PROPERTY AND CASUALTY INSURANCE EXAM UPDATED ACTUAL QUESTIONS AND CORRECT ANSWERS

PROPERTY AND CASUALTY INSURANCE EXAM
UPDATED ACTUAL QUESTIONS AND CORRECT
ANSWERS

Question:
1. Specific insurance
Answer:
This type of insurance designates a particular item to be insured

Question:
2. Blanket insurance
Answer:
This type of insurance covers more than one item of property at a single location or one more items of
property at multiple locations.

Question:
3. Speculative
Answer:
possibility of both gain and loss. Not insurable.

Question:
4. Pure
Answer:
only the possibility of loss. Insurable.

Question:
5. What are the 5 methods of managing or handling risk?
Answer:
avoid, control, retain, and transfer risk.

Question:
6. Hazard
Answer:
A condition or situation which increases the chance for loss

Question:
7. Physical Hazards
Answer:
a hazard that arises from the condition, occupancy, or use of the property itself.
ex: skateboard left on the steps

Question:
8. Moral Hazards

,Answer:
when an individual through carelessness or by irresponsible actions can increase the possibly for a loss.
ex: person who drives carelessly just because they know they are insured.

Question:
9. Morale Hazards
Answer:
when a person might create a loss situation on purpose just to collect from the insurance company.
ex: Prearranged, faked theft of someone's old vehicle so they can get an insurance payout to buy a new
vehicle.

Question:
10. Replacement Cost
Answer:
The amount of money it would take to replace a damaged or destroyed item with one of like kind and
quality AT THE TIME OF LOSS. No deduction for depreciation.

Question:
11. Actual Cash Value (ACV)
Answer:
Replacement Cost, minus depreciation.

Question:
12. Pair and Set Clause
Answer:
Loss to one item of a pair or set does not constitute loss to the entire pair or set.

Question:
13. Appraisal
Answer:
A method of resolving disputes between insurers and insureds over the amount owed on a covered loss.
-both parties select an appraiser
-the two appraisers select an umpire
-if the appraisers do not agree, the umpire is consulted
-the amount agreed on by 2 out of 3 is the amount that will be paid

Question:
14. Subrogation
Answer:
An insurer's right to recover the amount of its loss payment from the third party who is legally responsible
for the loss.

Question:
15. Arbitration

,Answer:
this condition is similar to the Appraisal Condition but it is not limited to disputes over the value of the
loss. It may also be used to resolve other areas of disagreement between the insured and the insurance
company.

Question:
16. What does WC SHAVVER stand for?
Answer:
Windstorm, Civil commotion, Smoke, Hail, Aircraft, Vehicles, Volcanic eruption, Explosion, Riot

Question:
17. What does BIG AFFECT stand for?
Answer:
Burglar damage, Ice & snow weight, Glass breakage, Accidental discharge, Falling objects, Freezing of
pipes, Electrical damage, Collapse, Tearing apart.

Question:
18. Insolvency
Answer:
A financial state that occurs if liabilities are greater than assets.

Question:
19. Law of Agency
Answer:
Knowledge of the Agents is Knowledge of the Principal (Insurance Company)

Question:
20. Principal
Answer:
Insurance Company

Question:
21. What is the ISO?
Answer:
Insurance Services Office which is an organization established for the benefit of its member insurance
companies. This organization gathers statistics, provides loss costs, drafts policy forms and coverage
provisions and conducts inspections for rate making purposes.

Question:
22. Coinsurance Clause
Answer:
Requires the insured to carry a minimum specified amount (generally 80%) of the replacement cost value
of the insured property in order for partial losses to be paid in full.

Question:
23. Estoppel

, Answer:
A legal bar to changing or denying a fact because of one's own previous actions or words to the contrary.
ex: If an insurance company representative intentionally or unintentionally gives the impression that a
specific fact exists when it does not and a client relies on that impression and is damaged a result.

Question:
24. Binder
Answer:
A temporary contract of insurance, oral or written, offered by an insurer pending issuance of the policy.
Usually written for a period of 30-60 days and remains in force for that period or until a permanent policy
is either issued or denied by the insurer.

Question:
25. Warranty
Answer:
A provision in a policy that pledges that a condition does exist or will exist at some time in the future.

Question:
26. Deposit Premium
Answer:
Tentative charge made at the beginning of certain policies and reinsurance agreements to be adjusted when
the actual earned charge has been later determined.

Question:
27. Audit
Answer:
Verification of books or accounts to determine their accuracy.

Question:
28. Occurrence
Answer:
An accident, including continuous or repeated exposure to the same harmful conditions, which result in
bodily injury or property damage.

Question:
29. Special Damages
Answer:
type of compensatory damages that reimburse the injured part for direct and specific expenses involved in
the loss. Such as medical expenses, funeral expenses and loss wages.

Question:
30. General Damages
Answer:
type of compensatory damages that reimburse the injured party for such things as pain and suffering and
disfigurement.