California Property and Casualty Insurance Test Pool Questions and answers, rated A

California Property and Casualty Insurance Test Pool Questions and answers, rated A The term "Time element Coverage" is used when the amount of loss depends on what? The time it takes to repair, rebuild, or restore damaged property. - -The term time element coverage is used for many indirect losses, such as a business income loss, because the amount of loss might not be directly related to the amount of property damage that occurred, but it is related to the time it takes to repair,, rebuild, or restore the damaged property. Many factors can influence the ultimate loss, including the availability of supplies and replacement parts. Which is NOT one of the common law defenses against an employer's liability? Proximate cause - -Assumption of risk, contributory negligence, and the fellow servant rule are the traditional common law defenses against employer liability. Are Vehicles eligible for a Personal Auto Policy PAP if used in a delivery business? No. Vans used in a delivery business are not eligible for coverage. - -Generally, four-wheel private passenger autos, pickups, and vans owned by an individual or married couple are eligible if used for pleasure or general transportation. Pickups and vans used in a business, other than farming or ranching, are not eligible. Business owners policies provide an additional coverage for preservation of property when it is removed from the premises to protect it from loss by a covered peril. The coverage will apply at other locations for up to? 30 Days - -The preservation of property additional coverage under a BUSINESS OWNERS POLICY covers direct physical loss or damage from an cause if the property has been removed to another location in order to protect it from loss by a covered peril. Coverage applies while the property is being moved and while it is temporarily stored at another location, but only for 30 days after the property is first moved. Which losses are excluded under the physical damage coverage of a personal auto policy? Loss of custom furnishings in a customized van loss caused by freezing of the cooling system Damage to equipment designed for the detection of Radar. - -Damage to a covered auto while being used as apart of a car pool is not excluded. Under the BUSINESS AUTO COVERAGE PART, liability insurance applies to mobile equipment while it is: Being carried or towed by a covered auto. - -Although mobile equipment exposures are usually covered by CGL insurance, it is covered by business auto insurance while being carried or towed by a covered auto because in such cases it is considered an extension of the covered auto. Insurance is a mechanism used to manage which type of risk? Pure risks. - -Insurance is only used to manage pure risks that involve only the possibility of loss and no opportunity for gain. Coverage for Vandalism and malicious mischief is attached to a policy, it will be suspended whenever the building has been vacant for more than how many days? 30 Consecutive days. - -If a dwelling policy includes the extended coverage (EC) perils, coverage for vandalism and malicious mischief (V&MM) may also be added. However, this coverage will not apply whenever the building has been vacant from more than 30 consecutive days. Commercial general liability coverage provides medical expense payments for accidental injuries if the expenses are incurred and reported to the insurer within what date? One year after the accident date. - -CGL insurance policies provide coverage for medical expense payments for accidental injuries if the expenses are incurred and reported to the insurer within one year after the accident date. An employer purchased a fidelity bond to protect against potential losses by employee dishonesty. In this situation, each of the employees covered by the bond is considered? A Principle. - -Fidelity bonds are contracts between three parties. The employees who are required to act honestly are the principals. The surety or guarantor, which is usually an insurance company, agrees to be responsible for a loss if a principal violates the terms of the bond. The obligee, the employer, is the party who is being protected by the bond and who will be paid if a loss occures. When insurance is written on a dwelling form, each of the following types of property would be insured under Coverage A (Dwelling Coverage). A Laundry room ATTACHED to the building Building Equipment and outdoor equipment Materials and supplies used for construction or repair of the dwelling. - -The storage shed connected to the dwelling by a utility line would be considered an "other structure" available for insurance under Coverage B. On Homeowners policies, "insured location" is a broad term describing where liability coverage apply. Family cemetery plots Any newly acquired premises A non owned premises used as a temporary residence by an insured. - -Family cemetery plots, newly acquired premises, and premises used as a temporary residence by an insured are all included in the policy definition of "insured location." Farm exposures are specifically excluded by the homeowner eligibility rules. The most common definition of actual cash value (ACV) in the property insurance field is? Replacement cost, less depreciation. - -Actual cas value is usually calculated by determining an item's replacement cost and subtracting an amount for depreciation. The National Flood Insurance Program. There are maximum limits on the amount of coverage available. Coverage may be written by private insurance carriers. The federal government reimburses insurance companies for losses that exceed premiums collected. - -The Federal insurance Administration sets rates, eligibility requirements, and coverage limitations fro flood insurance. Maximum limits do apply to the amount of coverage available. coverage may be written by private insurance carriers, and the FIA reimburses insurance companies for losses that exceed premiums collected. What is meant by the term "Adverse Selection"? The Tendency of people with greater than average exposure to loss to purchase insurance. - -Adverse selection means the tendency of people with a greater than average exposure to loss to purchase insurance coverage. For example, if insurers only sold earthquake coverage to applicants in earthquake prone areas, or flood insurance only to those in food prone areas, the situation known as adverse selections would exist. Insurers and underwriters guard against adverse selection by trying to sell bread ranges of coverage to large cross section of the population in order to increase the premium base and spread the risk of loss. A commercial building valued at $300,000 is insured for $200,000. If the policy is written with an 80% coinsurance percentage and a standard deductible, how much would be paid for a $60,000 loss? $49,500 - -The coinsurance requirement is for the insured to carry 80% of the $300K building value. or %240K of coverage. Because the insured only has 200K of coverage, a penalty applies. The formula is that the amount actually carried (200K) is divided by the amount required (240K) to produce a fraction hat will be multiplied by the loss. In this case, the fraction is 5/6 and the loss was 60K, so the result is a 50K covered loss. The standard deductible is $500 per occurrence, so the net amount paid will be $49,500. Under homeowners coverage for medical payments to others, necessary medical expenses for treating an accidental injury will be covered if it incurred within how many days? 3 Years of the accident date, - -Coverage for medical payments to others under a homeowners policy applies to necessary medical expenses incurred within three years of an accident that causes bodily injury. Under a Personal Umbrella policy, a self insured retention is an amount that is in effect a deductible for insured losses. - -A personal Umbrella may cover losses that are excluded by underlying insurance- in which case, a self insured retention limit applies. This operates similar to a deductible because it is the out of pocket amount the insured must absorb before the umbrella coverage applies. Ocean Marine PROTECTION AND INDEMNITY (P&I) coverage usually insures the ship owner against liability for all of the following : Cargo lost or damaged through negligence. damage to other vessels when casued by collision. Job related injuries to sailors. - -Damage to the insured ship is not covered under P&I, but the insurance is available under hull coverage. National flood insurance is available for Residential and nonresidential buildings and contents. - -Almost any building that is walled and roofed, is principally above ground, and is fixed to a permanent site is eligible to ce covered by a flood policy. A policy may cover a building, its contents, or both. Which dwelling forms can provide replacement cost coverage for buildings. The broad and special forms only. - -Although all dwelling forms settle personal property losses at actual cash value, under the broad and special forms (DP2 and DP3), replacement cost coverage for buildings is provided if the insured carries insurance equal to at least 80% of the full replacement cost at the time of loss. Under the commercial property conditions, the coverage territory includes all of the following: United States, Puerto Rico, and Canada. - -Mexico is not a covered territory. What risk might qualify for coverage under a business owners policy? An apartment building of any size. - -Under the BOP (Business Owners Policy) eligibility rules, there is no size limitation on apartment buildings, but a size limit does apply to office buildings. Banks, saving and loan associations, bars, and pubs are specifically described as ineligible risk categories. Under a BUSINESS AUTO LIABILITY coverage, if an insured takes time off from work at the request of the insurer and suffers loss of earnings, as a supplementary payment, the insurer will pay up to how much? $250 a day for lost earnings. - -The business auto coverage from includes supplementary payments under the liability section that state the insurer will pay expenses incurred by an insured at the insurer's request, including up to $250 a day for lost earnings because of time off from work. The primary purpose of insurance is to do what? Transfer Risk. - -The purpose of insurance is not to avoid or eliminate risk, but to transfer risk. Risk reduction efforts play a part in loss control,. which helps to keep insurance costs down, but insurance itself is not an example of reducing risk. Restoring an insured to approximately the same condition that existed before a property loss is an example of what principle? Indeminty - -The principle of indemnity states that when a loss occurs, an individual should be restored to approximately the same financial position he or she was in before the loss. Insurable interest is a requirement for the insurance to apply. Salvage and subrogation, which are related to claim settlements, help the insurer recover its losses and to not indemnify the insured. Which DWELLING FORMS provide coverage for loss of fair rental value when a dwelling becomes uninhabitable? The basic, broad, and special forms. - -All dwelling policies provide coverage for the loss of fair rental value if a building or other structure becomes uninhabitable because of an insured cause of loss. A limited amount of coverage is provided under the OTHER COVERAGES section of the policy, but an insured with a greater exposure might purchase a specific amount of coverage. On a COMMERCIAL PACKAGE policy, interline endorsements can? Apply t more than one line of insurance. - -Interline endorsements attached to a commercial package policy are endorsements that can apply to more than one line of insurance or coverage part. On HOMEOWNERS POLICIES, personal property used for business purposes is: Covered up to $2,500 on the premises and up to $500 off the premises. - -HOMEOWNERS POLICIES do cover some property used for business, by the coverage is subject to special limitations. The policy will only provide up to $2,500 of coverage for business property on the residence premises and $500 of coverage for business property away from the premises. When an insured cancels a policy prior to its expiration date, the insurance company will return a portion of the unused premium on a short rate basis, What does the term "short Rate" mean? The insurer will keep the earned premium plus an additional amount for policy writing expenses. - -when an insured cancels a policy prior to expiration, the unearned premium may be returned on a short rate basis. This means that the company not only keeps the earned premium for the insurance provided, but also keeps an additional amount for expenses of issuing the policy. he taking of money or other property from inside a premises by someone who has unlawfully and forcefully entered or exited is an example of what kind of crime? Burglary. - -Burglary is the taking of money or other property from inside a premises by someone who has unlawfully entered or exited the premises. There must be visible evidence or forced entry or exit. Robbery is taking money or property by force or threat. Embezzlement is taking money by means of bookkeeping fraud. Sage burglary is a special from of burglary that specifically refers only to breaking into a safe to take money or property, as opposed to just breaking in to a premises. Which method of risk management best describes the use of high deductibles or elements of self insurance to reduce insurance costs? Retention. - -Risks may be retained in whole or in part by intentionally self insuring or selecting high deductibles. The other risk management options are not examples of risk reduction. Transfer refers to the purchase of insurance , where the risk of loss is assumed by the insurance company in return for the premium. Avoidance means taking steps to not incur the risk at all, such as never driving a car to avoid the risk of collision. Reduction means taking steps to lower the severity of a loss if it occurs, such as installing a sprinkler system- a fire might still occur, but it won't spread if the sprinkler system puts the fire out. Office buildings are eligible for coverage under a BUSINESS OWNERS POLICY if the do not contain more than 100,000 square feet of space and do not exceed: 6 Stories in height. - -Under the eligibility rules, office buildings may qualify for coverage under a BUSINESS OWNERS POLICY if they do not exceed 100,000 SQ Feet of space and do not exceed 6 stories in height. An insurance company has made an underwriting profit when... Its combined ratio is less than 100% - -The combined ration is the sum of the loss ration and the expense ration. A combined ratio of less than 100% indicates that the company had an underwriting profit. A combined ratio of more than 100% indicates that the company has had a net loss. The COMMERCIAL COMMON POLICY declarations would include all of the following types of info: The policy period the coverage parts purchased and their premiums