Illinois Property and Casualty Insurance
Exam Prep
Insurance policy correct answersSocial device for the transfer of
financial risks
Transfer of Risks correct answersThrough insurance individuals transfer to
companies financial risks they cannot individually afford. Insurance
insurance
companies
accept can
for insured risks insureds cannot individually afford by charging a
small
to a large
premium
group of people. The premium is small compared to the size of
the financial
risk
transferred.
Pure Risk correct answersa risk that presents the chance of loss but no
gai
opportunity for
n
Speculative Risk correct answersa situation in which either profit or loss
is possible to profit or lose) insurance typically
(opportunity
doesn't cover
Pooling risks (for an insurance company) correct answersWhen large group
of people money to a fund out of which their losses can be paid. Larger the
contributes
group, it
better the
works
financially
Insured correct answersA person covered by an insurance policy and for
whom the company accepts
insurance
financial risk
Premium correct answersMoney paid by the insured to the insurance
company in
exchange for the insurance
policy
Lapse correct answersWhen a policy is terminated due to nonpayment of
premiums
Endorsement correct answersA form added to an insurance policy. Usually
added for premium charge to add additional coverage. Can be added to
additional
limit or restrict
coverag
e
Peril correct answersAn actual cause of loss that can be
insured against
Hazard correct answersA condition or operation in property which either
creates or the chance of loss by a
increases
covered peril
Risk correct answers"Exposure". The likelihood, probability, or degree of
uncertainty
that a covered peril will cause
loss
,Actuarial Tables correct answersStatistical tables used in calculating
premium
tables. Theyratetell the insurance companies how many people are likely to
havehow
and claims
much the losses are likely
to be.
Loss reserves correct answersmoneys set aside to pay claims in
accordance with the
actuarial
tables
Actuary correct answersAn insurance company representative who keeps
track and
stats of loss
calculates premium rate tables and loss
reserves
Law of Large Numbers correct answersThe more people the insurance
insures, the more accurate the actuarial
company
tables are
Insurable Interest correct answersA financial interest (risk) which the
insured must
possess AT THE TIME OF
LOSS
indemnity correct answersLegal concept of one party (insurance company)
place of itinmaking good for another (the
standing
insurers)
Reimbursement correct answersProperty insurance mean
the same
reimbursement and indemnity correct answersBoth prohibit an insurance
company from
reimbursing an insured for more than the actual
amount of loss
Deductible correct answersPurpose of deductible is to eliminate small
claims that
insured can afford and which would cost the insurance company to
administer
Limits of Liability correct answersThe maximum amounts which the
insurance
will pay undercompany
each
coverage.
Aggregate Limit correct answersmaximum limit of liability that the policy
will pay to
persons whoall are injured or who incur property damage in an
occurrence
Additional coverages correct answersThings specified in HOMEOWNER
POLICIES
the that company will pay for in addition to homeowner policy
insurance
limits of liability
Supplemental payments correct answersThings specified in AUTO POLICIES
that the company will pay for in addition to the auto policy
insurance
limits of liability
Basic Causes of loss (specified peril (named peril) coverage) correct
answers12
perils named called fire, extended coverage and vandalism coverage)
(sometimes
**least perils
insurer will
accept
Broad cause of loss (specified peril (named peril) coverage) correct
answersCovers
only the perils listed in the Insuring Agreement. The number of perils
listedaisbasic
than greatercause of
loss.
, All Risk (Open Peril) Coverage correct answersProtects an insured property
against
of all
the insurance perils that would have been covered under a Basic form
policy,
of the perils
and all
covered under a Broad form policy. Protects all loss caused
by perils
except those those specifically
excluded
Direct Physical Loss correct answersA loss where the covered peril is the
direct
of damage
cause(immediate cause or proximate
cause).
Indirect (consequential) loss correct answersLoss where the covered peril
is not the
direct cause (immediate cause or proximate cause) of damage or where the
property
mostly indirect
is
value
-most policies exclude or provide very little indirect
coverage
-to cover indirect loss, endorsement is needed under most
policies
Adjuster correct answersinsurance company representative who determines
there was
insurance coverage in effect for
the loss
-verify coverage dates and location of loss/ person submitting claim was
covered under
& investigates and settles the
date
-verify
loss
s loss is covered type of
loss
-verify amount of
-take necessary legal steps to
loss
settle losspaid on
-amount
loss
Loss settlement/adjustment correct answersThe amount paid on
the loss
Liability Coverage correct answersLoss caused by legal liability arising
out of the
insured
property
-pays for bodily injuries and property damages to third parties caused
by insured.
-cannot exceed limits of
liability
Claimant correct answersThe person who sustains injury and/or damages
and whothe
making is
claim
Insured correct answersPerson against whom the claim is being made
and who is the claim to insurance company for insurance
submitting
coverage
Three ways claimant can make liability claim against insured correct
through the court
answers-Proceed
system
-through attorneys (claimants and insurance
-insurance company
company's)
investigated
Exam Prep
Insurance policy correct answersSocial device for the transfer of
financial risks
Transfer of Risks correct answersThrough insurance individuals transfer to
companies financial risks they cannot individually afford. Insurance
insurance
companies
accept can
for insured risks insureds cannot individually afford by charging a
small
to a large
premium
group of people. The premium is small compared to the size of
the financial
risk
transferred.
Pure Risk correct answersa risk that presents the chance of loss but no
gai
opportunity for
n
Speculative Risk correct answersa situation in which either profit or loss
is possible to profit or lose) insurance typically
(opportunity
doesn't cover
Pooling risks (for an insurance company) correct answersWhen large group
of people money to a fund out of which their losses can be paid. Larger the
contributes
group, it
better the
works
financially
Insured correct answersA person covered by an insurance policy and for
whom the company accepts
insurance
financial risk
Premium correct answersMoney paid by the insured to the insurance
company in
exchange for the insurance
policy
Lapse correct answersWhen a policy is terminated due to nonpayment of
premiums
Endorsement correct answersA form added to an insurance policy. Usually
added for premium charge to add additional coverage. Can be added to
additional
limit or restrict
coverag
e
Peril correct answersAn actual cause of loss that can be
insured against
Hazard correct answersA condition or operation in property which either
creates or the chance of loss by a
increases
covered peril
Risk correct answers"Exposure". The likelihood, probability, or degree of
uncertainty
that a covered peril will cause
loss
,Actuarial Tables correct answersStatistical tables used in calculating
premium
tables. Theyratetell the insurance companies how many people are likely to
havehow
and claims
much the losses are likely
to be.
Loss reserves correct answersmoneys set aside to pay claims in
accordance with the
actuarial
tables
Actuary correct answersAn insurance company representative who keeps
track and
stats of loss
calculates premium rate tables and loss
reserves
Law of Large Numbers correct answersThe more people the insurance
insures, the more accurate the actuarial
company
tables are
Insurable Interest correct answersA financial interest (risk) which the
insured must
possess AT THE TIME OF
LOSS
indemnity correct answersLegal concept of one party (insurance company)
place of itinmaking good for another (the
standing
insurers)
Reimbursement correct answersProperty insurance mean
the same
reimbursement and indemnity correct answersBoth prohibit an insurance
company from
reimbursing an insured for more than the actual
amount of loss
Deductible correct answersPurpose of deductible is to eliminate small
claims that
insured can afford and which would cost the insurance company to
administer
Limits of Liability correct answersThe maximum amounts which the
insurance
will pay undercompany
each
coverage.
Aggregate Limit correct answersmaximum limit of liability that the policy
will pay to
persons whoall are injured or who incur property damage in an
occurrence
Additional coverages correct answersThings specified in HOMEOWNER
POLICIES
the that company will pay for in addition to homeowner policy
insurance
limits of liability
Supplemental payments correct answersThings specified in AUTO POLICIES
that the company will pay for in addition to the auto policy
insurance
limits of liability
Basic Causes of loss (specified peril (named peril) coverage) correct
answers12
perils named called fire, extended coverage and vandalism coverage)
(sometimes
**least perils
insurer will
accept
Broad cause of loss (specified peril (named peril) coverage) correct
answersCovers
only the perils listed in the Insuring Agreement. The number of perils
listedaisbasic
than greatercause of
loss.
, All Risk (Open Peril) Coverage correct answersProtects an insured property
against
of all
the insurance perils that would have been covered under a Basic form
policy,
of the perils
and all
covered under a Broad form policy. Protects all loss caused
by perils
except those those specifically
excluded
Direct Physical Loss correct answersA loss where the covered peril is the
direct
of damage
cause(immediate cause or proximate
cause).
Indirect (consequential) loss correct answersLoss where the covered peril
is not the
direct cause (immediate cause or proximate cause) of damage or where the
property
mostly indirect
is
value
-most policies exclude or provide very little indirect
coverage
-to cover indirect loss, endorsement is needed under most
policies
Adjuster correct answersinsurance company representative who determines
there was
insurance coverage in effect for
the loss
-verify coverage dates and location of loss/ person submitting claim was
covered under
& investigates and settles the
date
-verify
loss
s loss is covered type of
loss
-verify amount of
-take necessary legal steps to
loss
settle losspaid on
-amount
loss
Loss settlement/adjustment correct answersThe amount paid on
the loss
Liability Coverage correct answersLoss caused by legal liability arising
out of the
insured
property
-pays for bodily injuries and property damages to third parties caused
by insured.
-cannot exceed limits of
liability
Claimant correct answersThe person who sustains injury and/or damages
and whothe
making is
claim
Insured correct answersPerson against whom the claim is being made
and who is the claim to insurance company for insurance
submitting
coverage
Three ways claimant can make liability claim against insured correct
through the court
answers-Proceed
system
-through attorneys (claimants and insurance
-insurance company
company's)
investigated
