P&C

Question 1

The uncertainty about loss that exists whenever more than one outcome is possible is called a:

Answer 1

Risk

Question 2

A property and casualty insurance agent frequently has the authority to provide temporary insurance coverage known as a:

Answer 2

Binder

Question 3

Something that may increase the seriousness of a loss if loss occurs, or that increases the likelihood that a loss will occur, is called a:

Answer 3

Hazard

Question 4

The law of large numbers states that:

Answer 4

The predictions become more accurate as the number of units being considered increases.

Question 5

The tendency to create a loss on purpose, to collect from the insurance company is called a:

Answer 5

Moral hazard

Question 6

In property, casualty and medical-expense insurance, the principle of making someone whole again after a loss by paying only for actual losses is called:

Answer 6

Indemnity

Question 7

Liability that arises from an extremely dangerous situation. It is often found in cases involving explosives. Also known as “strict liability”.

Answer 7

Absolute liability

Question 8

A sudden and unexpected event, occurring at a specific time and place.

Answer 8

Accident

Question 9

The cost to replace an item of property at the time of loss, less an allowance for depreciation. Often used to determine amount of reimbursement for a loss (Replacement Cost minus Deprecation)

Answer 9

Actual Cash Value (ACV)

Question 10

A person, firm, or corporation other than the Named Insured on a policy, or a lender named in a mortgage clause, who is protected against loss by the terms of the policy.

Answer 10

Additional insured

Question 11

A coverage designed to reimburse the insured for an increase in living expenses necessitated by loss to the dwelling. This Indirect Loss must be the result of Direct Loss by a covered Peril.

Answer 11

Additional Living Expense

Question 12

Represents the insurance company and acts for the company in working on agreements as to the amount of a loss and the liability of the company.

Answer 12

Adjuster

Question 13

A company that meets the state insurance department’s standards and is authorized by the Director to do business in the state.

Answer 13

Admitted Company

Question 14

An individual appointed by an insurance company to solicit, negotiate, effect, or countersign insurance contracts on its behalf.

Answer 14

Agent/Producer

Question 15

A type of policy limit found in Liability policies that limits coverage to a specified total amount for all losses occurring within the policy period

Answer 15

Aggregate Limit

Question 16

An insurance company incorporated in a country other than the United States.

Answer 16

Alien Company

Question 17

Property coverages that are closely associated with and frequently sold with fire insurance: Dwelling Building and Contents form, Earthquake insurance, Sprinkler Leakage, etc.

Answer 17

Allied Lines

Question 18

Insurance protecting the insured from loss arising from any Peril other than those specifically excluded by name. This contrasts with Named Peril Insurance, which names the Peril or Perils insured against.

Answer 18

All-Risk Insurance

Question 19

A questionnaire that is filled out by an agent and the prospect seeking insurance. The form contains rating and underwriting information. The applicant is expected to make representations by answering questions to the best of his knowledge.

Answer 19

Application

Question 20

How does an Appraisal work?

Answer 20

If the insured and insurer cannot agree on the amount of loss, either may demand an appraisal. If demanded, each will select an appraiser, who jointly will select an umpire. The appraisers will appraise the loss and either agree or submit differences to the umpire. Agreement by any two of the three will be binding. Each party will pay its own appraiser and share equally the expenses of the appraisal and the umpire.

Question 21

A structure belonging to the insured structure, such as a tool shed. They are provided for in the Homeowners policy and other Dwelling policies. This coverage is often called Other Structures or Out Buildings.

Answer 21

Appurtenant Structure

Question 22

There are some applicants that underwriters do not care to insure, but because of state law or otherwise, must be provided protection. To become authorized, a Casualty company must agree to participate in the Assigned Risk Pool and take its turn providing Auto insurance to high-risk drivers. Also known as the auto insurance “plan”.

Answer 22

Assigned Risk

Question 23

A survey of the financial records of the insured conducted to determine exposures, limits, etc., which are needed to calculate the premium. The initial premium is only a deposit.

Answer 23

Audit

Question 24

A person who has temporary custody of property belonging to another person.

Answer 24

Bailee

Question 25

Insurance obtained by a bailee, to cover loss or damage to customers’ property in the bailee’s custody, without regard to liability.

Answer 25

Bailee’s Customers Policy

Question 26

Fidelity bond that specifies a single limit of Liability applicable to each employee involved in a loss.

Answer 26

Blanket Position Bond

Question 27

Usually defined to include bodily harm, sickness, disease, including required care, loss of services and resulting in death.

Answer 27

Bodily Injury

Question 28

Insurance that covers the insured against loss (Liability and Physical Damage) arising out of the use of steam boilers or other machinery. May be written as a separate policy or as part of a Commercial Package Policy.

Answer 28

Boiler and Machinery Policy

Question 29

An obligation of the insurance company to protect on against financial loss caused by the acts of others.

Answer 29

Bond

Question 30

One who represents an insured in the solicitation, negotiation, or procurement of contracts of insurance, and who may render services incidental to those functions. They may also be licensed as agents.

Answer 30

Broker

Question 31

In the formation of a legal contract, each party must give something of value. Under contract law, this is referred to as:

Answer 31

Consideration

Question 32

An insurance company owned by its policyholders, who receive a return of unused premiums in the form of policy dividends, is a:

Answer 32

Mutual Company

Question 33

When a property insurance applicant makes a statement on an application that becomes part of the contract and includes a promise by the insured, the statement is considered to be a:

Answer 33

Warranty

Question 34

Which element of an insurance contract requires that the insured have the legal capacity to make a contract?

Answer 34

Competent Parties

Question 35

The broad and special dwelling forms provide two extensions of coverage not found on the basic form. What are they?

Answer 35

Coverages for building collapse and for lawns, trees, and plants

Question 36

As it is defined in Crime insurance policies, the unlawful taking of property by forced entry into the premises, or exit from the premises, while the premises are closed for business. There must be visible evidence of forced entry or exit.

Answer 36

Burglary

Question 37

A commercial package policy designed for certain types of small business, combining Property and Liability coverages. Very similar to a Commercial Package Policy (CPP).

Answer 37

Business Owners Policy (BOP)

Question 38

Termination of contract of insurance in force mid-term (rather than at the renewal date) by voluntary act of the insurance company or insured, effected in accordance with provisions in the contract or by mutual agreement.

Answer 38

Cancellation

Question 39

A type of insurance that is primarily concerned with losses caused by injury to persons and legal liability imposed upon the insured for such injury or damage to property of others.

Answer 39

Casualty Insurance

Question 40

In Property insurance, a clause under which the insured shares in losses to the extent that she is underinsured at the time of the loss

Answer 40

Coinsurance

Question 41

A multi peril, multiline policy that provides a broad spectrum of Property and Casualty coverages for businesses. In addition to required basic Property and Liability insurance, the insured may add additional Marine, Boiler and Machinery, Glass, Crime, Business Auto or Farm coverages.

Answer 41

Commercial Package Policy

Question 42

Doctrine that a defendant is liable only for the amount of damages allocated to that defendant in direct proportion to the defendant’s percentage of fault (if not 51% or more at fault, defendant is not held liable).

Answer 42

Comparative Negligence

Question 43

A state fund writing Workers’ Compensation insurance in competition with private insurers.

Answer 43

Competitive State Fund

Question 44

Nonbusiness Liability exposure of individuals who are insured under this policy. The most common Personal Liability exposures arise out of the residence premises and activities of individuals and family members. It first became available as a separate policy. Eventually it was incorporated into Homeowners policies

Answer 44

Comprehensive Personal Liability

Question 45

Any form if insurance which is required by law.

Answer 45

Compulsory Insurance

Question 46

The withholding of material facts by an applicant for insurance, which materially affects an insurance risk or loss. May void the policy.

Answer 46

Concealment

Question 47

The portion of an insurance contract that sets forth the rights and duties of the Insured and the insurance company

Answer 47

Conditions

Question 48

Indirect losses that occur as a “consequence” of a direct loss. Includes Time-Element coverages, such as coverage for rental value.

Answer 48

Consequential Loss

Question 49

A characteristic of a legal contract: the thing of value exchanged for the performance promised in the contract.

Answer 49

Consideration

Question 50

A Time-Element coverage that protects the insured against Indirect Loss that results because of a Direct Loss to a supplier business, subcontractor or manufacturer location.

Answer 50

Contingent Business Income

Question 51

Liability that an insured person or business incurs because of the actions of others (family or employees). Also called Vicarious Liability.

Answer 51

Contingent Liability

Question 52

A legal agreement between two parties promising a certain performance in exchange for a certain consideration. To hold up in court, these must contain four required elements: Consideration, Offer, Acceptance and Legal Purpose (remember the acronym COAL).

Answer 52

Contract

Question 53

Provides coverage against liability arising out of an insured’s contractual obligation.

Answer 53

Contractual Liability

Question 54

The signature of a licensed agent, which, in most states, must appear on the policy to validate the contract.

Answer 54

Countersignature

Question 55

In Crime insurance, a custodian is the insured or a regular employee or partner of the insured who has care or control of the property within the premises. The term does not include watchman, porter or janitor.

Answer 55

Custodian

Question 56

A coverage provided in many Property contracts that reimburses the insured for expenses involved in removing debris produced by a loss from a Peril insured against.

Answer 56

Debris Removal

Question 57

A portion of the insurance contract that contains information such as the name and address of the insured, the property insured, its location and description, the policy period, the amount of insurance coverage, applicable premiums, and supplemental representations by the insured.

Answer 57

Declarations Page (Dec Sheet)

Question 58

Decrease in the value of property over a period of time due to use, wear and tear, and obsolescence.

Answer 58

Depreciation

Question 59

Loss that is a direct result of a Peril, such as fire.

Answer 59

Direct Loss

Question 60

An insurance company that sells its policies through licensed agents who represent the insurer exclusively, rather than through independent local agents, who represent several insurance companies. Direct writing producers are also called “Exclusive” or “captive” producers.

Answer 60

Direct Writer

Question 61

The return of part of the premium paid for a participating policy.

Answer 61

Dividend

Question 62

An insurance company formed under the laws of the state in which the insurance is written.

Answer 62

Domestic Insurance Company

Question 63

That portion of the premium for which policy protection has already been given during the now-expired portion of the policy term.

Answer 63

Earned Premium

Question 64

The date on which an insurance policy or bond goes into effect and from which protection is furnished.

Answer 64

Effective Date

Question 65

Coverage provided under a Workers’ Compensation policy to cover the employer’s liability arising out of employees’ work-related injuries.

Answer 65

Employers Liability Coverage

Question 66

Provides coverage to an employer for liability arising out of an employee’s use of his own auto in the employer’s business. May be included under a Business Auto Policy if added to a Commercial General Liability.

Answer 66

Employers Non-Ownership Liability

Question 67

A document, agreed to by both parties, that is attached to the policy and modifies or changes the original policy in some way. No change to a policy may become effective until approved by a company officer.

Answer 67

Endorsment

Question 68

A Professional Liability coverage that protects the insured against liability for committing an error or omission in performance of professional duties.

Answer 68

Errors and Omissions

Question 69

Causes, conditions, or property listed in the policy that are not covered and for which no benefits are payable.

Answer 69

Exclusions

Question 70

A Boiler and Machinery coverage that covers the cost of temporary repairs and the costs of speeding up permanent repairs.

Answer 70

Expediting Expenses

Question 71

The loss record of an insured, a class of coverage, or an insurance company.

Answer 71

Experience

Question 72

A specific endorsement, attached to a standard Fire policy, usually providing coverage for windstorm, hail, explosion, riot, civil commotion, aircraft, vehicular damage, volcanic eruption and smoke damage.

Answer 72

Extended Coverage Endorsement (ECE)

Question 73

A Time-Element coverage for additional expenses incurred by the insured business to continue operations following a Direct Loss by a Peril insured against.

Answer 73

Extra Expense Insurance

Question 74

Fair Access to Insurance Requirements. A program established by law that makes Property insurance available and affordable to insureds who might otherwise be uninsurable because of “environmental hazards”.

Answer 74

Fair Plan

Question 75

A federally administered program that makes crime insurance available and affordable to risks that might otherwise have found coverage difficult to obtain.

Answer 75

Federal Crime Insurance

Question 76

A class of bonds that guarantees an employee’s honest discharge of duty.

Answer 76

Fidelity Bond

Question 77

A person who occupies a position of special trust and confidence. For example, one handling or supervising the affairs or funds of another.

Answer 77

Fiduciary

Question 78

State laws that require owners or operators of autos to provide evidence that they have the funds to pay for automobile losses for which they might become liable. Insurance is the usual method for providing this evidence to the state.

Answer 78

Financial Responsibility Laws

Question 79

Combustion, sufficient to produce a spark, flame, or glow, that is hostile (not in a place where it is intended to be).

Answer 79

Fire

Question 80

1) Contract that indemnifies an insured for loss caused by the destruction of the insured property resulting from fire.
2) The field of insurance that provides policies on the insured property for a variety of Perils, including fire.

Answer 80

Fire Insurance

Question 81

Any act of stealing. A mysterious disappearance.

Answer 81

Theft or larceny

Question 82

The act of taking property from the care and custody of a person under the threat of bodily harm

Answer 82

Robbery

Question 83

What are the four parts to all policies?

Answer 83

Declarations page, Insuring agreement, conditions, and exclusions. (DICE)

Question 84

A cause of loss is called a:

Answer 84

Peril

Question 85

To make coverage better or enhance without charging the customer more is called:

Answer 85

Liberalization

Question 86

What is the main difference between the various dwelling property forms?

Answer 86

Covered property perils

Question 87

The DP-2 broad form automatically insures covered property against loss from any cause while being removed from a premises endangered by a peril insured against for no more than:

Answer 87

30 days

Question 88

The broad and special dwelling forms provide two extensions of coverage not found on the basic form. What are they?

Answer 88

Coverages for building collapse and for lawns, trees, and plants

Question 89

A personal articles floater provides coverage on what basis?

Answer 89

Actual Cash Value

Question 90

Fine arts floaters provide for payment of the full policy limit in the event of a total loss, regardless of the actual value of the property. This is called a(n):

Answer 90

Valued contract

Question 91

On an HO-3, replacement cost coverage applies to:

Answer 91

Coverages A and B only

Question 92

A commercial property insurance that has a single limit of insurance for all property coverage at 3 different locations is known as:

Answer 92

Blanket coverage

Question 93

These forms are used by insureds who have fluctuating inventories.

Answer 93

Reporting forms

Question 94

An inland marine policy that covers the insured’s merchandise held for sale, the insured’s property off premises, customer’s property in the custody of the insured and property being transported is a:

Answer 94

Jeweler’s block policy

Question 95

On an ocean marine policy, the peril of voluntarily throwing cargo overboard to save the ship is known as:

Answer 95

Jettison

Question 96

Liability without fault or negligence is defined as:

Answer 96

Absolute

Question 97

The transfer of the insured’s rights to the insurer after a loss is known as:

Answer 97

Subrogation

Question 98

What states the time and date of claim, as well as the description of the loss?

Answer 98

Notice of claim

Question 99

Injuries caused by hit-and-run drivers are covered under which type of coverage?

Answer 99

Uninsured motorist

Question 100

To provide auto liability coverage for 2 parties who are not married, but reside in the same household, you should add which endorsement to a PAP?

Answer 100

Joint Ownership

Question 101

On a PAP, what is the purpose of carrying underinsured motorists coverage?

Answer 101

It covers your injury in case the negligent party has inadequate BI limits

Question 102

What type of a bond guarantees a job will be completed on time per the terms of the contract?

Answer 102

Performance Bond

Question 103

A real estate agent gave his client an incorrect price of a home, what policy will cover that?

Answer 103

Professional

Question 104

Under a surety bond, the obligee is the party who:

Answer 104

Will be paid damages if default occurs

Question 105

The most significant difference between the claims made and the occurrence forms of a general liability policy is:

Answer 105

What triggers the insurance coverage

Question 106

Forcing a client to buy insurance from a particular lender as a condition of granting a loan is defined as:

Answer 106

Coercion

Question 107

Making false or malicious statements about the financial condition of an insurer or agent is what type of Unfair Trade Practice:

Answer 107

Defamation

Question 108

When the Commissioner finds, after a hearing, that a person has intentionally violated an insurance regulation, what is the maximum fine that may be levied:

Answer 108

$25,000

Question 109

Liquid monies kept by insurers in order to honor their future liabilities to policy holders are called:

Answer 109

Legal reserves

Question 110

When an insurer elects to base their rates on their underwriting experience rather than upon actuarial data, they are utilizing:

Answer 110

Judgment rating

Question 111

The clause in the dwelling policy that limits the liability of the insurer to a portion of the loss no greater than “the amount hereby insured shall bear to the whole insurance covering the property against the peril involved, whether collectible or not” is called the:

Answer 111

Pro-rata liability clause

Question 112

A commercial auto liability coverage that protects an insured whose employees drive their own autos on company business is called:

Answer 112

Non-owned auto

Question 113

What is the name of the area of tort law that provides remedies for wrongful acts other than crimes and breach of contract?

Answer 113

Negligence

Question 114

A careless person represents which type of hazard?

Answer 114

Morale hazard

Question 115

Statements provided by an applicant for insurance are considered to be:

Answer 115

Representations

Question 116

When a direct chain of events resulting from a negligent act causes injury or damage, that act is considered to be:

Answer 116

The proximate cause

Question 117

“This Company may require from the insured an assignment of all right of recovery against any party for loss to the extent that payment has been made by this Company.” This sentence defines which of the following?

Answer 117

Subrogation