PROPERTY AND CASUALTY INSURANCE EXAM PREP QUESTIONS AND ANSWERS 2024

BPP building coverage insures the building at the described location, outdoor, fixtures, furnitures, items used to service the property, permanently installed machinery and equipment, and additions under construction, including the materials, supplies, and equipment. HO limits of property at other residences the larger of $1000 or 10% Coverage C. Limit does not apply if property is moved because the residence premise is being repaired or rebuilt. When property is moved to newly acquired residence, the limit shown on declaration will apply on a proportional basis to each residence Dwellings under construction The limit of liability for a dwelling under construction is provisional, and is based on the completed value of the structure. At the time of loss, the applicable limit is a percentage of the provisional limit, based on the proportion of actual cash value of the property at the time of loss. Premium is based on an average amount of insurance during construction. Water Backup & Sump Pump Endorsement Coverage for up to $5,000 in loss or damage, subject to a $250 deductible, can be provided for an additional premium with this endorsement. Automatic Increase in Insurance Endorsement is used to provide at the annual renewal date of the policy, an automatic increase in the Coverage A and B limits of insurance to help offset inflation Other insurance A provision in an insurance policy that defines how the policy will respond if there is another valid insurance policy written on the same risk. Stock Companies Owned by the stockholders who provide the capital necessary to establish and operate the insurance company and who share in any profits or losses. Mutual companies Owned by the policyowners and issue participating policies. Policyowners are entitled to dividends, which are a return of excess premium and are nontaxable. 6 classes of insurance in Georgia 1. Life, accident, and sickness 2. Property, marine, and transportation 3. Casualty 4. Surety 5. Title 6. HMOs How often must the Insurance Commission examine domestic insurers? Once every 5 years. What are the timelines if a hearing is requested? A hearing must be made within 30 days of the receipt of the request. A notification of the hearing must be sent at least 15 days in advance. Within 30 days of the hearing, the Commissioner must release his decision. What are the penalties after a notice, hearing, and cease and desist order? A fine of up to $10,000 per violation Suspension/revocation of license Any other appropriate relief. Express authority the authority of an agent, stated in the document or agreement creating the agency Implied authority Authority that is not expressed or written into the contract, but which the agent is assumed to have in order to transact the business of insurance for the principal. Apparent authority The appearance or the assumption of authority based on the actions, words, or deeds of the principal or because of circumstances the principal created. When does an agents license expire? Licenses are good to for 2 years and expire on the last day of the licensee's with month. What are the CE requirements for an agent? 24 CE credit hours every 2 years, including 3 credit hours of ethics. Agents with licensed for 20 years only need 20 CE credit hours, including ethics. How long must an agent keep records regarding contracts, premiums, etc.? All records must be kept for 5 years after the completion of a transaction or for the term of the contract, whichever is greater. Misrepresentation Issuing, publishing, or circulation and illustration or sales materials that is false, misleading, or deceptive as to policy benefits or terms, the payments of dividends, etc. False advertising advertising that is misleading in some important way, including the failure to reveal facts about possible results from using the advertised products Rebating Any inducement offered in the sale of insurance products that is not specified in the policy. They are illegal in Georgia. Twisting A form of misrepresentation in which an agent persuades an insured/owner to cancel, lapse, or switch policies, even when it's to the insured's disadvantage. Churning Replacing insurance policies for the sole purpose of making commissions. It is illegal to replace existing life or disability policies with new policies if the producer cannot demonstrate that the replacement will benefit the insured. Coercion Unfair trade practice where an agent uses physical or mental force with the intense of inducing an applicant to purchase insurance. Defamation Defamation occurs when an oral or written statement is made that is intended to injure a person engaged in the insurance business. This also applies to statements that are maliciously critical of the financial condition of any person or a company. Controlled business Controlled business is any coverage written on a producer's own life, health or property, and/or that of the producer's immediate family or business associates. A licensee is not allowed to collect commissions on controlled business at rate higher than 25% of the agent' volume per calendar year. What is a binder A temporary insurance contract that goes in effect prior to the policy issue. No binder shall be valid pass the issuance of the policy beyond 90 days of its effective date, whichever period is shorted. Georgia FAIR The Georgia Fair Access to Insurance Requirement provides basic property insurance for those who cannot obtain it in the ordinary market. Georgia Automobile Insurance Plan The Georgia Automobile Insurance Plan makes automobile insurance available for insureds who are unable to purchase coverage in the voluntary market. When an automobile policy is cancelled or nonrenewed for a reason other than for nonpayment of premium, the insurer must notify the insured of their eligibility for coverage through the Georgia Automobile Insurance Plan. The notice about the Plan must accompany the notice of cancellation or nonrenewal. Workman's Compensation Covers all business with 3 or more employees Workman's Compensation Coverage Doctors bills hospital bills physical therapy prescriptions necessary travel expenses Treatment limited to max of 400 weeks unless injuries are catastrophic. What are the benefit payout requirements for WC? Workers can collect WC benefits after being out of work for more than 7 days, and the first check will arrive with 21 days of the first missed workday. The compensation is limited to 2/3 of the worker's average weekly pay up to $575. Georgia Workers Compensation Assigned Risk Plan The Georgia Workers Compensation Assigned Risk Plan exists to provide required Workers Compensation coverage for employers who do not qualify for coverage in the voluntary market. Liability is apportioned among all insurers authorized to write Workers Compensation and Employers Liability in the state. How often must an insurer update their rate filings? Every 2 years All insurers must file their rates 45 days before their effective date. When a rate increases more than 10$ or more within 12 months, the Commissioner will order and examination. What is the Commissioner's term of office? 4 years When does an agent have to notify the Commissioner of a change of address? Within 30 days How many days are allowed to report a criminal prosecution against a licensee? 30 days What is the total liability of the Georgia Life and Health Insurance Guaranty Association for any one life? $300,000 PAP Section II Part B: Medical Expenses Coverage -covers all reasonable medical costs and funeral expenses incurred, by the insured or the insured's family members within 3 years of an accident -recommended coverage of $50,000 Cancellation and Nonrenewal of Policies other than PA and PP For all insurance other than that covering a personal automobile or personal property, a notice of termination, including a notice of cancellation or nonrenewal, a notice of increase in premiums that exceeds 15% of the current policy's premium unless due to a change in risk or exposure or a notice of change in any policy provision which limits or restricts coverage must be delivered or mailed to the insured at least 45 days before the effective date of such termination or change. Failure to comply with this requirement entitles the policyholder to purchase a policy for an additional 30 days beyond the current expiration date (on the same terms and conditions and with the same premium as the expiring policy). If the policy will incur a premium increase of more than 15%, the dollar amount of that increase must be stated in the notice. Valuation of Loss For a 1-2 family residence Georgia law contains a valued policy statute. An insurer is required to value the property at the amount of insurance in effect at the time of the loss, minus any depreciation. If the loss occurs within 30 days of policy issuance, the actual loss sustain up to the LOL will be paid. What does the valued policy statute exclude? This valuation provision does not apply to the following situations: The building or structure is not wholly destroyed by fire; Insurance policies are issued by more than 1 company, insuring the same structure against fire, and the existence of overinsurance is not disclosed by the insured to all insurers; 2 or more policies provide insurance for the same loss; 2 or more buildings or structures are insured using a blanket amount of insurance; or The completed value of a building or structure is insured under a Builder's Risk policy. Georgia Tobacco Crop Coverage Any insurer who issues a crop insurance policy, other than federal crop insurance, for tobacco crops grown in Georgia, will offer coverage for wind, hail, or both for a period of time extending until the crop is harvested. How much notice must be given if an insurer doesn't renew an auto policy? 30 days What is Georgia's Financial Responsibility Law? Georgia requires all owners and operators of motor vehicles carry auto liability insurance as evidence of security in complying with the state's financial responsibility law. Must be issued for a minimum of 6 months. What are the motor vehicle liability policy limits? $25K for bodily injury to 1 person in any one accident. $50K for BI to 2 more persons in any one accident. $25K for property damage in any one accident. What is uninsured motorist coverage? Can be offered up to the LOL for BI and PD, but in no event less than the financial responsibility limit. The limits cannot be less than 25/50/25 Commissioner of Insurance Elected for 4 years Regulates the internal affairs of the Dept. of Insurance Does not write laws Examines all authorized insurers. Producer regulations Licenses may be issued only to individuals Only one license of the same business type is allowed per agent. Must be licensed in the first line of authority for the agent transacts business Avoid unfair trade practices. Company Regulations obtain a certificate of authority remain solvent have all policy forms and rates approved by the Dept. Avoid unfair trade practices and unfair claim settlement practices. Insurance Guaranty Association Protects policyowners, insureds, and beneficiaries against insolvent insurers All admitted insurers must be members of the Association Unfair trade practice: stating that the insurer's policies are guaranteed by the existence of the Association Licensing Requirements Meet age and residency requirements (18 years old; reside in the state at least 6 months a year) Pass examination Submit application and fees Be of good character Types of licenses Individuals - resident and nonresident Temporary license - valid for 6 months; issued to maintain the existing business Exposure susceptibility to risk Implied warranty a legal term meaning that a product is suitable for its intended purpose and that it fits an ordinary buyer's expectations Insurance policy a document detailing the terms and conditions of a contract of insurance. Law of Larger Numbers The law of large numbers states that the larger the number of people with a similar exposure to loss, the more predictable actual losses will be. This law forms the basis for statistical prediction of loss upon which insurance rates are calculated. Insurable Interest Any financial interest in life or property such that, if the life or property were lost or harmed, the insured would suffer financially. 3 elements of insurable risk 1. Financial (a monetary interest) 2. Blood (a relative) 3. Business (a business partner) Risk The uncertainty of loss or chance of a loss occurring. Business Auto transportation expenses $20 per day to max of $600. 48-hour waiting period. Loss of use expenses - rental vehicles - $20/day up to $600. Pure risk a risk that presents the chance of loss but no opportunity for gain Speculative risk a situation in which either profit or loss is possible