PROPERTY AND CASUALTY INSURANCE CORRECT
FINALS ANSWERS AND QUESTIONS SET A+
✔✔Apparent Authority - ✔✔Authority that states that an agent may have whatever
authority a reasonable person would assume the agent has.
✔✔General Rule of Agency - ✔✔Any knowledge of the agent is presumed to be
knowledge of the insurer (principal).
✔✔Producer (Agent) - ✔✔general term used to describe someone who sells insurance.
-represents the insurance company
✔✔Broker - ✔✔An individual, partnership, or corporation who, for a commission, acts or
aids in any manner in the sale of insurance as the representative of the insured.
In an insurance transaction, this person represents the insured.
✔✔Consultant - ✔✔Someone who, for a fee, offers advice on the benefits, advantages,
and disadvantages of various insurance policies.
-They don't actually sell insurance, only advice.
✔✔Solicitor - ✔✔like an agent, sells insurance and may even be authorized to collect
premiums. However, they cannot issue or countersign policies, only agents can do this.
-they represent the insurance company
✔✔Excess or Surplus Lines - ✔✔an agent licensed by the state to handle highly
specialized insurance coverages such as auto racing liability and tuition refund
insurance.
✔✔Non-Admitted Companies - ✔✔are companies that are not authorized to conduct
business in the state under ordinary circumstances.
,✔✔Reinsurance - ✔✔A contract under which one insurance company (the reinsurer)
indemnifies (insures) another insurance company for part, or all its liabilities.
✔✔Contract of Adhesion - ✔✔One party has greater power over the party in drafting the
contract. The insurer has more power when it comes to preparing the contract even
though the insured can request provisions or coverage.
✔✔Aleatory Contract - ✔✔it is a contract that is contingent on an uncertain event (a
loss) that provides for unequal transfer of value between the parties.
For example, people can pay insurance premiums for years without having a loss or on
the other hand someone could experience a loss and be reimbursed a great deal more
than they had paid in premiums.
✔✔Unilateral Contract - ✔✔Only one of the parties in the contract is legally bound to do
anything.
-Insurance policies are one sided because only the insurance company is legally bound
to perform its part of the agreement.
✔✔Absolute Liability - ✔✔Imposed on defendants engaged in hazardous activities,
such as harboring wild animals, using explosives, etc. The injured party does not have
to prove negligence.
✔✔Strict Liability - ✔✔Commonly applied in product liability cases. A person or
business that manufactures or sells a product makes an implied warranty that the
product is safe.The business is then liable for defective products, regardless of fault or
negligence.
✔✔Contract - ✔✔a legal agreement between two competent parties that promises a
certain performance in exchange for a certain consideration.
ex: Insurance policy covers insured's losses in exchange for a premium.
✔✔Characteristics of a valid contract include: - ✔✔-competent parties
-legal purpose
-offer and agreement
-consideration
✔✔Offer - ✔✔a promise that requires an act or another promise in exchange.
✔✔Agreement - ✔✔occurs when the other party agrees to the offer or does what was
proposed in the offer.
, ✔✔Consideration - ✔✔a thing of value exchanged for the performance promised in the
contract.
✔✔Principle of Indemnity - ✔✔states that when a loss occurs, an individual should be
restored to the approximate financial condition he/she was before the loss, no more and
no less.
No one will profit from the result of a loss.
✔✔Personal Contracts - ✔✔contracts that insure the person who owns the property not
the property itself.
✔✔Doctrine of Reasonable Expectations - ✔✔states that a policy includes coverage's
that an average person would reasonably expect it to include, regardless of what the
policy actually provides.
✔✔Contract of Utmost Good Faith - ✔✔means that the insurer relies on the truthfulness
and integrity of the applicant when issuing a policy and the insured relies on the
company's promise to provide coverage and pay claims
✔✔Declaration - ✔✔-Almost always are found on the first page
-Contain information such as the name of the insured, the address, and the amount of
coverage, a description of the property and the cost of the policy.
✔✔Insuring agreement - ✔✔The heart of the policy which states in general what is to be
covered or, in other words, the losses for which the insured will be indemnified. This
section also describes the type of property covered and the perils against which it is
insured.
✔✔Conditions - ✔✔This section states the ground rules for the policy. They describe
the responsibilities and the obligations of both the insurance company and the insured.
✔✔Exclusions - ✔✔This section describes the losses for which the insured is not
covered. If and excluded loss occurs, the insured will not be reimbursed.
✔✔Definitions - ✔✔This section clarifies the meanings of certain terms used in the
policy.
✔✔Endorsement - ✔✔These are documents that modify or change the original policy in
any way and are attached to the original policy.
These changes could be anything from broadening coverage, restricting coverage to
changing the name of the insured.
✔✔Insurance from the federal government may include: - ✔✔-War risk insurance
FINALS ANSWERS AND QUESTIONS SET A+
✔✔Apparent Authority - ✔✔Authority that states that an agent may have whatever
authority a reasonable person would assume the agent has.
✔✔General Rule of Agency - ✔✔Any knowledge of the agent is presumed to be
knowledge of the insurer (principal).
✔✔Producer (Agent) - ✔✔general term used to describe someone who sells insurance.
-represents the insurance company
✔✔Broker - ✔✔An individual, partnership, or corporation who, for a commission, acts or
aids in any manner in the sale of insurance as the representative of the insured.
In an insurance transaction, this person represents the insured.
✔✔Consultant - ✔✔Someone who, for a fee, offers advice on the benefits, advantages,
and disadvantages of various insurance policies.
-They don't actually sell insurance, only advice.
✔✔Solicitor - ✔✔like an agent, sells insurance and may even be authorized to collect
premiums. However, they cannot issue or countersign policies, only agents can do this.
-they represent the insurance company
✔✔Excess or Surplus Lines - ✔✔an agent licensed by the state to handle highly
specialized insurance coverages such as auto racing liability and tuition refund
insurance.
✔✔Non-Admitted Companies - ✔✔are companies that are not authorized to conduct
business in the state under ordinary circumstances.
,✔✔Reinsurance - ✔✔A contract under which one insurance company (the reinsurer)
indemnifies (insures) another insurance company for part, or all its liabilities.
✔✔Contract of Adhesion - ✔✔One party has greater power over the party in drafting the
contract. The insurer has more power when it comes to preparing the contract even
though the insured can request provisions or coverage.
✔✔Aleatory Contract - ✔✔it is a contract that is contingent on an uncertain event (a
loss) that provides for unequal transfer of value between the parties.
For example, people can pay insurance premiums for years without having a loss or on
the other hand someone could experience a loss and be reimbursed a great deal more
than they had paid in premiums.
✔✔Unilateral Contract - ✔✔Only one of the parties in the contract is legally bound to do
anything.
-Insurance policies are one sided because only the insurance company is legally bound
to perform its part of the agreement.
✔✔Absolute Liability - ✔✔Imposed on defendants engaged in hazardous activities,
such as harboring wild animals, using explosives, etc. The injured party does not have
to prove negligence.
✔✔Strict Liability - ✔✔Commonly applied in product liability cases. A person or
business that manufactures or sells a product makes an implied warranty that the
product is safe.The business is then liable for defective products, regardless of fault or
negligence.
✔✔Contract - ✔✔a legal agreement between two competent parties that promises a
certain performance in exchange for a certain consideration.
ex: Insurance policy covers insured's losses in exchange for a premium.
✔✔Characteristics of a valid contract include: - ✔✔-competent parties
-legal purpose
-offer and agreement
-consideration
✔✔Offer - ✔✔a promise that requires an act or another promise in exchange.
✔✔Agreement - ✔✔occurs when the other party agrees to the offer or does what was
proposed in the offer.
, ✔✔Consideration - ✔✔a thing of value exchanged for the performance promised in the
contract.
✔✔Principle of Indemnity - ✔✔states that when a loss occurs, an individual should be
restored to the approximate financial condition he/she was before the loss, no more and
no less.
No one will profit from the result of a loss.
✔✔Personal Contracts - ✔✔contracts that insure the person who owns the property not
the property itself.
✔✔Doctrine of Reasonable Expectations - ✔✔states that a policy includes coverage's
that an average person would reasonably expect it to include, regardless of what the
policy actually provides.
✔✔Contract of Utmost Good Faith - ✔✔means that the insurer relies on the truthfulness
and integrity of the applicant when issuing a policy and the insured relies on the
company's promise to provide coverage and pay claims
✔✔Declaration - ✔✔-Almost always are found on the first page
-Contain information such as the name of the insured, the address, and the amount of
coverage, a description of the property and the cost of the policy.
✔✔Insuring agreement - ✔✔The heart of the policy which states in general what is to be
covered or, in other words, the losses for which the insured will be indemnified. This
section also describes the type of property covered and the perils against which it is
insured.
✔✔Conditions - ✔✔This section states the ground rules for the policy. They describe
the responsibilities and the obligations of both the insurance company and the insured.
✔✔Exclusions - ✔✔This section describes the losses for which the insured is not
covered. If and excluded loss occurs, the insured will not be reimbursed.
✔✔Definitions - ✔✔This section clarifies the meanings of certain terms used in the
policy.
✔✔Endorsement - ✔✔These are documents that modify or change the original policy in
any way and are attached to the original policy.
These changes could be anything from broadening coverage, restricting coverage to
changing the name of the insured.
✔✔Insurance from the federal government may include: - ✔✔-War risk insurance
