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P&C Study

Terms in this set (39)

A ____ insurance company is owned by its policyholders.

a. stock
b. reciprocal
c. fraternal benefits society
d. mutual
d. mutual
If an insurance company wants to transfer all or part of the risk it has accepted, it would buy which of the following types of insurance?

a. residual
b. reinsurance
c. reciprocal
d. insurer
b. reinsurance
Which of the following is an insurance company that is organized under the laws of another state within the USA?

a. domestic
b. alien
c. foreign
d. authorized
c. foreign
Which insurance company department accepts the insurance risk?

a. executive
b. actuarial
c. claims
d. underwriting
d. underwriting
Which of the following individuals represents the insurance company when selling an insurance policy?

a. producer
b. broker
c. adjuster
d. insurer
a. producer
Which of the following types of authority does the public assume an agent has when quoting insurance?

a. authorized
b. express
c. implied
d. apparent
c. implied
A producer has each of the following responsibilities to the Insurer, except:

a. a fiduciary duty
b. forwarding premiums to the insurer on a timely basis
c. reporting material facts that may affect the underwriting
d. a duty to recommend only high rate policies
d. a duty to recommend only high rate policies
A federal regulation called the ___ protects consumer privacy.

a. consolidated omnibus budget reconciliation act
b. fraudulent insurance act
c. privacy protection act
d. fair credit reporting act
d. fair credit reporting act
Dishonest tendencies that increase the probability of loss are what types of hazard?

a. physical
b. moral
c. emotional
d. legal
b. moral
Each of the following must be included in an insurable risk, except:

a. calculable chance of loss
b. excluded catastrophic perils
c. large group with dissimilar members
d. accidental loss
c. large group with dissimilar members
Which principle of insurance restores the insured to the same economic condition that existed before the loss?

a. indemnity
b. insurability
c. adhesion
d. underwriting
a. indemnity
Each of the following is an element of a legal contract, except:

a. consideration
b. legal purpose
c. agreement
d. indemnity
d. indemnity
A warranty is defined as which of the following?

a. Intentional misrepresentation on the application
b. Statement in the application that is guaranteed to be true
c. A false statement in the application
d. What a reasonable and prudent buyer can expect
b. Statement in the application that is guaranteed to be true
Each of the following is a factor considered by an underwriter, except:

a. hazards
b. marital status
c. claims history
d. outside factors
b. marital status
Which of the following calculations equals a company's loss ratio?

a. all losses + expenses
b. paid losses + loss expresses/ total earned premium
c. losses + total operating expenses/ total written premium
d. paid losses + paid expenses/ total earned premium
b. paid losses + loss expresses/ total earned premium
Reinsurance
Is the transfer of risk between insurance companies. The reinsurer assumes some or all of the risk.
Peril
Is the cause of loss
Risk
Is the uncertainty of a lass
Hazard
Increases the chance of loss
3 types of hazards
Physical, Moral, Morale
Accident
An unexpected happening that may result in injury, loss, or damage.
Occurrence
continuous or repeated exposure which results in bodily injury or property damage which is not expected or intended by the insured.
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
b. endorsement
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
d. bailee
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
b. arbitration
Arbitration
settling a dispute by agreeing to accept the decision of an impartial outsider/third party
Deductible
The specified amount of each loss that the insured must bear.
Bailee
A person/organization that has been entrusted for repairs, servicing, or storage.
Bailor
A person or organization that entrusts property to a bailee.
Each of the following is a direct loss, except:

a. loss of income
b. fire damage
c. cracked windshield
d. broken pipe water damage
a. loss of income
_____________ is the method of loss valuation that values damaged 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
c. replacement value
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
b. replacement cost - depreciation = ACV
Parts of a policy
Declarations
Insuring Agreement
Conditions
Exclusions
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
b. insures multiple items of property on a single policy
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
d. conditions
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 premium change
d. broadened coverage applies automatically to all policies without premium change
Each of the following is a typical property insurance policy exclusion, except:

a. ordinance or law
b. flood
c. fire
d. neglect
c. fire
Which of the following has the broadest coverage under the insurance policy?

a. named insured
b. insured
c. first named insured
d. additional insured
a. named insured
Which of the following is not true of coinsurance?

a. it is common policy provision
b. it encourages the insured to maintain insurance to value
c. first named insured
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