Insurance Terms & Related Concepts

Question 1

An insurer discovers that an applicant for a policy has submitted a fraudulent insurance claim in the past. What type of hazard does this represent?

Answer 1

Moral Risk

Question 2

If an insured peril was the proximate cause of loss, what type of loss is it?

Answer 2

Direct Loss

Question 3

A tornado that destroys a property would be an example of what?

Answer 3

Peril

Question 4

What is Burglary?

Answer 4

A forced entry into another’s premises with felonious intent.

Question 5

A situation in which a person can experience only a loss and no gain presents what type of risk?

Answer 5

Pure Risk

Question 6

Insurance is a contract that protects the insured from what?

Answer 6

Loss

Question 7

What do individuals use to transfer their risk of loss to a larger group?

Answer 7

Insurance

Question 8

How is Actual Cash Value (ACV) calculated?

Answer 8

ACV = Current Replacement Cost - Depreciation

Question 9

How are direct and indirect losses related?

Answer 9

Direct losses can cause indirect losses

Question 10

What provision found in property policies prevents an insured from collecting twice for the same loss: once from the insurer and again for a third party?

Answer 10

Suborgation

Question 11

What term describes a loss caused by continuous exposure to a condition?

Answer 11

Occurrence

Question 12

What does indemnify mean in insurance?

Answer 12

To restore an insured to the same financial status as before a loss.

Question 13

In property insurance, what is actual cash value?

Answer 13

Replacement cost at the time of the loss, minus depreciation.

Question 14

(Insurance Carried divided by Insurance Required) x Loss Amount =

Answer 14

Loss payment

Question 15

What type of limits of liability has the limits separately stated for different coverages?

Answer 15

Split limits

Question 16

If a manufactured product is unsafe, what type of liability applies to the manufacturer?

Answer 16

Strict liability

Question 17

A policy that covers all causes of loss except for those specifically excluded is known as what type of policy?

Answer 17

Open peril (or special) form

Question 18

Conditions that increase the chance of a loss are known as what?

Answer 18

Hazards

Question 19

What are the three types of hazards?

Answer 19

Physical, moral, and morale

Question 20

What is a risk?

Answer 20

Uncertainty of loss

Question 21

What are the two types of compensatory damages?

Answer 21

Special and general

Question 22

A person who does not lock the doors to his or her house shows an indifferent attitude. What type of hazard does this represent?

Answer 22

Morale

Question 23

Under absolute liability, does an injured party need to prove negligence?

Answer 23

No. Absolute liability exists when a condition or conduct is inherently dangerous, so no proof of negligence is not required.

Question 24

What is negligence?

Answer 24

Failure to act as a reasonable, prudent person under given circumstance.

Question 25

What provision states that if a policy allows for greater benefits than the financial loss incurred, the insured, the insured may be compensated only for the amount lost?

Answer 25

Indemnity

Question 26

Both robbery and burglary can be considered what?

Answer 26

Theft

Question 27

What is the term for the causes of loss insured against in an insurance policy?

Answer 27

Peril

Question 28

What determines an insurer’s responsibility for payment, as stated in an insurance policy?

Answer 28

Limits of liability

Question 29

What is a deductible in an insurance policy?

Answer 29

A specified dollar amount that the insured must pay before the insurer will pay the policy benefits.

Question 30

What term defines an exact, direct, and uninterrupted cause of lost?

Answer 30

Proximate cause

Question 31

The reduction, decrease, or disappearance of value of the person or property in a policy is known as what?

Answer 31

Loss

Question 32

Wagering on a sporting event is known as what type of risk?

Answer 32

Speculative

Question 33

What law protects consumers from the circulation of inaccurate or obsolete information?

Answer 33

The Fair Credit Reporting Act

Question 34

What is the difference between vacancy and unoccupancy?

Answer 34

Vacancy refers to an insured structure in which no people have been living or working and no property has been stored for the specified period of time. Unoccupancy refers to an insured structure in which no people have been living or working within the required period of time, but some property is stored.

Question 35

What type of policy insures all property at multiple locations for a single amount?

Answer 35

Blanket policy

Question 36

An insured’s business is damaged by a fire, and temporarily shut down for repairs. As a result, the insured suffers loss of income. What type of loss is the loss of income?

Answer 36

Indirect or consequential

Question 37

What is subrogation?

Answer 37

An insurer’s legal right to seek damages from third parties after reimbursing insureds for a loss.

Question 38

In property insurance, what is the purpose of a coinsurance clause?

Answer 38

To encourage insureds to insure close to its value

Question 39

In property insurance, when must insurable interest exist?

Answer 39

At the time of loss

Question 40

What sublimit in a liability policy puts a ceiling on the payment for all claims that arise from a single accident?

Answer 40

Per occurrence