VIRGINIA PERSONAL LINES AGENT LICENSING
COURSE QUESTIONS AND ANSWERS
1.What is insurance?: 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.
2.What is insurance based on?: 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.
3.What is underwriting?: 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
4.Adverse selection: assess risk and charge too little; the tendency of insureds with a
greater-than-average chance of loss to purchase insurance
5.Reinsurace: a contract of indemnity against liability by which an insurance com- pany
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
6.What are the 6 parts of an insurance contract?: Declarations, Insuring Agree- ment,
Conditions, Exclusions and Limitations, Definitions, Endorsements
7.Declarations: 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.
8.Insuring Agreement: describes the covered perils, or risks assumed, or nature of
,VIRGINIA PERSONAL LINES AGENT LICENSING
COURSE QUESTIONS AND ANSWERS
coverage, or makes some reference to the contractual agreement between insurer and
insured; what insurer will cover for you.
9.Conditions: set provisions, rules of conduct, duties, and obligations for the par- ties;
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
10.Exclusions and Limitations: Exclusions: may describe property , perils, haz- ards, 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.
11.Definitions: Define important terms used in the policy language; explanation
, VIRGINIA PERSONAL LINES AGENT LICENSING
COURSE QUESTIONS AND ANSWERS
12.Endorsements: used to add, delete, or change any of the policy parts; written
modification of the policy; additional coverages to contract --> extra money premium.
13.Peril: potential cause of loss
14.Hazard: increases the seriousness of a loss or increases the likelihood that a loss
will occur; increased potential of peril
15.Direct Loss: direct consequence of a particular peril (example: fire damage to an
apartment building
16.Indirect Loss: loss that is a result of a covered peril but is not caused directly and
immediately by that peril (example: loss of rental income)
17.Salvage: 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)
18.Abandonment: insured cannot simply abandon the property to the insurance
company in exchange for the full-insured value.
19.Pair or Set Clause: 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
20.Deductible: Self-insured part of an insured loss, the insured must bear this loss;
amount you pay before insurance comes in --> you are responsible.
21.Vacancy and Unoccupancy: 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.
22.Assignment: Insurance policy cannot be assigned to another party without
consent of the insurance company
COURSE QUESTIONS AND ANSWERS
1.What is insurance?: 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.
2.What is insurance based on?: 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.
3.What is underwriting?: 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
4.Adverse selection: assess risk and charge too little; the tendency of insureds with a
greater-than-average chance of loss to purchase insurance
5.Reinsurace: a contract of indemnity against liability by which an insurance com- pany
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
6.What are the 6 parts of an insurance contract?: Declarations, Insuring Agree- ment,
Conditions, Exclusions and Limitations, Definitions, Endorsements
7.Declarations: 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.
8.Insuring Agreement: describes the covered perils, or risks assumed, or nature of
,VIRGINIA PERSONAL LINES AGENT LICENSING
COURSE QUESTIONS AND ANSWERS
coverage, or makes some reference to the contractual agreement between insurer and
insured; what insurer will cover for you.
9.Conditions: set provisions, rules of conduct, duties, and obligations for the par- ties;
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
10.Exclusions and Limitations: Exclusions: may describe property , perils, haz- ards, 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.
11.Definitions: Define important terms used in the policy language; explanation
, VIRGINIA PERSONAL LINES AGENT LICENSING
COURSE QUESTIONS AND ANSWERS
12.Endorsements: used to add, delete, or change any of the policy parts; written
modification of the policy; additional coverages to contract --> extra money premium.
13.Peril: potential cause of loss
14.Hazard: increases the seriousness of a loss or increases the likelihood that a loss
will occur; increased potential of peril
15.Direct Loss: direct consequence of a particular peril (example: fire damage to an
apartment building
16.Indirect Loss: loss that is a result of a covered peril but is not caused directly and
immediately by that peril (example: loss of rental income)
17.Salvage: 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)
18.Abandonment: insured cannot simply abandon the property to the insurance
company in exchange for the full-insured value.
19.Pair or Set Clause: 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
20.Deductible: Self-insured part of an insured loss, the insured must bear this loss;
amount you pay before insurance comes in --> you are responsible.
21.Vacancy and Unoccupancy: 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.
22.Assignment: Insurance policy cannot be assigned to another party without
consent of the insurance company
