Virginia Personal Lines Agent
Licensing Course Questions And
Answers
What is insurance? ANSWERS Insurance is a social device for spreading the
chance of financial loss among a large number of people. By purchasing
insurance, a "person" shares risk with a group of others, thereby reducing
the individual potential for disastrous financial consequences.
What is insurance based on? ANSWERS the law of large numbers; by
combining a large number of homogeneous units, the insurer is able to make
predictions of possible loss. Using the law of large numbers, insurers are
able to calculate probable losses and to establish the rates for premiums
that will cover their losses and their operating expenses.
What is underwriting? ANSWERS the process of selecting certain types of
risks that have historically produced a profit and rejecting those risks that do
not fit the underwriting criteria of the insurer; normally produces a favorable
loss ratio
Adverse selection ANSWERS assess risk and charge too little; the tendency
of insureds with a greater-than-average chance of loss to purchase insurance
Reinsurace ANSWERS a contract of indemnity against liability by which an
insurance company procures another insurance company to insure it against
loss or liability by reason of the original insurance; insurance companies
have a company that insures them
What are the 6 parts of an insurance contract? ANSWERS Declarations,
Insuring Agreement, Conditions, Exclusions and Limitations, Definitions,
Endorsements
,Declarations ANSWERS includes the identity and address of the named
insured, the policy term or period, the amount of insurance or limits of
liability, the policy premium, and any applicable deductibles; include property
description and any applicable deductibles as well as list any endorsements;
who is insured, what is insured, deductibles... etc.
Insuring Agreement ANSWERS describes the covered perils, or risks
assumed, or nature of coverage, or makes some reference to the contractual
agreement between insurer and insured; what insurer will cover for you.
Conditions ANSWERS set provisions, rules of conduct, duties, and obligations
for the parties; describes things such as the policy period and territory, the
insured's obligation to provide proof of loss, how settlements are handled
when other insurance is involved, and the right of each party to cancel the
policy
Exclusions and Limitations ANSWERS Exclusions: may describe property ,
perils, hazards, or losses arising from specific causes that are not covered by
the policy; Limitations; may eliminate or reduce coverage, but only under
certain circumstances or when specified conditions apply; Exclusions and
Limitations: when the insurance company wont cover you.
Definitions ANSWERS Define important terms used in the policy language;
explanation
Endorsements ANSWERS used to add, delete, or change any of the policy
parts; written modification of the policy; additional coverages to contract -->
extra money premium.
Peril ANSWERS potential cause of loss
Hazard ANSWERS increases the seriousness of a loss or increases the
likelihood that a loss will occur; increased potential of peril
Direct Loss ANSWERS direct consequence of a particular peril (example: fire
damage to an apartment building
Indirect Loss ANSWERS loss that is a result of a covered peril but is not
caused directly and immediately by that peril (example: loss of rental
income)
Salvage ANSWERS If the insurer pays a loss on behalf of the insured, the
insurer is entitled to the salvage to reduce the claim (example: totaled care --
> belongs to insurance company)
, Abandonment ANSWERS insured cannot simply abandon the property to the
insurance company in exchange for the full-insured value.
Pair or Set Clause ANSWERS if part of a pair or set is lost or damaged, the
loss will be valued as a fair proportion of the total value of the set, giving
consideration to the importance of the damaged article to the set; initial -
appraised = payout
Deductible ANSWERS Self-insured part of an insured loss, the insured must
bear this loss; amount you pay before insurance comes in --> you are
responsible.
Vacancy and Unoccupancy ANSWERS Vacancy: building is void of contents
and people; 60 or more days; Unoccupancy: premises are void of people, will
not affect the coverage provided by the policy.
Assignment ANSWERS Insurance policy cannot be assigned to another party
without consent of the insurance company
Liberalization ANSWERS if the policy or endorsement forms are broadened
and no additional premium is required, then all existing similar policies or
endorsements will be construed to include the broadened coverage
Binder ANSWERS temporary evidence that coverage is in effect until the
policy is issued --> oral or written
Primary Insurance ANSWERS in cases where more than one policy is in force,
the primary policy pays first; example: you borrow your friends car and get
into an accident --> that car's insurance covers you, then you can use your
own insurance.
Excess Insurance ANSWERS insurance policy that pays benefits only when
coverage under other applicable insurance policies have become exhausted
Accident ANSWERS sudden and unforeseen event resulting in a financial loss
Occurance ANSWERS continuous or repeated exposure to an event that
results in financial loss; also sudden and unforeseen
Appraisal and Arbitration ANSWERS Appraisal: both parties select an
appraiser to determine the value of the loss, appraiser chooses an umpire,
each party will pay its chosen appraiser and bear the other expenses of the
appraisal and umpire equally; Arbitration: resolve liability disputes for bodily
Licensing Course Questions And
Answers
What is insurance? ANSWERS Insurance is a social device for spreading the
chance of financial loss among a large number of people. By purchasing
insurance, a "person" shares risk with a group of others, thereby reducing
the individual potential for disastrous financial consequences.
What is insurance based on? ANSWERS the law of large numbers; by
combining a large number of homogeneous units, the insurer is able to make
predictions of possible loss. Using the law of large numbers, insurers are
able to calculate probable losses and to establish the rates for premiums
that will cover their losses and their operating expenses.
What is underwriting? ANSWERS the process of selecting certain types of
risks that have historically produced a profit and rejecting those risks that do
not fit the underwriting criteria of the insurer; normally produces a favorable
loss ratio
Adverse selection ANSWERS assess risk and charge too little; the tendency
of insureds with a greater-than-average chance of loss to purchase insurance
Reinsurace ANSWERS a contract of indemnity against liability by which an
insurance company procures another insurance company to insure it against
loss or liability by reason of the original insurance; insurance companies
have a company that insures them
What are the 6 parts of an insurance contract? ANSWERS Declarations,
Insuring Agreement, Conditions, Exclusions and Limitations, Definitions,
Endorsements
,Declarations ANSWERS includes the identity and address of the named
insured, the policy term or period, the amount of insurance or limits of
liability, the policy premium, and any applicable deductibles; include property
description and any applicable deductibles as well as list any endorsements;
who is insured, what is insured, deductibles... etc.
Insuring Agreement ANSWERS describes the covered perils, or risks
assumed, or nature of coverage, or makes some reference to the contractual
agreement between insurer and insured; what insurer will cover for you.
Conditions ANSWERS set provisions, rules of conduct, duties, and obligations
for the parties; describes things such as the policy period and territory, the
insured's obligation to provide proof of loss, how settlements are handled
when other insurance is involved, and the right of each party to cancel the
policy
Exclusions and Limitations ANSWERS Exclusions: may describe property ,
perils, hazards, or losses arising from specific causes that are not covered by
the policy; Limitations; may eliminate or reduce coverage, but only under
certain circumstances or when specified conditions apply; Exclusions and
Limitations: when the insurance company wont cover you.
Definitions ANSWERS Define important terms used in the policy language;
explanation
Endorsements ANSWERS used to add, delete, or change any of the policy
parts; written modification of the policy; additional coverages to contract -->
extra money premium.
Peril ANSWERS potential cause of loss
Hazard ANSWERS increases the seriousness of a loss or increases the
likelihood that a loss will occur; increased potential of peril
Direct Loss ANSWERS direct consequence of a particular peril (example: fire
damage to an apartment building
Indirect Loss ANSWERS loss that is a result of a covered peril but is not
caused directly and immediately by that peril (example: loss of rental
income)
Salvage ANSWERS If the insurer pays a loss on behalf of the insured, the
insurer is entitled to the salvage to reduce the claim (example: totaled care --
> belongs to insurance company)
, Abandonment ANSWERS insured cannot simply abandon the property to the
insurance company in exchange for the full-insured value.
Pair or Set Clause ANSWERS if part of a pair or set is lost or damaged, the
loss will be valued as a fair proportion of the total value of the set, giving
consideration to the importance of the damaged article to the set; initial -
appraised = payout
Deductible ANSWERS Self-insured part of an insured loss, the insured must
bear this loss; amount you pay before insurance comes in --> you are
responsible.
Vacancy and Unoccupancy ANSWERS Vacancy: building is void of contents
and people; 60 or more days; Unoccupancy: premises are void of people, will
not affect the coverage provided by the policy.
Assignment ANSWERS Insurance policy cannot be assigned to another party
without consent of the insurance company
Liberalization ANSWERS if the policy or endorsement forms are broadened
and no additional premium is required, then all existing similar policies or
endorsements will be construed to include the broadened coverage
Binder ANSWERS temporary evidence that coverage is in effect until the
policy is issued --> oral or written
Primary Insurance ANSWERS in cases where more than one policy is in force,
the primary policy pays first; example: you borrow your friends car and get
into an accident --> that car's insurance covers you, then you can use your
own insurance.
Excess Insurance ANSWERS insurance policy that pays benefits only when
coverage under other applicable insurance policies have become exhausted
Accident ANSWERS sudden and unforeseen event resulting in a financial loss
Occurance ANSWERS continuous or repeated exposure to an event that
results in financial loss; also sudden and unforeseen
Appraisal and Arbitration ANSWERS Appraisal: both parties select an
appraiser to determine the value of the loss, appraiser chooses an umpire,
each party will pay its chosen appraiser and bear the other expenses of the
appraisal and umpire equally; Arbitration: resolve liability disputes for bodily
