Chapter 2: Property Basics

Question 1

Continuous or repeated exposure

Answer 1

Occurence

Question 2

The termination of an insurance policy before its expiration date

Answer 2

Cancellation

Question 3

A proportionate cancellation of insurance that refunds premium to the insured based on the precise number of days coverage was in effect

Unearned premium is the premium refunded to the insured for the number of days coverage was not in place

Answer 3

Pro Rata Cancellation

Question 4

Cancellation of insurance that incurs a financial penalty. Sometimes when the insured cancels the policy before its expiration date

Answer 4

Short Rate Cancellation

Question 5

Termination of a policy at the expiration of its term

Answer 5

Non-renewal

Question 6

First event in the unbroken chain of events that resulted in loss
Most significant impact

Answer 6

Proximate Cause

Question 7

A fire that burn outside its intended boundaries

Answer 7

Hostile fire

Question 8

A fire that was intentionally set and stays within its intended boundaries

Answer 8

Friendly fire

Question 9

Rust, rot, and the fading of paint. not covered by a property policy

Answer 9

Inherent vice

Question 10

Temporary proof of insurance until the insurer is able to issue an insurance policy

Answer 10

Binder

Question 11

Process were disputed claim is settled by a neutral third part

Answer 11

Arbitration

Question 12

Right of the insurer to take possession

Answer 12

Right of Salvage

Question 13

Alters or adds to the provisions of a property and casualty insurance contract

Answer 13

Endorsement

Question 14

A principle holding that when two perils simultaneously cause a loss, the insurer must pay the loss even if one of the perils is excluded by the policy

Answer 14

Concurrent Causation

Question 15

The existence of two or more policies covering the same exposures, having the same policy periods, and the same coverage triggers.
ex. auto and umbrella written with the same policy dates

Answer 15

Concurrency/ Concurrent Policies

Question 16

The existence of two or more policies covering the same exposures that don’t have the same policy periods

Answer 16

Non-Concurrency/Non-Concurrent Policies

Question 17

Tool to limit small claims

Answer 17

Deductible

Question 18

Words, terms, and phrases that are clearly described and used in an insurance policy

Answer 18

Definitions

Question 19

A person or any organization to which property has been entrusted, usually for repairs, servicing or storage

Answer 19

Bailee

Question 20

A person or organization that entrust property to a bailee

Answer 20

Bailor

Question 21

ONLY after loss or damage exceeds a stated amount or the limits stated in specific policies or self-insurance. Excess insurance may be written over primary, excess, or umbrella insurance.

Answer 21

Excess Insurance

Question 22

A property that contains personal property but has no occupants

Answer 22

Unoccupancy

Question 23

Does not contain sufficient personal property to support intended occupancy
(like a motel)
-no contents, no people

Answer 23

Vacancy

Question 24

The taking of property from inside the premises or a locked safe or vault by a person who commits forcible entry into, or exit from, the property of another

Answer 24

Burglary

Question 25

The taking of property from the care and custody of a person who has been caused or threatened with bodily hard

Answer 25

Robbery

Question 26

The broadest of the crime coverages, the act of stealing

Answer 26

Theft

Question 27

Which of the following is attached to the policy to alter or add to the policy provisions? a. binder b. endorsement c. definitions d. excess insurance

Answer 27

b

Question 28

A person who takes possession of another person's property in order to repair it is called? a. assignee b. bailor c. subrogee d. bailee

Answer 28

d

Question 29

If the insured does not agree with the insurer's decision regarding a claim, what process helps decide the outcome a. Insurance company conference b. Arbitration c. Inspection d. Consequential hearing

Answer 29

b

Question 30

Direct damage to property without an intervening cause

Answer 30

Direct loss

Question 31

A loss that is not the direct result of a peril

Answer 31

Indirect loss

Question 32

Only provides insurance for the causes of loss, or perils, listed. If a peril is not "named" in the policy, no coverage applies

Answer 32

Named perils

Question 33

Provides insurance for all causes of loss that are not specifically excluded

Answer 33

Open perils

Question 34

Cost to replace property with property of a like kind and quality, at current pricing, without a deduction for depreciation

Answer 34

Replacement Value

Question 35

Cost to repair or replace property at its replacement value minus depreciation

Answer 35

Actual Cash Value (ACV)

Question 36

The insurance company and insured agree to a specific value of a particular property before the policy is issued

Answer 36

Agreed Value

Question 37

States the value of a particular property on the declarations page, but provides for the insurer to pay the lesser of the stated value or ACV

Answer 37

Stated Value

Question 38

States the value of property as the amount shown on the declarations page and will pay that full face value in the event of a total loss

Answer 38

Valued Policy

Question 39

The cost to replace property with other property that performs the same function with similar efficiency

Answer 39

Functional Replacement Value

Question 40

The price a willing buyer would pay for property purchased

Answer 40

Market Value

Question 41

A building that has a roof, floor, and supports of combustible material, usually wood, and combustible interior walls

Answer 41

Frame

Question 42

Building with exterior walls of masonry or fire-resistive construction

Answer 42

Joisted Masonry

Question 43

Constructed of noncombustible material

Answer 43

Noncombustible

Question 44

Exterior walls of masonry or made fire resistive construction with a rating of not less than one hour

Answer 44

Masonry Noncombustible

Question 45

Reinforced concrete and steel. Must have at least a 2-hour fire resistive rating

Answer 45

Fire Resistive

Question 46

Fire resistive rating of at least 1 hour, but less than 2 hours

Answer 46

Modified Fire Resistive

Question 47

Each of the following is a direct loss, except: a. loss of income b. fire damage c. cracked windshield d. broken pipe water damage

Answer 47

a

Question 48

_____ is the method of loss valuation that values damages property at the cost to replace with property of like kind and quality, at current prices, and without deduction for depreciation a. functional replacement cost b. actual cash value c. replacement value d. market value

Answer 48

c

Question 49

What calculation is used to determine the actual cash value (ACV) of a loss? a. market value - depreciation = ACV b. replacement cost - depreciation = ACV c. market value - original purchase price = ACV d. Replacement cost - market value = ACV

Answer 49

b

Question 50

Single item of property for a single limit of insurance - 1 item - 1 limit

Answer 50

Specific Limit

Question 51

One or more items of property on a single policy - per item - all on 1 policy

Answer 51

Scheduled Limit

Question 52

Property located at more than one location OR more than one type of property at the same location OR both -covers everything

Answer 52

Blanket Limit

Question 53

D I C E

Answer 53

declarations insuring agreement conditions exclusions

Question 54

Which of the following BEST describes a scheduled limit of insurance on a property policy? a. insures multiple items of property on multiple policies b. insures multiple items of property on a single policy c. insures a single item of property on a single policy for a specific limit d. insures a single item of property at a blanket limit

Answer 54

b

Question 55

What part of the policy includes the who, what, where, when, how much

Answer 55

Declarations

Question 56

Insurance company's promise to pay the insured

Answer 56

Insuring Agreement

Question 57

States the obligations of the parties to the contract

Answer 57

Conditions

Question 58

When the policy is in force

Answer 58

Policy Period

Question 59

Broadens coverage with no increase

Answer 59

Liberalization Clause

Question 60

Specifies the terms under which the policy can be cancelled

Answer 60

Cancellation

Question 61

addresses the requirements of the insurer if it elects not to renew a policy

Answer 61

Nonrenewal

Question 62

Specifies that the insured may not transfer rights of ownership

Answer 62

Assignment

Question 63

- prevents the insured from collecting twice - helps the insurer control expenses - holds the responsible third party accountable

Answer 63

Subrogation

Question 64

The insurer will not be responsible for payment of loss in an amount greater than the financial interest of an insured

Answer 64

Insurable Interest and Limit of Liability

Question 65

To restore a policy to its initial face value or not reduce limits of coverage after the insurer has paid a claim

Answer 65

Restoration/Non-reduction of Limits

Question 66

- Giving prompt written notice - Notify the police if a theft occurred - Cooperating - Protecting property - Inventory of damaged property - Allow insurer to inspect damaged property - Submit proof of loss

Answer 66

Duties in the Event of Loss

Question 67

Proof of loss includes:

Answer 67

1. time and cause of loss 2. any other insurance that may cover loss 3. appropriate receipts, evidence, or affidavits to support the loss

Question 68

Addresses disputes about the mount of a loss

Answer 68

Appraisal

Question 69

Specifies the process to be followed when more than one policy covers the same loss

Answer 69

Other insurance

Question 70

No one may bring suit against the insurer until all terms and conditions of the policy have been complied with

Answer 70

Legal Action Against Us

Question 71

How the insurer will make payment for loss

Answer 71

Loss payment

Question 72

Insurer is not obligated to accept any property abandoned by an insured

Answer 72

Abandonment of Property

Question 73

Specifies how the policy protects the mortgagee's financial interest

Answer 73

Mortgage Clause

Question 74

Specifies how the policy protects the interests of a loss payee. A loss payee has insurable interest in personal property

Answer 74

Loss Payable Clause

Question 75

Specifies that no coverage applies if loss payment benefits a bailee

Answer 75

Non Benefit to Bailee

Question 76

Insured has the right of keeping the claim payment or returning the claim payment and retaining right to the property after adjustments have been made for any damage

Answer 76

Recovered property

Question 77

Perils that are NOT covered by the policy

Answer 77

Exclusions

Question 78

What are the exclusions:

Answer 78

``` Ordinance or Law Earth movement War Water perils Utility failure Neglect of the insured Intentional loss Nuclear hazard, war, and military action Governmental action Fungus, wet rot, dry rot, and bacteria ```

Question 79

Coverages that are automatically included in property policies without an additional premium

Answer 79

Additional coverages

Question 80

The duties and obligations of the insured are found under what part of the insurance policy? a. declarations b. insuring agreement c. additional coverages d. conditions

Answer 80

d

Question 81

A liberalization clause serves which of the following purposes? a. at each annual renewal, the policy limit automatically increases in value b. the insurer has the right to recover from any party causing a loss c. the insured is given permission to bring suit against the insurer d. broadened coverage applies automatically to all policies without a premium charge

Answer 81

d

Question 82

Each of the following is a typical property insurance policy exclusion, except: a. ordinance or law b. flood c. fire d. neglect

Answer 82

c

Question 83

a provision used to encourage the insured to purchase and maintain insurance to value

Answer 83

Coinsurance | 80%

Question 84

Which of the following has the broadest coverage under the insurance policy? a. named insured b. insured c. first named insured d. additional insured

Answer 84

a

Question 85

Which of the following is not true of coinsurance? a. it is a common policy provision b. it encourages the insured to maintain insurance to value c. it applies in the event of a loss d. the higher the coinsurance percentage purchased, the lower the rate the insured pays

Answer 85

c