PROPERTY AND CASUALTY INSURANCE
PRINCIPLES AND CONCEPTS QUESTIONS AND
VERIFIED ANSWERS
Absolute Liability Correct Answer: Exists when a person subjects another party to a dangerous or
hazardous condition present on their property, including the idea of harboring a wild animal on the
premises.
Additional (Other, Supplementary) Coverage Correct Answer: allow insurers to provide limited coverage
for property, perils or other items that are otherwise excluded and not covered by an insurance policy.
Adverse selection Correct Answer: Are risks that have a high exposure to loss and could undermine the
viability of the insurer.
Assumption of risk Correct Answer: means a party knew of an existing risk and understood injury was
possible, yet the injured party went ahead and subjected him or herself to the risk anyhow.
Class Rating Correct Answer: takes into consideration a group of insured that have similar loss exposure
and are therefore assessed equal premium ratings.
Combined Ratio Correct Answer: totals an insurer's losses and expenses (cost to acquire, service,
underwrite and reinsure risks) and divides that total by the cumulative amount of earned premiums, the
percentage calculated equals the combined ratio of that insurance company.
Comparative negligence Correct Answer: to the parties involved based on their degree of responsibility
for any losses caused by the occurrence under review.
Compensatory damages Correct Answer: compensate an injured party for loss caused by an at-fault party.
Conditions Correct Answer: set forth and describe the rights and duties of both the insurance company
and the insured.
Contributory negligence Correct Answer: Person who is pursuing a claim cannot hold the other party
liable if the court ruled that the claimant had partly contributed to their own injury.
Damages Correct Answer: are monetary amounts awarded to an injured party when the action or
inaction of a negligent party is found to be liable (responsible) for a loss, which can include harm to
people (bodily injury) and/or damage to a property.
PRINCIPLES AND CONCEPTS QUESTIONS AND
VERIFIED ANSWERS
Absolute Liability Correct Answer: Exists when a person subjects another party to a dangerous or
hazardous condition present on their property, including the idea of harboring a wild animal on the
premises.
Additional (Other, Supplementary) Coverage Correct Answer: allow insurers to provide limited coverage
for property, perils or other items that are otherwise excluded and not covered by an insurance policy.
Adverse selection Correct Answer: Are risks that have a high exposure to loss and could undermine the
viability of the insurer.
Assumption of risk Correct Answer: means a party knew of an existing risk and understood injury was
possible, yet the injured party went ahead and subjected him or herself to the risk anyhow.
Class Rating Correct Answer: takes into consideration a group of insured that have similar loss exposure
and are therefore assessed equal premium ratings.
Combined Ratio Correct Answer: totals an insurer's losses and expenses (cost to acquire, service,
underwrite and reinsure risks) and divides that total by the cumulative amount of earned premiums, the
percentage calculated equals the combined ratio of that insurance company.
Comparative negligence Correct Answer: to the parties involved based on their degree of responsibility
for any losses caused by the occurrence under review.
Compensatory damages Correct Answer: compensate an injured party for loss caused by an at-fault party.
Conditions Correct Answer: set forth and describe the rights and duties of both the insurance company
and the insured.
Contributory negligence Correct Answer: Person who is pursuing a claim cannot hold the other party
liable if the court ruled that the claimant had partly contributed to their own injury.
Damages Correct Answer: are monetary amounts awarded to an injured party when the action or
inaction of a negligent party is found to be liable (responsible) for a loss, which can include harm to
people (bodily injury) and/or damage to a property.
