Personal Lines Study Guide ACTUAL Exam
Questions and CORRECT Answers
State Commissioner - CORRECT ANSWER - Supervisor or director of insurance who
protects the insuring population
Stock Insurance Company - CORRECT ANSWER - Issues non participating policies and
is owned by stock holders who receive taxable corporate dividends
Mutual Insurance Company - CORRECT ANSWER - A type of insurance company
owned by its policyholders.
Reinsurance - CORRECT ANSWER - The transfer of insurance risk from one insurer to
another through a contractual agreement under which one insurer (the reinsurer) agrees, in return
for a reinsurance premium, to indemnify another insurer (the primary insurer) for some or all of
the financial consequences of certain loss exposures covered by the primary's insurance policies.
Domicile - CORRECT ANSWER - state in which an insurer is incorporated
Admitted Insurer - CORRECT ANSWER - An insurer to which a state insurance
department has granted a license to do business within that state.
Underwriting Department - CORRECT ANSWER - Assesses risks and determines policy
issuance and risks
Agent/producer - CORRECT ANSWER - Authorized dealer who is either employed or
independent
Law of Agency - CORRECT ANSWER - 3 party relationship where a principal authorize
agent to act on its behalf to create legal relationship with 3rd party
,Express Authority - CORRECT ANSWER - The authority granted to an agent by means of
the agent's written contract.
Implied Authority - CORRECT ANSWER - 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 - CORRECT ANSWER - Exceeding express authority
Fair Credit Reporting Act - CORRECT ANSWER - Act that protects privacy of
background information and ensures that information supplied is accurate.
Risk - CORRECT ANSWER - The chance of loss from an event that cannot be entirely
controlled
Peril - CORRECT ANSWER - cause of loss
Hazard - CORRECT ANSWER - A danger or risk.
Principle of Indemnity - CORRECT ANSWER - The principle that insurance policies
should provide a benefit no greater than the loss suffered by an insured.
Insurable Interest - CORRECT ANSWER - something of value that, if lost, would cause
you financial harm, must exist at time of loss
Insurance Contract - CORRECT ANSWER - -A legal contract purchased to indemnify the
insured against a loss, damage, or liability arising from an unexpected event.
-The exchange of a relatively small and definite expense for the risk of loss that, if it occurs, may
be large or small.
-A contract designed to transfer risk from the insured to the insurer.
, Underwriting Factors - CORRECT ANSWER - used to determine premium include the
nature of the risk, hazards, claims history, and other factors that vary depending upon the risk
Occurence - CORRECT ANSWER - accident including repeat exposure to harmful
conditions
Pro Rata Cancellation - CORRECT ANSWER - The termination of a contract with
premium charge being adjusted in proportion to the exact time the protection has been in force.
All unearned premium is returned to the insured.
Proximate Cause - CORRECT ANSWER - The primary cause of loss
friendly fire - CORRECT ANSWER - fire contained where intended
Hostile Fire - CORRECT ANSWER - a fire that leaves its intended place, such as a spark
that escapes a fireplace and sets the carpet on fire
endorsement - CORRECT ANSWER - A policy form that alters or adds to the provisions
of a property and casualty insurance contract.
Direct Loss - CORRECT ANSWER - Loss that is a direct result of a peril, such as fire.
Indirect Loss - CORRECT ANSWER - Loss that is a result or consequence of a direct loss
Named Perils - CORRECT ANSWER - Covered perils are specifically named in the
policy
Open Perils - CORRECT ANSWER - a type of insurance that covers all perils except
those specifically noted as excluded
Questions and CORRECT Answers
State Commissioner - CORRECT ANSWER - Supervisor or director of insurance who
protects the insuring population
Stock Insurance Company - CORRECT ANSWER - Issues non participating policies and
is owned by stock holders who receive taxable corporate dividends
Mutual Insurance Company - CORRECT ANSWER - A type of insurance company
owned by its policyholders.
Reinsurance - CORRECT ANSWER - The transfer of insurance risk from one insurer to
another through a contractual agreement under which one insurer (the reinsurer) agrees, in return
for a reinsurance premium, to indemnify another insurer (the primary insurer) for some or all of
the financial consequences of certain loss exposures covered by the primary's insurance policies.
Domicile - CORRECT ANSWER - state in which an insurer is incorporated
Admitted Insurer - CORRECT ANSWER - An insurer to which a state insurance
department has granted a license to do business within that state.
Underwriting Department - CORRECT ANSWER - Assesses risks and determines policy
issuance and risks
Agent/producer - CORRECT ANSWER - Authorized dealer who is either employed or
independent
Law of Agency - CORRECT ANSWER - 3 party relationship where a principal authorize
agent to act on its behalf to create legal relationship with 3rd party
,Express Authority - CORRECT ANSWER - The authority granted to an agent by means of
the agent's written contract.
Implied Authority - CORRECT ANSWER - 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 - CORRECT ANSWER - Exceeding express authority
Fair Credit Reporting Act - CORRECT ANSWER - Act that protects privacy of
background information and ensures that information supplied is accurate.
Risk - CORRECT ANSWER - The chance of loss from an event that cannot be entirely
controlled
Peril - CORRECT ANSWER - cause of loss
Hazard - CORRECT ANSWER - A danger or risk.
Principle of Indemnity - CORRECT ANSWER - The principle that insurance policies
should provide a benefit no greater than the loss suffered by an insured.
Insurable Interest - CORRECT ANSWER - something of value that, if lost, would cause
you financial harm, must exist at time of loss
Insurance Contract - CORRECT ANSWER - -A legal contract purchased to indemnify the
insured against a loss, damage, or liability arising from an unexpected event.
-The exchange of a relatively small and definite expense for the risk of loss that, if it occurs, may
be large or small.
-A contract designed to transfer risk from the insured to the insurer.
, Underwriting Factors - CORRECT ANSWER - used to determine premium include the
nature of the risk, hazards, claims history, and other factors that vary depending upon the risk
Occurence - CORRECT ANSWER - accident including repeat exposure to harmful
conditions
Pro Rata Cancellation - CORRECT ANSWER - The termination of a contract with
premium charge being adjusted in proportion to the exact time the protection has been in force.
All unearned premium is returned to the insured.
Proximate Cause - CORRECT ANSWER - The primary cause of loss
friendly fire - CORRECT ANSWER - fire contained where intended
Hostile Fire - CORRECT ANSWER - a fire that leaves its intended place, such as a spark
that escapes a fireplace and sets the carpet on fire
endorsement - CORRECT ANSWER - A policy form that alters or adds to the provisions
of a property and casualty insurance contract.
Direct Loss - CORRECT ANSWER - Loss that is a direct result of a peril, such as fire.
Indirect Loss - CORRECT ANSWER - Loss that is a result or consequence of a direct loss
Named Perils - CORRECT ANSWER - Covered perils are specifically named in the
policy
Open Perils - CORRECT ANSWER - a type of insurance that covers all perils except
those specifically noted as excluded
