AU 61 Questions with CORRECT Answers
Question:
A property location's probable maximum loss (PML) is
Answer:
The underwriter's estimate of the largest loss likely to occur.
Question:
Underwriters must sometimes underwrite package policies for applicants that have
differing loss exposure levels by line of business. Which one of the following can be used
to ensure that enough premiums are paid to cover the higher hazard risks?
Answer:
Minimum premium levels for low hazard risks
Question:
Insureds sometimes purchase package policies to meet their insurance needs. The
underwriting approach can be affected by the type of package policies offered. Which
one of the following types of package policies is used to reduce adverse selection and
often results in a premium discount for the insured?
Answer:
Minimum combination requirement
Question:
In insurance terminology, property being shipped by aircraft is considered to be
Answer:
Property in transit.
Question:
When working with a valuation guidebook or computer software, underwriters use
several factors to determine a property's value. Which one of the following is a factor
evaluated by underwriters to determine property value?
Answer:
Construction materials used
,Question:
Verifying the values of property exposed to a loss is an essential part of commercial
property underwriting. For example, if the property values shown on a commercial
property submission are higher than the property's actual value, then
Answer:
The insured will pay for unnecessary coverage.
Question:
Underwriters can use a valuation guidebook or computer software supplied by an
appraisal company to make their own property value estimates. Which one of the
following is true regarding the valuation guidebooks or computer software?
Answer:
They can also be used for valuing building contents or equipment.
Question:
Which one of the following statements is true regarding amount subject and probable
maximum loss (PML) in evaluating property loss exposures?
Answer:
Underwriters often use the expression "within four walls" to explain the concept of
amount subject.
Question:
One reason underwriters analyze the financial condition of a potential property insured
is to determine if the business is financially resilient and can cope with changing
economic cycles. Which one of the following statements is true regarding financial
condition and changing economic cycles for property insureds?
Answer:
Economic contraction can increase the probable frequency and severity of losses.
Question:
Which one of the following statements regarding package policy underwriting is true?
Answer:
The disadvantage of package underwriting is that underwriters cannot be selective in
the coverage offered to the applicant
, Question:
A policy that covers two or more lines of business by combining ISO's Commercial Lines
coverage parts is
Answer:
A commercial package policy.
Question:
In the context of property loss exposures, flood is considered to be all of the following,
EXCEPT:
Answer:
An adverse financial consequence
Question:
A technology firm recently built a new production facility with unique property loss
exposures. Of the following possibilities, which one is most likely to address the firm's
needs?
Answer:
A nonstandard form using provisions more favorable to the insured than standard forms
Question:
For which one of the following reasons should an underwriter consider the attitude of a
prospective commercial property insured's management toward risk control?
Answer:
It helps the underwriter assess the quality of the account.
Question:
Agreed Value optional coverage suspends the coinsurance condition if the insured
carries the amount of insurance agreed to by the insurer and the insured. Because of
this, underwriters should
Answer:
Take extra steps to verify the value of the property being insured.
Question:
A property location's probable maximum loss (PML) is
Answer:
The underwriter's estimate of the largest loss likely to occur.
Question:
Underwriters must sometimes underwrite package policies for applicants that have
differing loss exposure levels by line of business. Which one of the following can be used
to ensure that enough premiums are paid to cover the higher hazard risks?
Answer:
Minimum premium levels for low hazard risks
Question:
Insureds sometimes purchase package policies to meet their insurance needs. The
underwriting approach can be affected by the type of package policies offered. Which
one of the following types of package policies is used to reduce adverse selection and
often results in a premium discount for the insured?
Answer:
Minimum combination requirement
Question:
In insurance terminology, property being shipped by aircraft is considered to be
Answer:
Property in transit.
Question:
When working with a valuation guidebook or computer software, underwriters use
several factors to determine a property's value. Which one of the following is a factor
evaluated by underwriters to determine property value?
Answer:
Construction materials used
,Question:
Verifying the values of property exposed to a loss is an essential part of commercial
property underwriting. For example, if the property values shown on a commercial
property submission are higher than the property's actual value, then
Answer:
The insured will pay for unnecessary coverage.
Question:
Underwriters can use a valuation guidebook or computer software supplied by an
appraisal company to make their own property value estimates. Which one of the
following is true regarding the valuation guidebooks or computer software?
Answer:
They can also be used for valuing building contents or equipment.
Question:
Which one of the following statements is true regarding amount subject and probable
maximum loss (PML) in evaluating property loss exposures?
Answer:
Underwriters often use the expression "within four walls" to explain the concept of
amount subject.
Question:
One reason underwriters analyze the financial condition of a potential property insured
is to determine if the business is financially resilient and can cope with changing
economic cycles. Which one of the following statements is true regarding financial
condition and changing economic cycles for property insureds?
Answer:
Economic contraction can increase the probable frequency and severity of losses.
Question:
Which one of the following statements regarding package policy underwriting is true?
Answer:
The disadvantage of package underwriting is that underwriters cannot be selective in
the coverage offered to the applicant
, Question:
A policy that covers two or more lines of business by combining ISO's Commercial Lines
coverage parts is
Answer:
A commercial package policy.
Question:
In the context of property loss exposures, flood is considered to be all of the following,
EXCEPT:
Answer:
An adverse financial consequence
Question:
A technology firm recently built a new production facility with unique property loss
exposures. Of the following possibilities, which one is most likely to address the firm's
needs?
Answer:
A nonstandard form using provisions more favorable to the insured than standard forms
Question:
For which one of the following reasons should an underwriter consider the attitude of a
prospective commercial property insured's management toward risk control?
Answer:
It helps the underwriter assess the quality of the account.
Question:
Agreed Value optional coverage suspends the coinsurance condition if the insured
carries the amount of insurance agreed to by the insurer and the insured. Because of
this, underwriters should
Answer:
Take extra steps to verify the value of the property being insured.
