State Farm Insurance License Exam Questions and Answers (2022/2023) (Verified Answers)

State Farm Insurance License Exam Questions and Answers (2022/2023) (Verified Answers) Abandonment Condition A condition often contained in property insurance policies that states that the insured cannot abandon damaged property to the insurer and demand to be reimbursed for its full value. Accident A loss that occurs at a specific time and place Actual Cash Value (ACV) Today's replacement cost minus depreciation. Depreciation from wear and tear, or obsolescence. admitted insurer; authorized insurer Company that meets a state insurance department's standards and is allowed to do business in that state. Adverse Selection the tendency of insureds with a greater than average chance of loss to purchase insurance Annual Transit Policy Nonfiled commercial inland marine transportation form that insures a property owner's incoming or outgoing shipments of goods during a year Appraisal Clause A survey of property to determine the insurable value of the property or the value of the loss sustained. Appraisal Condition Policy condition that outlines a procedure for when the insured and insurer disagree on the amount of a loss Assignment The legal transfer of one's interest in an insurance policy to another person. Aviation Hull Insurance Provides coverage for physical damage to an aircraft. Bailee's Customers Policy Nonfiled commercial inland marine form obtained by a bailee to cover loss or damage to customers' property in the bailee's custody without regard to liability. Appurtenant Structures Buildings of lesser value that are on the same premises as the main building insured under a property policy; they are usually covered by the policy. Assignment Condition Condition in insurance policies that specifies that the policy cannot be transferred to another unless the company consents to the transfer in writing. Bailee A person or organization that has temporary possession of someone else's personal property. Basic Perils in Homeowners Policy There are 14 perils. Fire, lightening, riot, explosion, vehicles, volcanic eruption, civil commotion, smoke, hail, aircraft, windstorm, vandalism, malicious mischief, theft. Basic Property Policy Structure (DICEE) D - Declarations I - Insuring agreement C - Conditions E - Exclusions E - Endorsements Blanket Insurance Type of insurance policy that covers more than one item of property at a single location or one or more items of property at multiple locations Builders Risk Coverage Form Commercial property coverage forms that covers commercial, residential, or farm buildings that are under construction or during remodeling. Cargo Insurance Type of ocean marine insurance that covers goods while they are in transit over water. Binder Oral or written statement that provides immediate insurance protection for a specified period; designed to provide temporary coverage until a policy is issued or denied. BOP Package policy designed to provide broad property and liability coverage for small businesses; eligibility requirements are stricter than the CPP. Business Income Policy Pays for loss of income that the insured sustains due to a direct physical loss from a covered peril that forces the insured to suspend operations until the property can be repaired, rebuilt, or replaced with reasonable speed; available with or without extra expense coverage. Causes of Loss Form Separate form used with the commercial property coverage part of the commercial package policy that lists covered perils and exclusions. Several different versions provide increasingly broader coverage from basic to broad to special. Condominium Association Coverage Form Commercial Property coverage form that covers the buildings in a condominium complex. Does not cover condominium owner's personal property. Coverage D on a HO Policy - Loss of Use If property loss makes the residence premises uninhabitable, the additional living expenses are covered; or if a covered loss to the insured's property makes a part of the residence premises uninhabitable that is rented to others or held for rental by the insured, this coverage will pay the fair rental value. coverages excluded on dwelling policy Theft, vandalism, and malicious mischief excluded on basic policy. Liability excluded on all policies. Coverage B of homeowners policy Other structures; covers building and structures on the premises other than the dwelling set apart by a clear space from the dwelling; 10% of Coverage A. Coverage D on a dwelling policy Fair rental value is covered on a dwelling policy. Coverage limit on money in HO $200 limit on personal property with special limits Coinsurance Clause on Property Insurance carried/Insurance required X amount of loss Coverage F on homeowners policy Medical payments to others; pays all necessary medical expenses for up to three years after an accident. Deductible The amount of expenses that must be paid out of pocket before an insurer will pay any expenses from a covered loss. Direct Loss Financial loss resulting directly from a loss to property Equipment Breakdown Coverage; boiler and machinery coverage Part of the commercial package policy that covers a loss due to breakdown of business equipment due to direct or indirect loss. Excess Insurance When two or more policies or coverage apply to the same loss, the one that applies only after the limits of the primary coverage have been exhausted. Difference in Conditions Insurance (DIC) Type of commercial property policy that covers most insurable perils but excludes basic fire and extended coverage perils. Eligible for Dwelling Policy Provides coverage for the following: -Up to five boarders -Up to four apartments -Mobile home -Residence rented to others -Vacation home -Townhouse/rowhouse -Home under construction Estoppel Principle that states that if one intentionally or unintentionally creates the impression that a certain fact exists, and an innocent party relies on that impression and is injured as a result, the guilty party may be legally prohibited from asserting that the fact does not exist Extra Expense Commercial property coverage form that covers additional expenses incurred by the insured business to continue operations following a direct loss by a peril insured against. Fair Access to Insurance Requirements (FAIR) Program established by law that makes property insurance available to insureds who might otherwise be uninsurable in the standard market. Fiduciary Someone who has undertaken to act for and on behalf of another in a particular matter in circumstance which give rise to a relationship of trust and confidence