Chapter 1 Review

Question 1

What are the four main parts of the policy?

Answer 1

Declarations
Insuring Agreement
Conditions
Exclusions

Question 2

Where in the policy
would the insured
read the perils that
will be covered?

Answer 2

The Insuring Agreement
P.P.E (3)

Question 3

Where in the policy
would the policy owner
read what perils are
covered when it is an
open peril policy?

Answer 3

The Exclusions

Question 4

Which hazard is
caused by the
dishonesty of the
insured?

Answer 4

Moral Hazard

Question 5

What term describes
the insurers right to
sue the at fault 3rd
party after
reimbursing the
insured?

Answer 5

Subrogation

Question 6

Transfer of Risk

Answer 6

Insurance

Question 7

Who can cancel
the policy at any
time for any reason?

Answer 7

The Named Insured

Question 8

Chance / Uncertainty of
loss

Answer 8

Risk

Question 9

The AKA for peril

Answer 9

Cause of Loss

Question 10

The three categories of
exclusions

Answer 10

Predictable
Catastrophic
Covered by another policy

Question 11

Repeated and long term
exposure, due to a peril

Answer 11

Occurrence

Question 12

All unearned premium
returned

Answer 12

Pro - Rata

Question 13

The insurance
company’s assumption
of your legal rights to sue
the at fault 3rd party

Answer 13

Subrogation

Question 14

In which part of the
policy would the insured
read the rules and
responsibilities of the
policy?

Answer 14

Conditions

Question 15

Which part of the policy
contains the insurance
companies
consideration?

Answer 15

Insuring
Agreement

Question 16

Giving up a right /
relinquishing a right

Answer 16

Waiver

Question 17

A physical or tangible
loss to property

Answer 17

Direct Loss

Question 18

An increased chance
of loss and involves
the dishonesty of the
insured

Answer 18

Moral Hazard

Question 19

A loss that is sudden
and unexpected

Answer 19

Accident

Question 20

Who is responsible for
payment on a personal
lines policy?

Answer 20

The Named
Insured

Question 21

Insurance is what type
of risk?
A. Pure risk
B. Speculative risk
C. Assumptive risk
D. Training risk

Answer 21

A. Pure risk

Question 22

Leaving your keys in a
running vehicle is an example
of :
A. Morale Hazard
B. Moral Hazard
C. Physical Hazard
D. An intentional Hazard

Answer 22

A. Morale Hazard

Question 23

Restoring the insured
to their previous
financial condition

Answer 23

Indemnify

Question 24

Where in the contract
would P be able to
find her name?

Answer 24

Declarations

Question 25

Your house caught on fire causing your neighbor’s house to catch on fire. What kind of loss is this?

Answer 25

Direct Loss

Question 26

Give one example of an indirect loss

Answer 26

* Renting a car after an accident * Staying in a hotel following a house fire * Loss of Rental Income house fire * Eating out after a kitchen fire

Question 27

Which is NOT true about exclusions? A. Losses from exclusions can often be covered by a separate policy. B. Catastrophic losses are never covered C. Intentional acts are never covered D. Losses from exclusions cannot often be covered on a separate policy.

Question 28

How is unearned premium returned when the insured cancels the policy

Answer 28

Short Rate​

Question 29

Risk is defined as:​ A. Sentimental loss​ B. Chance of loss​ C. Certainty of loss ​ D. Exposure​

Answer 29

B. Chance of loss​

Question 30

A new homeowner failing to install a security system would best be described as a:​

Answer 30

Morale Hazard​

Question 31

Which is NOT a method of handling risk?​ A. Avoid the risk​ B. Assumption of risk​ C. Transfer of risk​ D. Reduce the risk​

Question 32

Increases the chance of loss​

Answer 32

Hazard​

Question 33

Putting the insured back to their pre-loss status

Answer 33

Indemnify​

Question 34

Which is true about a deductible? A. When a higher deductible is selected the rate increases B. When a higher deductible is selected the rate decreases C. When a lower deductible is selected the rate stays the same D. When a lower deductible is selected the rate decreases

Answer 34

B. When a higher deductible is selected the rate decreases

Question 35

Which of the following describes the concept of risk? A. The cause of loss B. The amount of the loss C. The uncertainty of loss D. The increase of a chance of a loss

Answer 35

C. The uncertainty of loss

Question 36

In which part of the policy would the insured find the insurance company’s promise to pay? A. Insuring Agreement B. Declarations C. Conditions D. Exclusions

Answer 36

A. Insuring Agreement

Question 37

Rust on the bumper over time is an example of an: A. Accident B. Hazard C. Occurrence D. Upset

Answer 37

C. Occurrence