FLORIDA ACA CLAIM LICENCING EXAM QUESTIONS WITH CORRECT ANSWERS GRADED TO PASS

Insurance - transfer of risk by contract to insurers who agree to indemnify insureds for losses Risk - chance of loss pure risk - only outcomes are loss or no loss personal risk - premature death, insufficient income, poor health, unemployment property risk - loss of real property or personal property (on the land not the land itself) Liability risk - something that results in loss to another (3rd party buyout) Controlling risk - risk management; minimal loss speculative risk - either profit or loss is possible (NOT insurable) indemnify - compensate for loss, damage, or injury; reimburse; repay Law of Large Numbers - must have a large pool of insureds to be able to predict losses so that the outcomes will reflect the probability of the results Direct loss - Results from the damage, destruction, or theft of property by a covered peril indirect loss - a financial loss that results from the occurrence of a direct physical damage or theft loss When can there be a pay out on liability risk - negligence is proven negligence - failure to use due care; otherwise known as the prudent person rule Strict or Absolute Liability - Liability assigned by statute without regard for negligence (set by the state or industry, no allowable defense) Indemnity Principle - one should be in approximately the same position after a loss as he was before the loss Insurer - A person or company that underwrites an insurance risk; the party in an insurance contract undertaking to pay compensation. Insured - one who is named or covered by insurance Insurable interest - must exist at the time of loss and usually means an economic or other interest in the event or in a particular property ex: bank loans or mortgage companies What is the measure of insurable interest - the extent to which the insured might be damnified by loss, injury, or impairment thereof Policy - a written document containing coverage, exclusions, conditions and endorsements Binder - can be oral or written and places the insurance "in effect" Requirements of a valid contract - consent of all parties (offer and acceptance), valuable consideration (monetary exchange), all parties must be of legal capacity (competent), and it must be for legal purposes to be enforceable Characteristics of an insurance contract - personal, conditional, contract of adhesion (gray area, will side on the behalf of the insured), principle of indemnity, aleatory (exchange is not equal), unilateral (payment for a promise) Domestic insurance company - A company that resides and is incorporated under the laws of the state in which it is operating Foreign Insurance Company - An insurance company that is incorporated outside the state where it is conducting business Alien Insurance Company - An insurance company incorporated outside the country Peril - something that causes a loss ex: Fire, lightening Hazard - something that increases the probability a loss will occur or increases the severity Physical hazard - A physical characteristic that may increase the likelihood of loss (wet floor, icy roads) Moral hazard - a conscious act that may cause a loss to occur (deliberate theft) Morale hazard - an unconscious act that may cause a loss to occur (out of your control) Proximate cause - if there is an unbroken chain of events from the occurrence and damage from that occurrence, all damage is a result of that occurrence (water damage from a fire) property insurance - A type of insurance that covers damage to property, such as a home. Liability/Casualty Insurance - Payable to a third party on behalf of the insured (bodily injury to another) assumption of risk - A defense against negligence that can be used when the plaintiff was aware of a danger and voluntarily assumed the risk of injury from that danger. Comparative Negligence - the apportioning of blame in an accident (both parties are at fault) actual cash value - current cost less depreciation replacement cost - current cost (no depreciation) valued policy - pays the face amount of insurance if a total loss occurs Florida Valued Policy Law applies to - total loss of a building, home or manufactured home based on insured value Coinsurance - the sharing of expenses by the policyholder and the insurance company ex: a homeowner fails to increase insurance policy after renovations, therefore the DID/Should model is applied and the insurance company only pays out partially on the loss specific insurance - When each property is named and specifically covered for a set amount blanket insurance - When a single amount of coverage applies to any loss of property or injury up to the single limit amount (one bucket for multiple properties) mortgage clause - establishes rights of mortgagee (lender) in the policy. Generally used in fixed property (real estate). Loss Payable Clause - Establishes rights of a lender having interest in personal property. Sometimes called loss payee clause Subrogation - when insured transfers right to his company to collect damages ex: collecting funds from an at fault driver's insurance company severability - Insurance applies separately to each insured as if other insureds did not exist. (usually applies to spouses) liberalization - used when a company increases benefits with no additional premium (new benefits extend to existing policy holders) warranty - a guarantee of fact representation - a material statement by applicant in an insurance situation misrepresentation - A false statement or lie that can render the contract void. primary coverage - must pay first