Unit Three Basics of Property and Casualty Insurance

Question 1

What does property insurance cover?

Answer 1

It covers “my stuff” meaning buildings (real property) and personal belongings know as “first party loss”

Question 2

What is casualty insurance?

Answer 2

Liability insurance it always pays the other guy never me 

Question 3

Who is the first party 

Answer 3

The insured

Question 4

Who is the second party?

Answer 4

The insurer

Question 5

Who is the third-party?

Answer 5

The other guy

Question 6

List the policy sections (DICEE)

Answer 6

Declarations
Insuring agreement(s)
Conditions
Endorsements
Exclusions

Question 7

What is in the declarations section?

Answer 7

The name of the insured(s) a current address a legal description of the insured property the policy deductibles and the term of coverage are contained. This information is used to help determine the premium cost of the policy.

Question 8

What is in the insuring agreement section?

Answer 8

The covered perils or risks assumed by the insurer and makes reference to the contractual agreement between the insurer and the insured. It’s summarizes the major promises of the insurance company as well as states what is covered. 

Question 9

What is in the conditions section? 

Answer 9

The policy, provisions rules of conduct duties and obligations required for coverage.

Question 10

What is in the endorsements section? 

Answer 10

Changes to the original policy that were added, modified or taken away and are still a part of the legal contract

Question 11

What is in the exclusions section?

Answer 11

Items not covered by the policy

Question 12

What is additional/supplementary coverage?

Answer 12

Provides payment for certain additional expenses. Depending on the policy, this coverage may have separate limits of insured and may be paid in addition to the maximum limit of liability.

Question 13

What is listed in the definition section?

Answer 13

It clarifies the meanings of certain terms used in the policy

Question 14

Who is in the named insured section? 

Answer 14

The person business or other entity named in the declarations to which the policy is issued 

Question 15

Who is listed in the first name insured?

Answer 15

The person listed first on the declaration page where there is more than one name insured. This is typically used when there are multiple partners in a business 

Question 16

How would you add resident relatives to your insurance policy?

Answer 16

Insureds-by definition

Question 17

How would you add additional insured to your policy?

Answer 17

Added by endorsement 

Question 18

What does policy period mean

Answer 18

When the policy begins and ends

Question 19

What does policy territory mean?

Answer 19

Where a policy must occur

Question 20

What does unearned premium mean?

Answer 20

If the insured had paid premiums in advance for future months and canceled their policy before it ends the company must return the unused premium

Question 21

What does prorated basis mean?

Answer 21

That the insured will receive a portion of the premium back, depending on when the policy is canceled

Question 22

What is a flat rate cancellation?

Answer 22

When a policy is canceled on the effective date by either the insurer or the insured

Question 23

When does nonrenewal occur?

Answer 23

At the expiration date 

Question 24

What is deductible?

Answer 24

Amount of loss paid by the insured. The higher, the deductible, the lower, the premium.

Question 25

What is the concept of indemnity?

Answer 25

To restore the insured to their original pre-loss condition - no better and no worse 

Question 26

What is the concept of indemnity?

Answer 26

To restore the insured to their original pre-loss condition - no better and no worse 

Question 27

What is non-concurrency 

Answer 27

The result of two or more policies covering the same property, but providing different or non-identical coverage

Question 28

Sum up Primary insurance and excess coverage?

Answer 28

Excess pace, what is not covered by primary? 

Question 29

What is pro rata?

Answer 29

Each insurer liable for portion of loss 

Question 30

How do you calculate pro rata?

Answer 30

Policy limit of one company/policy limit of all companies x LOSS

Question 31

What is contribution by equal shares?

Answer 31

Each policy pays the same up to the smallest policy limit

Question 32

What are the duties after a lost?

Answer 32

•Prompt notice of claim to the insurer •Protect the property from further damage •Complete detailed proof of loss •Make the property available for inspection •Submit to examination under oath if required •Cooperate with the insurer 

Question 33

What does the assignment condition specify?

Answer 33

A policy cannot be transferred without written consent from the insurer.

Question 34

What provision allows illegal representative to have a policy transferred in their name if the first owner died

Answer 34

Transfer of rights

Question 35

What is abandonment?

Answer 35

Insured cannot abandon property that can be repaired and expect to be paid as if the loss was total 

Question 36

What is salvage and who has the right to it?

Answer 36

Salvage property can lower the claim cost for the insurance company and the insurer has the right of salvage not the insured 

Question 37

What is liberalization?

Answer 37

• extended coverage to insured • no additional premium charged • no action required by insured

Question 38

What is subrogation?

Answer 38

Insurer has the right to sue an at-fault party for damages if they have no insurance and the insurer how to pay the insured 

Question 39

What is insurable interest?

Answer 39

Risk of financial loss such as blood love or money May present at the time of application must be present at the time of loss

Question 40

What is underwriting?

Answer 40

The process of evaluating the risk and exposures of potential clients 

Question 41

Who ultimately decides whether to accept or reject the application for insurance

Answer 41

Underwriters

Question 42

What is a binder?

Answer 42

temporary insurance

Question 43

Who can give a binder and who can cancel a binder?

Answer 43

Usually given by the agent verbally or in writing The company cancels the binder

Question 44

Does a binder guarantee a policy will be issued

Answer 44

No

Question 45

When does a binder end?

Answer 45

Automatically ends if a policy is issued by the underwriter or if canceled by the insurance company

Question 46

What are the three ways to assign rates?

Answer 46

Judgment Manual Experience rating

Question 47

How is judgment rating determined?

Answer 47

There are no set rates in based upon underwriters experience

Question 48

How is manual rate determined?

Answer 48

Set rates for specific risk classes

Question 49

How is experience rating determined?

Answer 49

Modification factor based on loss experience Increases or decreases premium Usually a three-year period

Question 50

What is the fair credit reporting act?

Answer 50

Guidelines All insurers and producers must comply while pulling a customers personal information •MUST send notice to the applicant within three days after reporting was requested •if not the maximum penalty - $5000, 1 year in prison or both

Question 51

What does TRIPRA(TRIA) stand for?

Answer 51

Terrorism risk insurance program reauthorization act of 2019

Question 52

What does Gramm-Leach-Bliley Act (GLBA) protect?

Answer 52

The confidentiality of personal information 

Question 53

Since it is illegal to make false statements, if guilty, what happens

Answer 53

-fine, up to 10 years in prison or both -up to 15 years in prison, if false statements jeopardize insurer

Question 54

Since it is illegal to make false statements, if guilty, what happens

Answer 54

-fine, up to 10 years in prison or both -up to 15 years in prison, if false statements jeopardize insurer