PROPERTY AND CASUALTY INSURANCE
COMPREHENSIVE ANSWERS AND QUESTIONS SET
A+
✔✔Commercial Lines - ✔✔are coverages designed for businesses.
✔✔Suspense or dairy system - ✔✔this system alerts an agent before a policies renewal
time.
✔✔Countersigning - ✔✔this is when the agent signs each new policy prepared by the
company before delivering it to the insured.
Most states require this in order to validate the contract.
✔✔Responsibilities of an insurance agent: - ✔✔-selling insurance
-issuing and countersigning policies
-collecting premiums
-providing a link between the insured and the insurance company
-field underwriting risks
✔✔Field underwriting - ✔✔this is when an agent uses pre-established criteria to seek
out the type of business that is likely to be acceptable to the company.
✔✔Errors and Omissions (E&O) insurance - ✔✔Agents should purchase this type of
insurance to protect themselves against legal liability arising from inadvertent
(unintentional) errors or omissions.
✔✔Agency Relationship - ✔✔exists when one party (an agent) is authorized to act on
behalf of another (a principal-insurance company).
✔✔Exclusive (captive) Agency System - ✔✔The insurance company contracts with
agencies, which are independent businesses, to represent and sell insurance only for
that insurance company.
,✔✔Direct Writer System - ✔✔The insurance company's agents are actually employees.
They may receive a salary, be paid by commission or a combination of both.
✔✔Direct Response System - ✔✔The insurance company where there are no agents.
These companies sell through direct mail or over the phone.
✔✔Independent Agency System - ✔✔Agencies that are independent contractors which
contract with several different companies to represent and sell insurance for those
companies.
✔✔Independent or Nonexclusive Agent. - ✔✔An agent who represents more than one
company.
✔✔Investigative Consumer Reports - ✔✔This type of consumer report gathers data
through personal interviews with friends, neighbors, and associates.
-Pre-notification is only required for this report
✔✔First Named Insured - ✔✔This happens when there is more than one person listed
as an insured. The first person listed will have more duties or rights in the policy.
✔✔Named Insured - ✔✔the person, business, or other entity named in the declarations
to whom the policy is issued.
✔✔Additional insureds - ✔✔are designated persons, businesses, or entities listed as
insureds that are covered under the policy.
ex: mortgage company
✔✔Market Value - ✔✔This is the amount that a property could be sold for at the time of
the loss.
✔✔Reporting policies - ✔✔policies that do not charge a flat premium, the insured pays
a deposit premium, then submits periodic reports to the insurer showing the status of
the factors on which the premium is based; from these reports premiums are calculated
and charged against the deposit.
✔✔Non-reporting Policies - ✔✔policies that charge a flat premium every time the policy
is renewed.
-ex: homeowners policies or auto policies.
✔✔Prejudgment Interest - ✔✔this is interest that may accrue on damages or injury
before a judgment has been rendered.
, ✔✔Postjudgment Interest - ✔✔this is interest that accrues on the judgment after an
award has been made but before payment is made by the company.
✔✔Risk - ✔✔the chance or uncertainty of loss.
✔✔Exposure - ✔✔condition or situation that presents a possibility of loss.
✔✔Four Methods to Manage Risk - ✔✔- avoid risk
- control risk
- retain risk
- transfer risk
✔✔Loss Prevention - ✔✔Risk control techniques that reduce loss frequency.
✔✔Risk reduction - ✔✔Risk control techniques that limit loss severity.
✔✔Hold harmless agreement - ✔✔A contractual arrangement where one party
assumes liability of a situation and relieves the other party of responsibility.
✔✔Insurance - ✔✔a contract or device for transferring risk from a person, business or
organization to an insurance company that agrees, in exchange for a premium, to pay
for losses through an accumulation of premiums.
✔✔Law of Large Numbers - ✔✔says that the more examples used to develop an
statistic, the more reliable the statistic will be. This is used to predict the number of
potential losses accurately so that the proper premium can be charged each month in
order to accumulate adequate funds.
✔✔Speculative Risks - ✔✔are risks in which there exists both the possibility of gain and
the possibility of loss. Insurance CANNOT be used to protect against these risks.
✔✔Pure Risks - ✔✔are risks that involve only the possibility of loss.
Insurance can ONLY be used to manage these risks.
✔✔Insurable interest - ✔✔Says that before you can benefit from insurance you must
first have a chance of financial loss or financial interest in the property.
It exists when there is an actual economic interest in the safety or preservation of the
subject of the insurance from loss, destruction, financial damage or impairment.
✔✔Elements of Insurable Risk - ✔✔-definite
-must be unexpected
-must create a financial hardship
COMPREHENSIVE ANSWERS AND QUESTIONS SET
A+
✔✔Commercial Lines - ✔✔are coverages designed for businesses.
✔✔Suspense or dairy system - ✔✔this system alerts an agent before a policies renewal
time.
✔✔Countersigning - ✔✔this is when the agent signs each new policy prepared by the
company before delivering it to the insured.
Most states require this in order to validate the contract.
✔✔Responsibilities of an insurance agent: - ✔✔-selling insurance
-issuing and countersigning policies
-collecting premiums
-providing a link between the insured and the insurance company
-field underwriting risks
✔✔Field underwriting - ✔✔this is when an agent uses pre-established criteria to seek
out the type of business that is likely to be acceptable to the company.
✔✔Errors and Omissions (E&O) insurance - ✔✔Agents should purchase this type of
insurance to protect themselves against legal liability arising from inadvertent
(unintentional) errors or omissions.
✔✔Agency Relationship - ✔✔exists when one party (an agent) is authorized to act on
behalf of another (a principal-insurance company).
✔✔Exclusive (captive) Agency System - ✔✔The insurance company contracts with
agencies, which are independent businesses, to represent and sell insurance only for
that insurance company.
,✔✔Direct Writer System - ✔✔The insurance company's agents are actually employees.
They may receive a salary, be paid by commission or a combination of both.
✔✔Direct Response System - ✔✔The insurance company where there are no agents.
These companies sell through direct mail or over the phone.
✔✔Independent Agency System - ✔✔Agencies that are independent contractors which
contract with several different companies to represent and sell insurance for those
companies.
✔✔Independent or Nonexclusive Agent. - ✔✔An agent who represents more than one
company.
✔✔Investigative Consumer Reports - ✔✔This type of consumer report gathers data
through personal interviews with friends, neighbors, and associates.
-Pre-notification is only required for this report
✔✔First Named Insured - ✔✔This happens when there is more than one person listed
as an insured. The first person listed will have more duties or rights in the policy.
✔✔Named Insured - ✔✔the person, business, or other entity named in the declarations
to whom the policy is issued.
✔✔Additional insureds - ✔✔are designated persons, businesses, or entities listed as
insureds that are covered under the policy.
ex: mortgage company
✔✔Market Value - ✔✔This is the amount that a property could be sold for at the time of
the loss.
✔✔Reporting policies - ✔✔policies that do not charge a flat premium, the insured pays
a deposit premium, then submits periodic reports to the insurer showing the status of
the factors on which the premium is based; from these reports premiums are calculated
and charged against the deposit.
✔✔Non-reporting Policies - ✔✔policies that charge a flat premium every time the policy
is renewed.
-ex: homeowners policies or auto policies.
✔✔Prejudgment Interest - ✔✔this is interest that may accrue on damages or injury
before a judgment has been rendered.
, ✔✔Postjudgment Interest - ✔✔this is interest that accrues on the judgment after an
award has been made but before payment is made by the company.
✔✔Risk - ✔✔the chance or uncertainty of loss.
✔✔Exposure - ✔✔condition or situation that presents a possibility of loss.
✔✔Four Methods to Manage Risk - ✔✔- avoid risk
- control risk
- retain risk
- transfer risk
✔✔Loss Prevention - ✔✔Risk control techniques that reduce loss frequency.
✔✔Risk reduction - ✔✔Risk control techniques that limit loss severity.
✔✔Hold harmless agreement - ✔✔A contractual arrangement where one party
assumes liability of a situation and relieves the other party of responsibility.
✔✔Insurance - ✔✔a contract or device for transferring risk from a person, business or
organization to an insurance company that agrees, in exchange for a premium, to pay
for losses through an accumulation of premiums.
✔✔Law of Large Numbers - ✔✔says that the more examples used to develop an
statistic, the more reliable the statistic will be. This is used to predict the number of
potential losses accurately so that the proper premium can be charged each month in
order to accumulate adequate funds.
✔✔Speculative Risks - ✔✔are risks in which there exists both the possibility of gain and
the possibility of loss. Insurance CANNOT be used to protect against these risks.
✔✔Pure Risks - ✔✔are risks that involve only the possibility of loss.
Insurance can ONLY be used to manage these risks.
✔✔Insurable interest - ✔✔Says that before you can benefit from insurance you must
first have a chance of financial loss or financial interest in the property.
It exists when there is an actual economic interest in the safety or preservation of the
subject of the insurance from loss, destruction, financial damage or impairment.
✔✔Elements of Insurable Risk - ✔✔-definite
-must be unexpected
-must create a financial hardship
