Property and Casualty Insurance Exam Questions and Answers Updated 2024 (GRADED)

Property and Casualty Insurance Exam Questions and Answers Updated 2024 (GRADED) Specific insurance - Correct answer-This type of insurance designates a particular item to be insured Blanket insurance - Correct 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. Speculative - Correct answer-possibility of both gain and loss. Not insurable. Pure - Correct answer-only the possibility of loss. Insurable. What are the 5 methods of managing or handling risk? - Correct answer-avoid, control, retain, and transfer risk. Hazard - Correct answer-A condition or situation which increases the chance for loss Physical Hazards - Correct answer-a hazard that arises from the condition, occupancy, or use of the property itself. ex: skateboard left on the steps Moral Hazards - Correct 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. Morale Hazards - Correct 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. Replacement Cost - Correct 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. Actual Cash Value (ACV) - Correct answer-Replacement Cost, minus depreciation. Pair and Set Clause - Correct answer-Loss to one item of a pair or set does not constitute loss to the entire pair or set. Appraisal - Correct 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 Subrogation - Correct answer-An insurer's right to recover the amount of its loss payment from the third party who is legally responsible for the loss. Arbitration - Correct 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. What does WC SHAVVER stand for? - Correct answer-Windstorm, Civil commotion, Smoke, Hail, Aircraft, Vehicles, Volcanic eruption, Explosion, Riot What does BIG AFFECT stand for? - Correct answer-Burglar damage, Ice & snow weight, Glass breakage, Accidental discharge, Falling objects, Freezing of pipes, Electrical damage, Collapse, Tearing apart. Insolvency - Correct answer-A financial state that occurs if liabilities are greater than assets. Law of Agency - Correct answer-Knowledge of the Agents is Knowledge of the Principal (Insurance Company) Principal - Correct answer-Insurance Company What is the ISO? - Correct 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. Coinsurance Clause - Correct 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. Estoppel - Correct 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. Binder - Correct 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. Warranty - Correct answer-A provision in a policy that pledges that a condition does exist or will exist at some time in the future. Deposit Premium - Correct 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. Audit - Correct answer-Verification of books or accounts to determine their accuracy. Occurrence - Correct answer-An accident, including continuous or repeated exposure to the same harmful conditions, which result in bodily injury or property damage. Special Damages - Correct 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. General Damages - Correct answer-type of compensatory damages that reimburse the injured party for such things as pain and suffering and disfigurement. Punitive Damages - Correct answer-type of damages intended to punish the defendant and make an example out of her to discourage others from behaving the same way. Proximate Cause - Correct answer-An act, through an uniterrupted chain of events, that can be determined to be the immediate or actual cause of a loss. 4 elements of negligence - Correct answer-1. The existence of a DUTY to act in a certain way 2. A FAILURE to live up to this duty 3. An actual INJURY must occur 4. The failure in duty must be the PROXIMATE CAUSE of the injury. Negligence - Correct answer-An unreasonable or prudent act, A thoughtless or careless act or one committed out of ignorance. It may be a non-act or omission, but it is NEVER an intentional act. Casualty Insurance - Correct answer-Refers to coverage designed to address the liability of individuals and organizations resulting from negligent acts in their personal, business, or professional roles. Overinsurance - Correct answer-Exists if a property or an insurable interest in property is insured by one or more insurance contracts against the same hazard in excess of the fair value of the property or of such interest. Specific Insurance - Correct answer-Coverage on ONE type of property (real or personal) in ONE location. Blanket Insurance - Correct answer-A single policy written on an insured's interest for 2 or more different types of property (dwelling/building and contents) at the same location, or at different locations. Uninsured Motor Vehicle - Correct answer-A motor vehicle or trailer to which: - No liability coverage at the time of accident -has liability coverage but not enough to meet the state's financial responsibility requirement - Operated by a hit and run driver - Has invalid liability insurance at the time of the accident because the insurer is insolvent or denies coverage Part C: Uninsured Motorist Coverage - Correct answer-this coverage compensates the insured for bodily injury ONLY as a result of an accident with an uninsured motorist. Medical Payments - Correct answer-Insurance company agrees to pay for reasonable expenses incurred for necessary medical and funeral services because of bodily injury. - Covers first party. - "Stays in the car" - 3 years is time limit for incurring medical expenses Supplementary Payments - Correct answer-Payments made in addition to the Limits of Liability. - Up to $200/day for loss of earnings - Up to $250 for the cost of bail bonds required because of an accident. Excess - Correct answer-Any insurance that is provided for a vehicle you do not own, shall be excess over any other collectible insurance. Example: If you borrowed your friend's car, your own liability coverage will act as excess to your friend's primary coverage. Single Limit Basis - Correct answer-One amount representing the total (aggregate) limit for all claims arising from any one accident. (1 amount for Bodily Injury and Property Damage) Split Limit Basis - Correct answer-This limit has separate limits for BI and PD. For example: 20/50/10 - $20,000 for per person bodily injury, $50,000 total per accident bodily injury, $10,000 per accident for property damage. Split/ Combined Single Limit - Correct answer-This limit has only one limit that applies to both BI and PD. Part A - Liability Coverage - Correct answer-Provides payment for Bodily Injury (BI) & Property Damage (PD) damage resulting from the injured's use of an automobile for which the insured becomes legally liable. - Covers Third Party Only - Pays for both $pecial and General Damages Loss of Use - Correct answer-The inconvenience caused to an individual for the inability to use property. Underinsured Motorist Coverage (UIM) - Correct answer-Covers the insured when involved in an accident with a driver who has auto liability insurance, but the limit of this insurance is insufficient to pay for the insured's damage. Collision - Correct answer-The upset of a covered auto or its impact with another motor vehicle . Comprehensive - Correct answer-Addresses property damage losses to the insured vehicle involving losses other than collisions. Examples: - Contact with birds or animals - Theft or larceny - Fire - Hair, water, or flood - Vandalism or malicious mischief (VMM) - Breakage of glass Nonowned Auto - Correct answer-Any private passenger vehicle not owned by the insured being operated by the insured. Examples: - Rental Car - Temporary Substitute APIP - Correct answer-Additional Personal Injury Protection (optional) OBEL - Correct answer-Optional Basic Economic Loss Additional $25,000 to be assigned to any combination of Medical Expenses, Loss Wages, Rehab. Red Lining - Correct answer-No insurer may refuse to issue or renew an auto policy because of age, sex, race, occupation or principal place of garaging of the named insured. Stacking - Correct answer-The practice of adding (stacking) the limits of all applicable policies to address a given loss. Flood - Correct answer-A general or temporary condition of partial or complete inundation of normally dry land areas. Must affect: - 2 or more acres or - 2 or more properties Vicarious Liability - Correct answer-liability situation where someone is held responsible for the actions or omissions of another person. ex: an employer can be liable for the acts or omissions of its employees, provided it can be shown that they took place in the course of their employment. Write Your Own (WYO) - Correct answer-Program instituted by the Federal Government which enables private insurers (Allstate, State Farm, etc) to write, service, bill and settle claims directly with insureds while being backed financially by the federal government. Tort - Correct answer-Fault A civil wrong that violates the rights of another person. Can be intentional or unintentional