personal lines insurance Questions and Verified
Answers
Risk _________ is when one takes action to prevent or reduce potential loss. Correct Answer: Reduction
When the number of similar units increases, the predictability of the loss improves according to the rule
of _____ ________. Correct Answer: Large Numbers
The insuring of risks that are more prone to losses than average risks is known as? Correct Answer:
Adverse Selection
A ___________ contract is an arrangement where one insurer transfers or shares risks with another
insurer. Correct Answer: Reinsurance
_____________ Reinsurance is accepted or rejected by a case by case basis. Correct Answer: Facultative
The fact that an insured would profit from a loss, would be a violation of the principle of ___________.
Correct Answer: Indemnity
The determination of acceptable risks is the primary function of the ___________ . Correct Answer:
Underwriter
Underwriters like to select insureds who's actual losses will be similar to expected losses. True or False?
Correct Answer: True
When rates cannot be used until they are improved by the department or division of insurance, they are
called ____ ________ rates. Correct Answer: Prior Approval
The termination of a policy by either the insured or insurer before its expiration date is known as
___________. Correct Answer: Cancellation
When the insurer cancels a property policy, the unearned premium is returned ___ ____. Correct
Answer: Pro Rata
When an insured requests cancellation of a policy, the unearned premium is refunded to the insured on
a _____ _____. Correct Answer: Short Rate
A fire is considered to be a _____ of a potential loss. Correct Answer: Cause
,A document that provides temporary insurance coverage until a policy is issued is known as a ______.
Correct Answer: Binder
The process by which a disputed claim is decided by a neutral third party is known as ___________.
Correct Answer: Arbitration
_________ _________ is a situation where there are two causes resulting in a loss, with one of the causes
excluded and the other cause of loss not excluded. Correct Answer: Concurrent Causation
If two or more policies provide identical coverage for the same risk, the policies are deemed to be
__________. Correct Answer: Concurrent
Policy A is written for $100,000, and an excess Policy B is written for $200,000 on the same property. In
the event of a $20,000 loss, how much will each policy pay? Correct Answer: A= $20,000 ; B= $0
A building that has neither occupants nor personal property is ______. Correct Answer: Vacant
When property is damaged by fire, the loss is said to be a(n) ______ loss. Correct Answer: Direct
If a fire on a premises caused a power outage, which caused meat in the freezer to spoil, would the meat
spoilage be considered a direct loss or indirect loss? Correct Answer: Indirect Loss
Open peril policies include losses caused by theft. True or False? Correct Answer: True
If a property owner does not desire any deduction for depreciation following a covered loss, he/she
should purchase a ___________ ____ policy. Correct Answer: Replacement Cost
For replacement cost coverage to apply in dwelling policies, the insured must carry insurance at least
equal to ____% of the cost of replacement of the building. Correct Answer: 80
Would a stated amount method of valuation likely be used when insuring gold bullion? Correct Answer:
No
An ____ policy is one that the value of the subject matter is not agreed upon, but is left to be ascertained
in case of loss. Correct Answer: Open
A valued policy is one that expresses on it's face an agreement that the thing insured is valued at a
specific sum. True or False? Correct Answer: True
Insuring more than one property on one policy for a single amount of insurance that applies to all
properties covered under the policy is known as _______ coverage. Correct Answer: Blanket
, The name of the insured is found on the declarations page of the policy. True or False? Correct Answer:
True
What part or portion of a property policy contains the effective or expiration dates of the policy? Correct
Answer: Declarations
Are the insurer's limits of insurance amount stated in the conditions part or portion part of the policy?
Correct Answer: No
The __________ part or portion of a property policy sets forth the rights, rules, duties, and obligations of
the insurer and insured to be followed throughout the policy period. Correct Answer: Conditions
The ______________ Clause allows insurers to automatically broaden coverage without endorsement on
existing policies with no increase in premium. Correct Answer: Liberalization
When a property policy has been in effect less than 60 days and the insurer cancels for the nonpayment
of premium, the insurer must give the insured ____ days written notice. Correct Answer: 10
Could an order to vacate the property possibly cause an insurer to cancel a commercial property policy?
Correct Answer: Yes
An insurer may nonrenew a homeowners policy with oral notice to the insured. True or False? Correct
Answer: False
The insured's transfer of right of ownership or interest in an insurance policy to another party with the
insurer's written consent is known as an __________. Correct Answer: Assignment
___________ transfers an insured's legal right of recovery to the insurer that paid the claim. Correct
Answer: Subrogation
When an insured suffers a loss, they are required to prepare an inventory of the damaged property at the
________ request. Correct Answer: Insurers
In the event of a loss under a homeowners policy, a proof of loss must be signed and sworn by the
_______. Correct Answer: Insured
Company A has issued a policy in the amount of $200,000, and company B has issued a policy in the
amount of $300,000. under the other insurance or pro rata liability condition or provision, how much
will company A pay of a $100,000 loss? Correct Answer: $40,000
The _________ portion of the policy specifies the causes of loss perils not covered, or property not
covered. Correct Answer: Exclusions
Answers
Risk _________ is when one takes action to prevent or reduce potential loss. Correct Answer: Reduction
When the number of similar units increases, the predictability of the loss improves according to the rule
of _____ ________. Correct Answer: Large Numbers
The insuring of risks that are more prone to losses than average risks is known as? Correct Answer:
Adverse Selection
A ___________ contract is an arrangement where one insurer transfers or shares risks with another
insurer. Correct Answer: Reinsurance
_____________ Reinsurance is accepted or rejected by a case by case basis. Correct Answer: Facultative
The fact that an insured would profit from a loss, would be a violation of the principle of ___________.
Correct Answer: Indemnity
The determination of acceptable risks is the primary function of the ___________ . Correct Answer:
Underwriter
Underwriters like to select insureds who's actual losses will be similar to expected losses. True or False?
Correct Answer: True
When rates cannot be used until they are improved by the department or division of insurance, they are
called ____ ________ rates. Correct Answer: Prior Approval
The termination of a policy by either the insured or insurer before its expiration date is known as
___________. Correct Answer: Cancellation
When the insurer cancels a property policy, the unearned premium is returned ___ ____. Correct
Answer: Pro Rata
When an insured requests cancellation of a policy, the unearned premium is refunded to the insured on
a _____ _____. Correct Answer: Short Rate
A fire is considered to be a _____ of a potential loss. Correct Answer: Cause
,A document that provides temporary insurance coverage until a policy is issued is known as a ______.
Correct Answer: Binder
The process by which a disputed claim is decided by a neutral third party is known as ___________.
Correct Answer: Arbitration
_________ _________ is a situation where there are two causes resulting in a loss, with one of the causes
excluded and the other cause of loss not excluded. Correct Answer: Concurrent Causation
If two or more policies provide identical coverage for the same risk, the policies are deemed to be
__________. Correct Answer: Concurrent
Policy A is written for $100,000, and an excess Policy B is written for $200,000 on the same property. In
the event of a $20,000 loss, how much will each policy pay? Correct Answer: A= $20,000 ; B= $0
A building that has neither occupants nor personal property is ______. Correct Answer: Vacant
When property is damaged by fire, the loss is said to be a(n) ______ loss. Correct Answer: Direct
If a fire on a premises caused a power outage, which caused meat in the freezer to spoil, would the meat
spoilage be considered a direct loss or indirect loss? Correct Answer: Indirect Loss
Open peril policies include losses caused by theft. True or False? Correct Answer: True
If a property owner does not desire any deduction for depreciation following a covered loss, he/she
should purchase a ___________ ____ policy. Correct Answer: Replacement Cost
For replacement cost coverage to apply in dwelling policies, the insured must carry insurance at least
equal to ____% of the cost of replacement of the building. Correct Answer: 80
Would a stated amount method of valuation likely be used when insuring gold bullion? Correct Answer:
No
An ____ policy is one that the value of the subject matter is not agreed upon, but is left to be ascertained
in case of loss. Correct Answer: Open
A valued policy is one that expresses on it's face an agreement that the thing insured is valued at a
specific sum. True or False? Correct Answer: True
Insuring more than one property on one policy for a single amount of insurance that applies to all
properties covered under the policy is known as _______ coverage. Correct Answer: Blanket
, The name of the insured is found on the declarations page of the policy. True or False? Correct Answer:
True
What part or portion of a property policy contains the effective or expiration dates of the policy? Correct
Answer: Declarations
Are the insurer's limits of insurance amount stated in the conditions part or portion part of the policy?
Correct Answer: No
The __________ part or portion of a property policy sets forth the rights, rules, duties, and obligations of
the insurer and insured to be followed throughout the policy period. Correct Answer: Conditions
The ______________ Clause allows insurers to automatically broaden coverage without endorsement on
existing policies with no increase in premium. Correct Answer: Liberalization
When a property policy has been in effect less than 60 days and the insurer cancels for the nonpayment
of premium, the insurer must give the insured ____ days written notice. Correct Answer: 10
Could an order to vacate the property possibly cause an insurer to cancel a commercial property policy?
Correct Answer: Yes
An insurer may nonrenew a homeowners policy with oral notice to the insured. True or False? Correct
Answer: False
The insured's transfer of right of ownership or interest in an insurance policy to another party with the
insurer's written consent is known as an __________. Correct Answer: Assignment
___________ transfers an insured's legal right of recovery to the insurer that paid the claim. Correct
Answer: Subrogation
When an insured suffers a loss, they are required to prepare an inventory of the damaged property at the
________ request. Correct Answer: Insurers
In the event of a loss under a homeowners policy, a proof of loss must be signed and sworn by the
_______. Correct Answer: Insured
Company A has issued a policy in the amount of $200,000, and company B has issued a policy in the
amount of $300,000. under the other insurance or pro rata liability condition or provision, how much
will company A pay of a $100,000 loss? Correct Answer: $40,000
The _________ portion of the policy specifies the causes of loss perils not covered, or property not
covered. Correct Answer: Exclusions
