Chap 5 Commercial insurance

Question 1

2 types of commercial insurance

Answer 1

1) Property Insurance (-direct loss -Indirect loss)

2) Liability Insurance ( -General liability -Professional liability -Employer liability)

Question 2

Commercial insurance/ General Liability insurance

Answer 2

it is defined as the legal liability that an enterprise faces when running its day to day operations

Question 3

Commercial insurance/ General Liability insurance/ 5 areas

Answer 3

1) Operations
2) Product
3) Completed Operations
4) Contingent liability
5) Contractual liability

Question 4

Commercial insurance/ professional liability

Answer 4

Arise from negligent act, errors, omissions and poor performance by employees when performing their professional duties.

Question 5

Commercial insurance/ employer liability

Answer 5

Covers the various risk exposure that an organization faces when it employs people to complete various tasks

Question 6

Commercial insurance/ occurrence

Answer 6

Commercial insurance require that the loss or bodily harm be caused by an occurrence which includes:

1) continuous or repeated events over a period of time
2) accident
3) series of accident

Question 7

Commercial insurance/occurrence policies

Answer 7

Pays for the loss that occurred during the policy period regardless of when the claim is filled

Question 8

Commercial insurance/claim made policies

Answer 8

Pay for loss after a certain date but the claim are made during the policy period

Question 9

Commercial insurance/ 3possible types of deductibles

Answer 9

1) aggregate deductible
2) straight or per occurrence deductible
3) franchise deductible

Question 10

Commercial insurance/ aggregate deductible

Answer 10

The firm pays all the losses for the year until the deductible limit is reached

Question 11

Commercial insurance/straight or per occurrence deductible

Answer 11

The firm pays the deductible for each separate loss

Question 12

Commercial insurance/franchise deductible

Answer 12

It is only for ocean marine insurance. Either a dollar amount or a percentage of the loss and the entire loss is paid once the loss is greater than the deductible

Question 13

Commercial insurance/ stop loss provision

Answer 13

Caps the amount the insured pays in total through out the policy period

Question 14

Commercial insurance/ coinsurance in commercial property

Answer 14

An insured can elect to underinsure but will pay a higher premiums for doing so and is expected to keep the amount of coverage based on the current replacement value. If so, the insurer will pay all losses up to the limit of the policy

Question 15

Commercial insurance/ coinsurance for commercial property: calculation of pure premiums

Answer 15

Expected loss paid / $coverage

Question 16

Commercial insurance/ coinsurance for indirect loss

Answer 16

Covers extra expenses for additional cost incurred as a result of a direct loss. The coinsurance requirement is based on the amount of time a firm would be shut down if is incurred a loss

Question 17

Commercial insurance/ captive insurers

Answer 17

Insurance companies owned by a firm or firms. The insurer insures the firm and perhaps other non related companies to capitalize on risk pooling. Can be pure captive or group captive

Question 18

Commercial insurance/ pure captive

Answer 18

Insures only parents and parent’s subsidiaries

Question 19

Commercial insurance/ group captives

Answer 19

Insurers having many parents

Question 20

Commercial insurance/ 3 structures of coverage

Answer 20

1) umbrella policy
2) blanket insurance
3) multiple-line insurance

Question 21

Commercial insurance/ structure of the coverage / umbrella policy

Answer 21

Provides protection against a catastrophic lawsuit by providing broad blanket coverage to areas not covered by the underlying policy. Covers beyond the scope of the underlying policy for personal injury and property damage

Question 22

Commercial insurance/ structure of the coverage/ blanket insurance

Answer 22

Provides coverage under a single limit for:

• 2 or more items
• 2 or more locations
• a combination of items and/or location

Question 23

Commercial insurance/ structure of the coverage/ multiple-line insurance

Answer 23

Covers property and casualty in one contract it could provide insurance for property, general liability, business income, equipment breakdown and crime

Question 24

Commercial property insurance

Answer 24

Covers damage and loss to property. Loss can be direct or indirect/ consequential

Question 25

Commercial property insurance / 2 categories of direct loss

Answer 25

Loss due to perils | Loss due to dishonesty

Question 26

Commercial property insurance / direct loss due to perils / extended coverage

Answer 26

Provides protection against perils not covered by the basic policy such as riot and civil commotion

Question 27

Commercial property insurance / direct loss due to perils / specified perils

Answer 27

Covers a list of perils named

Question 28

Commercial property insurance / direct loss due to perils / open perils

Answer 28

Provides coverage for every peril except for a list of exclusion

Question 29

Commercial property insurance / direct loss due to perils / 9 types of possible coverage

Answer 29

1) building and personal property 2) boiler and machinery 3) account receivable 4) Builder risk 5) condominium association 6) credit insurance 7) crop (hail) insurance 8) glass insurance 9) marine insurance

Question 30

Commercial property insurance / direct loss due to perils / 3 types of building and personal property

Answer 30

1) real property 2) business personal property 3) personal property of others

Question 31

Commercial property insurance / direct loss due to perils / boiler and machinery insurance

Answer 31

Protects against physical damage and financial loss that result from sudden and accidental breakdown of boiler machinery and equipment. It might provide inspection and repairs before the machine breaks down

Question 32

Commercial property insurance / direct loss due to perils /builders risk

Answer 32

Covers buildings under construction for fire, windstorm, flood, earthquake and vandalism

Question 33

Commercial property insurance / direct loss due to perils /Credit insurance

Answer 33

Protects manufacturers, wholesales, and service organizations against consumer insolvency

Question 34

Commercial property insurance / direct loss due to perils / glass insurance

Answer 34

Provides coverage for plate glass windows and doors which are often excluded from building coverage

Question 35

Commercial property insurance / direct loss due to perils / 2 types of marine insurance

Answer 35

1) ocean marine | 2) island marine

Question 36

Commercial property insurance / direct loss due to perils / 4 major types of ocean marine insurance

Answer 36

1) Cargo insurance 2) Hull insurance 3) Protection and indemnity insurance 4) Freight insurance

Question 37

Commercial property insurance / direct loss due to perils / ocean marine insurance/ cargo insurance

Answer 37

Covers goods being shipped for damage and loss

Question 38

Commercial property insurance / direct loss due to perils / ocean marine insurance/ hull insurance

Answer 38

Covers the ship on an all risk basis

Question 39

Commercial property insurance / direct loss due to perils / ocean marine insurance/ protection and indemnity

Answer 39

Covers: 1) damage to piers, docks, and the ship's cargo 2) illness or injury to passengers and crew 3) fines and penalties

Question 40

Commercial property insurance / direct loss due to perils / ocean marine insurance/ freight insurance

Answer 40

Covers loss of earnings to the ship's owner if goods are damaged or losed and can't be delivered

Question 41

Commercial property insurance / direct loss due to perils / island marine insurance

Answer 41

Covers articles in transit and also bridges and tunnels

Question 42

Commercial property insurance / direct loss due to perils / 3 major types of island marine insurance

Answer 42

1) Bailee 2) business floaters 3) means of transportation

Question 43

Commercial property insurance / direct loss due to perils / island marine insurance/ bailee coverage

Answer 43

Covers property held by someone who has temporary procession of the property that belongs to another

Question 44

Commercial property insurance / direct loss due to perils / island marine insurance/ business coverage

Answer 44

Policy that provides broad and comprehensive protection on a property that is frequently moved from one location to another

Question 45

Commercial property insurance / direct loss due to dishonesty/ 2 types of insurance

Answer 45

1) crime insurance for non employee theft | 2) theft by employees covered by fidelity bonds

Question 46

Commercial property insurance / direct loss due to dishonesty / non employee theft / 5 major types of coverage

Answer 46

1) forgery or alteration 2) inside the premises 3) outside the premises 4) computer fraud 5) money orders and counterfeit currency

Question 47

Commercial property insurance / indirect or consequential losses / 6 types of coverages

Answer 47

1) Business income 2) Spoiled food 3) Extra expenses 4) Contingent business interruption 5) leasehold interest 6) rain insurance

Question 48

Commercial liability insurance / vicarious liability

Answer 48

The obligation of a principal to pay the losses of a third party caused. Y an agent such as an employee

Question 49

Commercial liability / strict liability

Answer 49

Those engaging in certain undertaking such as hazardous practices like the industrial use of high explosives are held responsible for injury without inquiry into fault

Question 50

Commercial liability/ products liability

Answer 50

It is increasingly held to strict liability for makers of items such as foods, cosmetics, drugs, automobile

Question 51

Commercial liability/ general liability/ 5 specific policies not covered by the exceptions

Answer 51

1) personal and advertising injury 2) environmental liability 3) fire legal liability 4) liquor liability 5) property in the insured's care custody or control

Question 52

Commercial liability/ 5 types of professional liability

Answer 52

1) errors and omissions 2) directors and officers 3) malpractice 4) architects and engineers 5) general partners liability

Question 53

Commercial insurance/ Surety bonds

Answer 53

Bond that provides monetary compensation if the bonded party fails to perform certain acts. They guarantee the performance of the principal

Question 54

Commercial liability/ 3 parties involved in a surety bond

Answer 54

Principal (party bonded ) obligee (party reimbursed for the damages ) surety ( party the agrees to answer for the debt)

Question 55

Commercial liability / 9 types of surety bonds

Answer 55

1) auctioneer's bond 2) insurance agent bond 3) judaical bond 4) federal surety bond 5) fiduciary bond 6) license and permit bond 7) lost instrument bond 8) public official bond 9) contract bond