CPCU 530 II Exam Questions with Correct Answers

CPCU 530 II Exam Questions with Correct Answers What is an insurance contract? - Answer-A contract where the policyholder pays premiums and the insurer promises to cover losses. What are the five main parts of a common insurance contract? - Answer-Declarations page, definitions section, insuring agreement, exclusions, and conditions. What information is included in the declarations page of an insurance contract? - Answer-Address of insured property, deductibles, description of insured property, mailing address, name of insured, name of insurer, numbers of forms in the contract, policy limits, policy number, policy period, and rating information. What is the purpose of the definitions section in an insurance contract? - Answer-To define words and phrases used throughout the contract with special meanings. Give an example of a term defined in the definitions section of an insurance contract. - Answer-The term 'we' refers to the insurer, and the term 'you' refers to the insured. What does the insuring agreement state in an insurance contract? - Answer-That the insurer agrees to pay for the losses of the insured. What is a limited insuring agreement? - Answer-An insuring agreement that directly specifies the causes of loss covered by insurance. What is a comprehensive insuring agreement? - Answer-An insuring agreement that covers all causes of loss except for those specifically stated. What is a named peril? - Answer-A cause of loss that is specifically named and covered by an insurance policy. What is an open peril? - Answer-A cause of loss that is covered by an insurance policy unless specifically excluded. What is the purpose of exclusions in an insurance contract? - Answer-To specify what is not covered by the insurance policy. What are conditions in an insurance contract? - Answer-The obligations and responsibilities of the insured and insurer. What is a premium in an insurance contract? - Answer-The periodic payment made by the policyholder to the insurer. What is a policy limit? - Answer-The maximum amount the insurer will pay for covered losses. What is a policy period? - Answer-The duration of time that the insurance policy is in effect. What is rating information in an insurance contract? - Answer-Information used to determine the premium for the policy. What is WC coverage in a commercial insurance policy? - Answer-Workers' compensation coverage. What is GL coverage in a commercial insurance policy? - Answer-General liability coverage. What is an insured peril? - Answer-A cause of loss that is covered by an insurance policy. What is an excluded peril? - Answer-A cause of loss that is specifically not covered by an insurance policy. What is an exclusion section in an insurance contract? - Answer-Section that excludes coverage for specific exposures. What are the six basic reasons for using exclusions in an insurance contract? - AnswerTo avoid moral and morale hazards, uninsurable exposures, reduce premiums, remove duplicate coverage, remove special coverages, and remove unneeded coverage. What are conditions in an insurance contract? - Answer-Stated criteria that must be met by one party of the contract. What happens if the conditions are not met by the insured? - Answer-The insurer does not need to pay for the policyholder's losses. Give an example of a condition in an insurance contract. - Answer-Insured must call the police immediately after a theft loss. What are other policy documents that can be added to an insurance policy? - AnswerApplication, bylaws. What is an application in an insurance policy? - Answer-Document submitted by the prospect to request insurance coverage. Who completes the application? - Answer-The insured and producer. What information does the application contain? - Answer-Information about the insured. What is the purpose of the application? - Answer-To determine loss exposures and if the customer can be covered with insurance. What are bylaws in an insurance policy? - Answer-Set of rules adopted by a company or organization to govern its meetings or affairs. What do mutual insurance companies include in their bylaws? - Answer-Policyholders' rights and duties. Are bylaws physically attached to the policy or referenced within it? - Answer-They can be either physically attached or referenced within the policy. What is the purpose of exclusions in an insurance contract? - Answer-To specify which loss exposures the insurer does not cover. What is the purpose of conditions in an insurance contract? - Answer-To ensure that certain criteria are met by one party of the contract.