PROPERTY AND CASUALTY
INSURANCE BASICS EXAM QUESTIONS
WITH CORRECT ANSWERS
COMPONENTS OF RATE FILING - Answer-cost of claims + cost of admin. expenses -
interest the insurer makes by investing pre-paid premiums
RISK - Answer-chance of loss
HAZARDS (3) - Answer-Physical; Moral; Morale
PHYSICAL HAZARD - Answer-e.g. dead tree that could fall on your house and cause
roof damage
MORAL HAZARD - Answer-one presented by a dishonest person who might try to over-
insure in order to profit
MORALE HAZARD - Answer-one a careless person presents who does not take care of
their property
FRONT-LINE UNDERWRITERS - Answer-are agents; called this because they are
usually the first to recognize a hazard
NEGLIGENCE - Answer-failure to act as a reasonable person would in the same
circumstances
NEGLIGENCE - Answer-is a civil injury; considered a "tort" and the burden of proof in a
negligence lawsuit (tort) rests with the party bringing the lawsuit
PLAINTIFF - Answer-injured party
STANDARD OF CARE - Answer-what a reasonable person would do to maintain their
legal duty to protect others
NEGLIGENCE LAWSUIT - Answer-plaintiff (injured party) must prove the defendant
violated a legal duty or generally accepted standard of care and that the injury was the
direct result of the defendant's negligent act; if no direct chain of evidence exists,
negligence is not established
PROXIMATE CAUSE - Answer-must be a direct chain of events proven to determine
proximate cause
, NEGLIGENCE LAWSUIT AWARDS - Answer-plaintiff must prove actual loss or
damages to recover, even if negligence is proved (exception is sometimes awards for
pain and suffering)
NEGLIGENCE DEFENSES - Answer-generally accepted defenses in negligence
lawsuits are 1: intervening causes (for example, kids were teasing the dog and therefore
negligence not proven) 2: assumption of risk (means you agreed going in to take the
risk of participating in certain activities and therefore cannot sue)
TORT THRESHOLD - Answer-you assume the risk up to a certain level, such as driving
a car (if the claim is not above a certain threshold, you must make a claim on your own
insurance instead of suing the other party)
DOCTRINE OF CONTRIBUTORY NEGLIGENCE (THIS IS NOW OBSOLETE) -
Answer-states if you are partly at fault, you cannot recover from the other party at all,
even if your fault was minor
COMPARATIVE NEGLIGENCE (HAS REPLACED CONTRIBUTORY NEG) - Answer-a
degree of fault is assigned to both parties; degree of fault is allocated on a proportionate
basis to both parties; YOU CANNOT RECOVER FROM THE OTHER PARTY UNLESS
THEY ARE 50% OR MORE AT FAULT
STATUTES OF LIMITATIONS - Answer-time limits during which a lawsuit may be filed
after the occurrence of a claim; vary by state, but mostly range from 2-7 years
COMPENSATORY DAMAGES - Answer-what most jurisdictions permit courts to award;
may be 1: special 2: general 3: punitive
SPECIAL DAMAGES - Answer-consist of medical expenses and lost wages; sometimes
called out-of-pocket expenses; an exact and verifiable figure
GENERAL DAMAGES - Answer-attempt to compensate the injured party for mental and
physical distress, including pain and suffering, disfigurement and loss of consortium
PUNITIVE DAMAGES - Answer-awarded when the injury was caused by gross
negligence; often are triple the amount of general damages awarded and are
sometimes not covered by insurance
GROSS NEGLIGENCE - Answer-willful and wanton negligence (defendant knew
product was faulty but continued to sell it anyway)
ABSOLUTE OR STRICT LIABILITY - Answer-some things are inherently so dangerous
that liability is absolute or statutory, as in keeping a tiger as a pet, or keeping explosives
in the home
INSURANCE BASICS EXAM QUESTIONS
WITH CORRECT ANSWERS
COMPONENTS OF RATE FILING - Answer-cost of claims + cost of admin. expenses -
interest the insurer makes by investing pre-paid premiums
RISK - Answer-chance of loss
HAZARDS (3) - Answer-Physical; Moral; Morale
PHYSICAL HAZARD - Answer-e.g. dead tree that could fall on your house and cause
roof damage
MORAL HAZARD - Answer-one presented by a dishonest person who might try to over-
insure in order to profit
MORALE HAZARD - Answer-one a careless person presents who does not take care of
their property
FRONT-LINE UNDERWRITERS - Answer-are agents; called this because they are
usually the first to recognize a hazard
NEGLIGENCE - Answer-failure to act as a reasonable person would in the same
circumstances
NEGLIGENCE - Answer-is a civil injury; considered a "tort" and the burden of proof in a
negligence lawsuit (tort) rests with the party bringing the lawsuit
PLAINTIFF - Answer-injured party
STANDARD OF CARE - Answer-what a reasonable person would do to maintain their
legal duty to protect others
NEGLIGENCE LAWSUIT - Answer-plaintiff (injured party) must prove the defendant
violated a legal duty or generally accepted standard of care and that the injury was the
direct result of the defendant's negligent act; if no direct chain of evidence exists,
negligence is not established
PROXIMATE CAUSE - Answer-must be a direct chain of events proven to determine
proximate cause
, NEGLIGENCE LAWSUIT AWARDS - Answer-plaintiff must prove actual loss or
damages to recover, even if negligence is proved (exception is sometimes awards for
pain and suffering)
NEGLIGENCE DEFENSES - Answer-generally accepted defenses in negligence
lawsuits are 1: intervening causes (for example, kids were teasing the dog and therefore
negligence not proven) 2: assumption of risk (means you agreed going in to take the
risk of participating in certain activities and therefore cannot sue)
TORT THRESHOLD - Answer-you assume the risk up to a certain level, such as driving
a car (if the claim is not above a certain threshold, you must make a claim on your own
insurance instead of suing the other party)
DOCTRINE OF CONTRIBUTORY NEGLIGENCE (THIS IS NOW OBSOLETE) -
Answer-states if you are partly at fault, you cannot recover from the other party at all,
even if your fault was minor
COMPARATIVE NEGLIGENCE (HAS REPLACED CONTRIBUTORY NEG) - Answer-a
degree of fault is assigned to both parties; degree of fault is allocated on a proportionate
basis to both parties; YOU CANNOT RECOVER FROM THE OTHER PARTY UNLESS
THEY ARE 50% OR MORE AT FAULT
STATUTES OF LIMITATIONS - Answer-time limits during which a lawsuit may be filed
after the occurrence of a claim; vary by state, but mostly range from 2-7 years
COMPENSATORY DAMAGES - Answer-what most jurisdictions permit courts to award;
may be 1: special 2: general 3: punitive
SPECIAL DAMAGES - Answer-consist of medical expenses and lost wages; sometimes
called out-of-pocket expenses; an exact and verifiable figure
GENERAL DAMAGES - Answer-attempt to compensate the injured party for mental and
physical distress, including pain and suffering, disfigurement and loss of consortium
PUNITIVE DAMAGES - Answer-awarded when the injury was caused by gross
negligence; often are triple the amount of general damages awarded and are
sometimes not covered by insurance
GROSS NEGLIGENCE - Answer-willful and wanton negligence (defendant knew
product was faulty but continued to sell it anyway)
ABSOLUTE OR STRICT LIABILITY - Answer-some things are inherently so dangerous
that liability is absolute or statutory, as in keeping a tiger as a pet, or keeping explosives
in the home
