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Property and Casualty Insurance EXAM
Questions and Answers
Specific insurance
Ans: This type of insurance designates a particular item to be insured
Blanket insurance
Ans: 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
Ans: possibility of both gain and loss. Not insurable.
Pure
Ans: only the possibility of loss. Insurable.
What are the 5 methods of managing or handling risk?
Ans: avoid, control, retain, and transfer risk.
Hazard
Ans: A condition or situation which increases the chance for loss
Physical Hazards
Ans: a hazard that arises from the condition, occupancy, or use of the
property itself.
ex: skateboard left on the steps
Moral Hazards
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Ans: 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
Ans: 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
Ans: 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)
Ans: Replacement Cost, minus depreciation.
Pair and Set Clause
Ans: Loss to one item of a pair or set does not constitute loss to the
entire pair or set.
Appraisal
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Ans: 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
Ans: An insurer's right to recover the amount of its loss payment from
the third party who is legally responsible for the loss.
Arbitration
Ans: 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?
Ans: Windstorm, Civil commotion, Smoke, Hail, Aircraft, Vehicles,
Volcanic eruption, Explosion, Riot
What does BIG AFFECT stand for?
Ans: Burglar damage, Ice & snow weight, Glass breakage, Accidental
discharge, Falling objects, Freezing of pipes, Electrical damage, Collapse,
Tearing apart.
Insolvency
Ans: A financial state that occurs if liabilities are greater than assets.
Law of Agency
Ans: Knowledge of the Agents is Knowledge of the Principal (Insurance
Company)
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Principal
Ans: Insurance Company
What is the ISO?
Ans: 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
Ans: 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
Ans: 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
Ans: 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
Ans: A provision in a policy that pledges that a condition does exist or
will exist at some time in the future.
Deposit Premium
© 2025 All rights reserved
Property and Casualty Insurance EXAM
Questions and Answers
Specific insurance
Ans: This type of insurance designates a particular item to be insured
Blanket insurance
Ans: 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
Ans: possibility of both gain and loss. Not insurable.
Pure
Ans: only the possibility of loss. Insurable.
What are the 5 methods of managing or handling risk?
Ans: avoid, control, retain, and transfer risk.
Hazard
Ans: A condition or situation which increases the chance for loss
Physical Hazards
Ans: a hazard that arises from the condition, occupancy, or use of the
property itself.
ex: skateboard left on the steps
Moral Hazards
© 2025 All rights reserved
, 2 | Page
Ans: 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
Ans: 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
Ans: 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)
Ans: Replacement Cost, minus depreciation.
Pair and Set Clause
Ans: Loss to one item of a pair or set does not constitute loss to the
entire pair or set.
Appraisal
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, 3 | Page
Ans: 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
Ans: An insurer's right to recover the amount of its loss payment from
the third party who is legally responsible for the loss.
Arbitration
Ans: 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?
Ans: Windstorm, Civil commotion, Smoke, Hail, Aircraft, Vehicles,
Volcanic eruption, Explosion, Riot
What does BIG AFFECT stand for?
Ans: Burglar damage, Ice & snow weight, Glass breakage, Accidental
discharge, Falling objects, Freezing of pipes, Electrical damage, Collapse,
Tearing apart.
Insolvency
Ans: A financial state that occurs if liabilities are greater than assets.
Law of Agency
Ans: Knowledge of the Agents is Knowledge of the Principal (Insurance
Company)
© 2025 All rights reserved
, 4 | Page
Principal
Ans: Insurance Company
What is the ISO?
Ans: 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
Ans: 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
Ans: 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
Ans: 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
Ans: A provision in a policy that pledges that a condition does exist or
will exist at some time in the future.
Deposit Premium
© 2025 All rights reserved
