VIRGINIA PERSONAL LINES AGENT
LICENSE EXAM QUESTIONS WITH
VERIFIED ANSWERS
What is insurance? - ANSWER Insurance is a social device for spreading the
chance of financial loss among a large number of people. By purchasing
insurance, a "person" shares risk with a group of others, thereby reducing the
individual potential for disastrous financial consequences.
What is insurance based on? - ANSWER the law of large numbers; by
combining a large number of homogeneous units, the insurer is able to make
predictions of possible loss. Using the law of large numbers, insurers are able to
calculate probable losses and to establish the rates for premiums that will cover
their losses and their operating expenses.
What is underwriting? - ANSWER the process of selecting certain types of
risks that have historically produced a profit and rejecting those risks that do not
fit the underwriting criteria of the insurer; normally produces a favorable loss
ratio
Adverse selection - ANSWER assess risk and charge too little; the tendency of
insureds with a greater-than-average chance of loss to purchase insurance
Reinsurace - ANSWER a contract of indemnity against liability by which an
insurance company procures another insurance company to insure it against loss
or liability by reason of the original insurance; insurance companies have a
company that insures them
What are the 6 parts of an insurance contract? - ANSWER Declarations,
Insuring Agreement, Conditions, Exclusions and Limitations, Definitions,
Endorsements
Declarations - ANSWER includes the identity and address of the named
insured, the policy term or period, the amount of insurance or limits of liability,
,the policy premium, and any applicable deductibles; include property
description and any applicable deductibles as well as list any endorsements;
who is insured, what is insured, deductibles... etc.
Insuring Agreement - ANSWER describes the covered perils, or risks
assumed, or nature of coverage, or makes some reference to the contractual
agreement between insurer and insured; what insurer will cover for you.
Conditions - ANSWER set provisions, rules of conduct, duties, and obligations
for the parties; describes things such as the policy period and territory, the
insured's obligation to provide proof of loss, how settlements are handled when
other insurance is involved, and the right of each party to cancel the policy
Exclusions and Limitations - ANSWER Exclusions: may describe property ,
perils, hazards, or losses arising from specific causes that are not covered by the
policy; Limitations; may eliminate or reduce coverage, but only under certain
circumstances or when specified conditions apply; Exclusions and Limitations:
when the insurance company wont cover you.
Definitions - ANSWER Define important terms used in the policy language;
explanation
Endorsements - ANSWER used to add, delete, or change any of the policy
parts; written modification of the policy; additional coverages to contract -->
extra money premium.
Peril - ANSWER potential cause of loss
Hazard - ANSWER increases the seriousness of a loss or increases the
likelihood that a loss will occur; increased potential of peril
Direct Loss - ANSWER direct consequence of a particular peril (example: fire
damage to an apartment building
Indirect Loss - ANSWER loss that is a result of a covered peril but is not
caused directly and immediately by that peril (example: loss of rental income)
, Salvage - ANSWER If the insurer pays a loss on behalf of the insured, the
insurer is entitled to the salvage to reduce the claim (example: totaled care -->
belongs to insurance company)
Abandonment - ANSWER insured cannot simply abandon the property to the
insurance company in exchange for the full-insured value.
Pair or Set Clause - ANSWER if part of a pair or set is lost or damaged, the
loss will be valued as a fair proportion of the total value of the set, giving
consideration to the importance of the damaged article to the set; initial -
appraised = payout
Deductible - ANSWER Self-insured part of an insured loss, the insured must
bear this loss; amount you pay before insurance comes in --> you are
responsible.
Vacancy and Unoccupancy - ANSWER Vacancy: building is void of contents
and people; 60 or more days; Unoccupancy: premises are void of people, will
not affect the coverage provided by the policy.
Assignment - ANSWER Insurance policy cannot be assigned to another party
without consent of the insurance company
Liberalization - ANSWER if the policy or endorsement forms are broadened
and no additional premium is required, then all existing similar policies or
endorsements will be construed to include the broadened coverage
Binder - ANSWER temporary evidence that coverage is in effect until the
policy is issued --> oral or written
Primary Insurance - ANSWER in cases where more than one policy is in force,
the primary policy pays first; example: you borrow your friends car and get into
an accident --> that car's insurance covers you, then you can use your own
insurance.
Excess Insurance - ANSWER insurance policy that pays benefits only when
coverage under other applicable insurance policies have become exhausted
LICENSE EXAM QUESTIONS WITH
VERIFIED ANSWERS
What is insurance? - ANSWER Insurance is a social device for spreading the
chance of financial loss among a large number of people. By purchasing
insurance, a "person" shares risk with a group of others, thereby reducing the
individual potential for disastrous financial consequences.
What is insurance based on? - ANSWER the law of large numbers; by
combining a large number of homogeneous units, the insurer is able to make
predictions of possible loss. Using the law of large numbers, insurers are able to
calculate probable losses and to establish the rates for premiums that will cover
their losses and their operating expenses.
What is underwriting? - ANSWER the process of selecting certain types of
risks that have historically produced a profit and rejecting those risks that do not
fit the underwriting criteria of the insurer; normally produces a favorable loss
ratio
Adverse selection - ANSWER assess risk and charge too little; the tendency of
insureds with a greater-than-average chance of loss to purchase insurance
Reinsurace - ANSWER a contract of indemnity against liability by which an
insurance company procures another insurance company to insure it against loss
or liability by reason of the original insurance; insurance companies have a
company that insures them
What are the 6 parts of an insurance contract? - ANSWER Declarations,
Insuring Agreement, Conditions, Exclusions and Limitations, Definitions,
Endorsements
Declarations - ANSWER includes the identity and address of the named
insured, the policy term or period, the amount of insurance or limits of liability,
,the policy premium, and any applicable deductibles; include property
description and any applicable deductibles as well as list any endorsements;
who is insured, what is insured, deductibles... etc.
Insuring Agreement - ANSWER describes the covered perils, or risks
assumed, or nature of coverage, or makes some reference to the contractual
agreement between insurer and insured; what insurer will cover for you.
Conditions - ANSWER set provisions, rules of conduct, duties, and obligations
for the parties; describes things such as the policy period and territory, the
insured's obligation to provide proof of loss, how settlements are handled when
other insurance is involved, and the right of each party to cancel the policy
Exclusions and Limitations - ANSWER Exclusions: may describe property ,
perils, hazards, or losses arising from specific causes that are not covered by the
policy; Limitations; may eliminate or reduce coverage, but only under certain
circumstances or when specified conditions apply; Exclusions and Limitations:
when the insurance company wont cover you.
Definitions - ANSWER Define important terms used in the policy language;
explanation
Endorsements - ANSWER used to add, delete, or change any of the policy
parts; written modification of the policy; additional coverages to contract -->
extra money premium.
Peril - ANSWER potential cause of loss
Hazard - ANSWER increases the seriousness of a loss or increases the
likelihood that a loss will occur; increased potential of peril
Direct Loss - ANSWER direct consequence of a particular peril (example: fire
damage to an apartment building
Indirect Loss - ANSWER loss that is a result of a covered peril but is not
caused directly and immediately by that peril (example: loss of rental income)
, Salvage - ANSWER If the insurer pays a loss on behalf of the insured, the
insurer is entitled to the salvage to reduce the claim (example: totaled care -->
belongs to insurance company)
Abandonment - ANSWER insured cannot simply abandon the property to the
insurance company in exchange for the full-insured value.
Pair or Set Clause - ANSWER if part of a pair or set is lost or damaged, the
loss will be valued as a fair proportion of the total value of the set, giving
consideration to the importance of the damaged article to the set; initial -
appraised = payout
Deductible - ANSWER Self-insured part of an insured loss, the insured must
bear this loss; amount you pay before insurance comes in --> you are
responsible.
Vacancy and Unoccupancy - ANSWER Vacancy: building is void of contents
and people; 60 or more days; Unoccupancy: premises are void of people, will
not affect the coverage provided by the policy.
Assignment - ANSWER Insurance policy cannot be assigned to another party
without consent of the insurance company
Liberalization - ANSWER if the policy or endorsement forms are broadened
and no additional premium is required, then all existing similar policies or
endorsements will be construed to include the broadened coverage
Binder - ANSWER temporary evidence that coverage is in effect until the
policy is issued --> oral or written
Primary Insurance - ANSWER in cases where more than one policy is in force,
the primary policy pays first; example: you borrow your friends car and get into
an accident --> that car's insurance covers you, then you can use your own
insurance.
Excess Insurance - ANSWER insurance policy that pays benefits only when
coverage under other applicable insurance policies have become exhausted
