MO PROPERTY AND CASUALTY UPDATED
EVALUATION EXAMS QUESTIONS AND ANSWERS
SURE A+
- ✔✔The cost of the insurance must be affordable to the consumer and be able to cover
an unexpected loss.
✔✔Losses are Predictable - ✔✔There must be a large number of persons with similar
potential loss available for the losses to become predictable.
✔✔Adequate spread of risk - ✔✔Must not happen to a large number of the insured at
the same time. Not insuring every person that would be effected by the same risk.
✔✔Peril - ✔✔the cause of loss
✔✔Hazard - ✔✔anything that increases the chance of loss
✔✔physical hazard - ✔✔a hazard that arises from the condition, occupancy, or use of
the property itself
✔✔morale hazard - ✔✔an individual, through carelessness or by irresponsible actions,
can increase the possibility for a loss
,✔✔moral hazard - ✔✔a person might create a loss situation on purpose just to collect
from the insurance company
✔✔contract - ✔✔legal agreement between two competent parties that promises a
certain performance in exchange for a certain consideration
✔✔Elements of a Valid Contract - ✔✔Competent parties
Legal purpose
Offer and acceptance (agreement)
consideration
✔✔Competent Parties - ✔✔a person who is a minor, insane, or under the influence of
alcohol or drugs is considered incompetent.
✔✔Offer and Acceptance - ✔✔ontract involves two parties: one who makes an offer and
one who accepts it. An offer is a promise that requires an act or another promise in
exchange. Acceptance occurs when the other party agrees to the offer or does what
was proposed in the offer.
✔✔Principle of Indemnity - ✔✔when a loss occurs, an individual should be restored to
the approximate financial condition he was in before the loss, no more and no less
✔✔aleatory - ✔✔contingent on an uncertain event (a loss) that provides for unequal
transfer of value between the parties
✔✔Adhesion - ✔✔one party has greater power over the other party in drafting the
contract
✔✔doctrine of reasonable expectations - ✔✔policy includes coverages that an average
person would reasonably expect it to include, regardless of what the policy actually
provides.
✔✔Unilateral Contract - ✔✔One sided. If an insured pays a premium and a loss occurs,
the insurer is legally bound to pay for the loss under the terms of the policy. However,
insureds are not legally obligated to pay premiums.
✔✔Contract of Utmost Good Faith - ✔✔The insurance company relies on the
truthfulness and integrity of the applicant when issuing a policy. In return, the insured
relies on the company's promise and ability to provide coverage and pay claims.
✔✔conditional contract - ✔✔An insurance policy includes a number of conditions that
both the insured and the insurer must comply with.
, ✔✔Parts of the Insurance Contract - ✔✔Declarations
Insuring Agreements
Conditions
Exclusions
Definitions
✔✔Declarations - ✔✔Information such as the name of the insured, the address, the
amount of coverage provided, a description of the property, and the cost of the policy.
✔✔Insuring Agreements - ✔✔The losses for which the insured will be covered. The type
of property covered and the perils for which it is covered.
✔✔Conditions - ✔✔Ground rules for the policy. Describes the responsibilities and the
obligations of both the insurance company and the insured.
✔✔Exclusions - ✔✔Describes the losses for which the insured is not covered.
✔✔Definitions - ✔✔Clarifies the meanings of certain terms used in the policy.
✔✔stock company - ✔✔When the company first forms, it sells stock to stockholders to
raise the money necessary to operate the business. Stockholders are not necessarily
insured by the company, and insureds do not necessarily own stock in the company.
Profits attributed to the operation of the company are returned as dividends to the
stockholders, not the insureds.
✔✔mutual insurance company - ✔✔The insureds are also owners of the company. As
owners, they can vote to elect the management of the company. Profits are returned to
the insureds in the form of dividends or reductions in future premiums. Most are
advance premium companies that charge nonassessable premiums. As a result they
are required to set money aside in a reserve in case their claims experience is higher
than expected.
✔✔assessment companies - ✔✔Provide primarily fire and windstorm insurance for
small towns and farmers.
Charge members a pro rata share of losses at the end of each policy period.
✔✔reciprocal company - ✔✔Members agree to share the insurance responsibilities with
all other members of the unincorporated group. In a sense, all members insure each
other and share the losses with each other.
Managed by an attorney-in-fact.
✔✔attorney-in-fact - ✔✔Handles all business for a company. (Reciprocal Company)
EVALUATION EXAMS QUESTIONS AND ANSWERS
SURE A+
- ✔✔The cost of the insurance must be affordable to the consumer and be able to cover
an unexpected loss.
✔✔Losses are Predictable - ✔✔There must be a large number of persons with similar
potential loss available for the losses to become predictable.
✔✔Adequate spread of risk - ✔✔Must not happen to a large number of the insured at
the same time. Not insuring every person that would be effected by the same risk.
✔✔Peril - ✔✔the cause of loss
✔✔Hazard - ✔✔anything that increases the chance of loss
✔✔physical hazard - ✔✔a hazard that arises from the condition, occupancy, or use of
the property itself
✔✔morale hazard - ✔✔an individual, through carelessness or by irresponsible actions,
can increase the possibility for a loss
,✔✔moral hazard - ✔✔a person might create a loss situation on purpose just to collect
from the insurance company
✔✔contract - ✔✔legal agreement between two competent parties that promises a
certain performance in exchange for a certain consideration
✔✔Elements of a Valid Contract - ✔✔Competent parties
Legal purpose
Offer and acceptance (agreement)
consideration
✔✔Competent Parties - ✔✔a person who is a minor, insane, or under the influence of
alcohol or drugs is considered incompetent.
✔✔Offer and Acceptance - ✔✔ontract involves two parties: one who makes an offer and
one who accepts it. An offer is a promise that requires an act or another promise in
exchange. Acceptance occurs when the other party agrees to the offer or does what
was proposed in the offer.
✔✔Principle of Indemnity - ✔✔when a loss occurs, an individual should be restored to
the approximate financial condition he was in before the loss, no more and no less
✔✔aleatory - ✔✔contingent on an uncertain event (a loss) that provides for unequal
transfer of value between the parties
✔✔Adhesion - ✔✔one party has greater power over the other party in drafting the
contract
✔✔doctrine of reasonable expectations - ✔✔policy includes coverages that an average
person would reasonably expect it to include, regardless of what the policy actually
provides.
✔✔Unilateral Contract - ✔✔One sided. If an insured pays a premium and a loss occurs,
the insurer is legally bound to pay for the loss under the terms of the policy. However,
insureds are not legally obligated to pay premiums.
✔✔Contract of Utmost Good Faith - ✔✔The insurance company relies on the
truthfulness and integrity of the applicant when issuing a policy. In return, the insured
relies on the company's promise and ability to provide coverage and pay claims.
✔✔conditional contract - ✔✔An insurance policy includes a number of conditions that
both the insured and the insurer must comply with.
, ✔✔Parts of the Insurance Contract - ✔✔Declarations
Insuring Agreements
Conditions
Exclusions
Definitions
✔✔Declarations - ✔✔Information such as the name of the insured, the address, the
amount of coverage provided, a description of the property, and the cost of the policy.
✔✔Insuring Agreements - ✔✔The losses for which the insured will be covered. The type
of property covered and the perils for which it is covered.
✔✔Conditions - ✔✔Ground rules for the policy. Describes the responsibilities and the
obligations of both the insurance company and the insured.
✔✔Exclusions - ✔✔Describes the losses for which the insured is not covered.
✔✔Definitions - ✔✔Clarifies the meanings of certain terms used in the policy.
✔✔stock company - ✔✔When the company first forms, it sells stock to stockholders to
raise the money necessary to operate the business. Stockholders are not necessarily
insured by the company, and insureds do not necessarily own stock in the company.
Profits attributed to the operation of the company are returned as dividends to the
stockholders, not the insureds.
✔✔mutual insurance company - ✔✔The insureds are also owners of the company. As
owners, they can vote to elect the management of the company. Profits are returned to
the insureds in the form of dividends or reductions in future premiums. Most are
advance premium companies that charge nonassessable premiums. As a result they
are required to set money aside in a reserve in case their claims experience is higher
than expected.
✔✔assessment companies - ✔✔Provide primarily fire and windstorm insurance for
small towns and farmers.
Charge members a pro rata share of losses at the end of each policy period.
✔✔reciprocal company - ✔✔Members agree to share the insurance responsibilities with
all other members of the unincorporated group. In a sense, all members insure each
other and share the losses with each other.
Managed by an attorney-in-fact.
✔✔attorney-in-fact - ✔✔Handles all business for a company. (Reciprocal Company)
