Chapters 1-4 Review

Question 1

What loss valuation would you recommend to someone that wants protection for an expensive painting?

Answer 1

Agreed Value

Question 2

What gives immediate temporary insurance?

Answer 2

Binder

Question 3

The rate is too low for the risk

Answer 3

Adverse Selection

Question 4

Which of the following describes the concept of risk?

Cause of loss
Amount of the loss
Uncertainty of loss
Increase in chance of a loss

Answer 4

Uncertainty of loss

Question 5

The 4 elements that prove negligence

Answer 5

Duty to Act
Breach of Duty
Damages
Proximate Cause

Question 6

What are the 4 parts of the policy?

Answer 6

Declarations
Insuring Agreement
Conditions
Exclusions

Question 7

What coverage pays when the Insured damages someone’s reputation?

Answer 7

Personal Injury

Question 8

What valuation pays the full cost of replacing a home even if it exceeds the policy limit?

Answer 8

Guaranteed Replacement Cost

Question 9

AKA Indirect Loss

Answer 9

Consequential Loss

Question 10

The characteristic where an insurer must stick to the language in a contract and any ambiguity is found in favor of the policyholder

Answer 10

Contract of Adhesion

Question 11

The formula for Actual Cash Value

Answer 11

Replacement Cost
Minus (or less)
Depreciation

Question 12

Where in a named peril policy would the Insured read the perils that will be covered?

Answer 12

Insuring Agreement

Question 13

Time frame credit data is used for underwriting for any adverse action

Answer 13

7 years

Question 14

A loss that is sudden and unexpected or an unforeseen event

Answer 14

Accident

Question 15

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

Answer 15

Named Insured

Question 16

A customer’s response to the best of their knowledge

Answer 16

Representation

Question 17

The 1st peril in an unbroken chain of events

Answer 17

Proximate Cause

Question 18

Which type of damages does NOT indemnify the injured party?

Answer 18

Punitive Damages

Question 19

Withholding/hiding information

Answer 19

Concealment

Question 20

A lie or incorrect response

Answer 20

Misrepresentation

Question 21

The pizzeria tells their delivery drivers if they have an accident while making a delivery, the pizzeria will not be responsible. What will make them responsible anyway?

Answer 21

Vicarious Liability

Question 22

What clause describes an insurer’s right to sue an at-fault party after reimbursing their own insured?

Answer 22

Subrogation

Question 23

Absolute or guaranteed truth

Answer 23

Warranty

Question 24

How will the unearned premium be returned if the policy is cancelled by the policyholder?

Answer 24

Short Rate

Question 25

The 3 categories of exclusions

Answer 25

Predictable Catastrophic Covered by Another Policy

Question 26

What is the MOST important piece of underwriting?

Answer 26

Policy Application

Question 27

Where in the contract would the Named Insured be able to read their deductibles?

Answer 27

Declarations

Question 28

A new homeowner fails to install a security system on their expensive home. Which hazard would this be considered?

Answer 28

Morale Hazard

Question 29

What is it called when an insurer voluntarily gives up a known right in the contract?

Answer 29

Waiver

Question 30

Where in the policy would the insured read the rules, duties, and clauses?

Answer 30

Conditions

Question 31

How will the unearned premium be returned if the policy is cancelled by the insurance company?

Answer 31

Pro-Rata

Question 32

Unequal transfer of value

Answer 32

Aleatory

Question 33

A policy should cover what a reasonable Policyholder would expect it to cover

Answer 33

Doctrine of Reasonable Expectation

Question 34

In which part of the policy would the Insured find the Insurance Company’s promise to pay?

Answer 34

Insuring Agreement

Question 35

Trying to prevent someone from exercising a known right based on their previous actions is called

Answer 35

Estoppel

Question 36

What is the consideration of the Policyholder?

Answer 36

Truthful statements and paying the premium

Question 37

Legal wrongs between individuals

Answer 37

Tort Law

Question 38

Selecting, classifying, pricing and insuring a risk

Answer 38

Underwriting

Question 39

What are the consequences of a material misrepresentation?

Answer 39

The policy can be voided

Question 40

The 4 defenses against negligence

Answer 40

Contributory Fault Intervening Cause Statue of Limitations Assumption of Risk

Question 41

Which part of the policy contains the Insurance Companies consideration?

Answer 41

Insuring Agreement

Question 42

A one sided contract written by an insurer where they are making a promise

Answer 42

Unilateral

Question 43

The failure to do what a reasonable and prudent person would do – being imprudent

Answer 43

Negligence

Question 44

Paying the value of the lost or damaged property, repairing the property, or taking the property at agreed value are examples of this

Answer 44

Claims Settlement Options

Question 45

A building is covered by two policies. Policy A covers $200,000 and Policy B covers $100,000. Under pro-rata, what would each company pay towards a $45,000 loss?

Answer 45

Co A 2/3 $30,000 Co B 1/3 $15,000

Question 46

All of these will appear on the Declarations Page, EXCEPT? Policyholder Effective Dates Policyholder’s date of birth Deductible

Answer 46

Date of Birth

Question 47

What is the pro-rata formula?

Answer 47

(Limit of Policy A/ Total Limit of All Policies ) x Loss

Question 48

What is the coinsurance formula?

Answer 48

(Limit of Insurance/80% of Property Value) x loss