coverage for the loss of business income over a period of time that results from direct physical loss.

Question 96

Unilateral Contract

Answer 96

A type of contract that is one sided; an insurance policy is one sided because only the insurer is legally bound to perform its part of the agreement.

Question 97

Vacancy

Answer 97

Absence of both people and property from the insured premises - no contents/no activity.

Question 98

Warranty

Answer 98

A specific agreement between the insured and the insurer that becomes a part of the insurance policy; a breach of warranty can void the policy.

Question 99

Trip transit policy

Answer 99

Nonfiled commercial inland marine policy that covers a single shipment of goods.

Question 100

Unoccupied

Answer 100

Absence of people from the insured premises - contents with no activity

Question 101

Value reporting endorsement

Answer 101

Endorsement used with the commercial property coverage part to provide coverage based on the actual values of property at certain locations at specific times.