AIC 304 FULLY UPDATED SET OF EXAMINATION QUESTIONS WITH
VERIFIED CORRECT ANSWERS IN THE MOST RECENT VERSION
1. Q: What is a first-party claim? ANSWER A first-party claim is a
claim made by the policyholder directly to their own insurance company
for coverage under their policy.
2. Q: What is a third-party claim? ANSWER A third-party claim is a
claim made by someone other than the policyholder against the insured
party for damages or injuries allegedly caused by the insured.
3. Q: What is the principle of indemnity? ANSWER The principle of
indemnity states that insurance is designed to restore the insured to their
financial position before the loss, not to allow them to profit from the
loss.
4. Q: What is actual cash value (ACV)? ANSWER Actual cash value is
the replacement cost of damaged property minus depreciation,
representing the fair market value at the time of loss.
5. Q: What is replacement cost? ANSWER Replacement cost is the
amount needed to replace damaged property with new property of like
kind and quality, without deducting for depreciation.
6. Q: What is a deductible? ANSWER A deductible is the amount the
insured must pay out-of-pocket before the insurance company begins to
pay for a covered loss.
7. Q: What is coinsurance? ANSWER Coinsurance is a clause requiring
the insured to carry insurance equal to a specified percentage of the
property's value or face a penalty at the time of loss.
8. Q: What is proximate cause? ANSWER Proximate cause is the
dominant or primary cause of a loss that sets in motion an unbroken chain
of events leading to the damage.
9. Q: What is concurrent causation? ANSWER Concurrent causation
occurs when two or more perils act together at the same time to cause a
loss, with at least one being covered and one excluded.
,10.Q: What is the insuring agreement? ANSWER The insuring
agreement is the part of an insurance policy that states what the insurer
promises to do, including what perils are covered and what the insurer
will pay.
11.Q: What are policy conditions? ANSWER Policy conditions are
provisions in an insurance policy that qualify or limit the insurer's
promise to pay or perform, establishing the duties of the insured and
insurer.
12.Q: What are policy exclusions? ANSWER Policy exclusions are
provisions that eliminate coverage for certain perils, losses, property, or
locations that would otherwise be covered.
13.Q: What is an additional insured? ANSWER An additional insured is
a person or organization not automatically covered under a policy who is
granted insured status through an endorsement.
14.Q: What is the principle of utmost good faith? ANSWER The
principle of utmost good faith requires both parties to an insurance
contract to act honestly and disclose all material facts relevant to the
coverage.
15.Q: What is a material misrepresentation? ANSWER A material
misrepresentation is a false statement about a fact that is significant
enough that it would affect an insurer's decision to provide coverage or
determine premium rates.
16.Q: What is a reservation of rights letter? ANSWER A reservation of
rights letter is correspondence from an insurer to an insured indicating
that the insurer is investigating a claim but reserves the right to deny
coverage later.
17.Q: What is subrogation? ANSWER Subrogation is the insurer's right
to recover the amount it paid for a loss from a third party who is legally
responsible for causing that loss.
18.Q: What is salvage? ANSWER Salvage is the remaining value of
damaged property after a loss, which the insurer may take possession of
after paying a total loss settlement.
19.Q: What is a proof of loss? ANSWER A proof of loss is a formal,
signed statement by the insured detailing the circumstances of the loss,
the amount claimed, and other information required by the policy.
, 20.Q: What is the statute of limitations? ANSWER The statute of
limitations is the time period within which a lawsuit must be filed, after
which the claimant loses the legal right to sue.
21.Q: What is an appraisal clause? ANSWER An appraisal clause is a
policy provision that provides a method for resolving disputes between
the insured and insurer over the amount of a loss without going to court.
22.Q: What is betterment? ANSWER Betterment occurs when repairs or
replacement result in the insured's property being in better condition than
before the loss, often requiring a deduction for the improvement.
23.Q: What is a policy period? ANSWER A policy period is the time
during which an insurance policy provides coverage, typically stated in
the policy's declarations.
24.Q: What is occurrence-based coverage? ANSWER Occurrence-based
coverage provides protection for claims arising from incidents that occur
during the policy period, regardless of when the claim is made.
25.Q: What is claims-made coverage? ANSWER Claims-made coverage
provides protection only for claims that are made during the policy
period, regardless of when the incident occurred.
26.Q: What is the loss payee? ANSWER A loss payee is a person or
entity with a financial interest in insured property who is entitled to
receive insurance proceeds when a loss occurs.
27.Q: What is a mortgagee clause? ANSWER A mortgagee clause is a
property insurance provision that protects the mortgage lender's interest
in the property, allowing the lender to receive payment even if the
insured's claim is denied.
28.Q: What is the fair claims practices act? ANSWER Fair claims
practices acts are state laws that establish standards of conduct for
insurers in handling claims and provide penalties for violations.
29.Q: What is bad faith? ANSWER Bad faith is an insurer's intentional or
unreasonable failure to meet its obligations to the insured, such as
denying a valid claim or failing to investigate properly.
30.Q: What is a declaration page? ANSWER A declaration page is the
portion of an insurance policy that contains specific information about the
insured, coverage limits, premiums, and the policy period.
VERIFIED CORRECT ANSWERS IN THE MOST RECENT VERSION
1. Q: What is a first-party claim? ANSWER A first-party claim is a
claim made by the policyholder directly to their own insurance company
for coverage under their policy.
2. Q: What is a third-party claim? ANSWER A third-party claim is a
claim made by someone other than the policyholder against the insured
party for damages or injuries allegedly caused by the insured.
3. Q: What is the principle of indemnity? ANSWER The principle of
indemnity states that insurance is designed to restore the insured to their
financial position before the loss, not to allow them to profit from the
loss.
4. Q: What is actual cash value (ACV)? ANSWER Actual cash value is
the replacement cost of damaged property minus depreciation,
representing the fair market value at the time of loss.
5. Q: What is replacement cost? ANSWER Replacement cost is the
amount needed to replace damaged property with new property of like
kind and quality, without deducting for depreciation.
6. Q: What is a deductible? ANSWER A deductible is the amount the
insured must pay out-of-pocket before the insurance company begins to
pay for a covered loss.
7. Q: What is coinsurance? ANSWER Coinsurance is a clause requiring
the insured to carry insurance equal to a specified percentage of the
property's value or face a penalty at the time of loss.
8. Q: What is proximate cause? ANSWER Proximate cause is the
dominant or primary cause of a loss that sets in motion an unbroken chain
of events leading to the damage.
9. Q: What is concurrent causation? ANSWER Concurrent causation
occurs when two or more perils act together at the same time to cause a
loss, with at least one being covered and one excluded.
,10.Q: What is the insuring agreement? ANSWER The insuring
agreement is the part of an insurance policy that states what the insurer
promises to do, including what perils are covered and what the insurer
will pay.
11.Q: What are policy conditions? ANSWER Policy conditions are
provisions in an insurance policy that qualify or limit the insurer's
promise to pay or perform, establishing the duties of the insured and
insurer.
12.Q: What are policy exclusions? ANSWER Policy exclusions are
provisions that eliminate coverage for certain perils, losses, property, or
locations that would otherwise be covered.
13.Q: What is an additional insured? ANSWER An additional insured is
a person or organization not automatically covered under a policy who is
granted insured status through an endorsement.
14.Q: What is the principle of utmost good faith? ANSWER The
principle of utmost good faith requires both parties to an insurance
contract to act honestly and disclose all material facts relevant to the
coverage.
15.Q: What is a material misrepresentation? ANSWER A material
misrepresentation is a false statement about a fact that is significant
enough that it would affect an insurer's decision to provide coverage or
determine premium rates.
16.Q: What is a reservation of rights letter? ANSWER A reservation of
rights letter is correspondence from an insurer to an insured indicating
that the insurer is investigating a claim but reserves the right to deny
coverage later.
17.Q: What is subrogation? ANSWER Subrogation is the insurer's right
to recover the amount it paid for a loss from a third party who is legally
responsible for causing that loss.
18.Q: What is salvage? ANSWER Salvage is the remaining value of
damaged property after a loss, which the insurer may take possession of
after paying a total loss settlement.
19.Q: What is a proof of loss? ANSWER A proof of loss is a formal,
signed statement by the insured detailing the circumstances of the loss,
the amount claimed, and other information required by the policy.
, 20.Q: What is the statute of limitations? ANSWER The statute of
limitations is the time period within which a lawsuit must be filed, after
which the claimant loses the legal right to sue.
21.Q: What is an appraisal clause? ANSWER An appraisal clause is a
policy provision that provides a method for resolving disputes between
the insured and insurer over the amount of a loss without going to court.
22.Q: What is betterment? ANSWER Betterment occurs when repairs or
replacement result in the insured's property being in better condition than
before the loss, often requiring a deduction for the improvement.
23.Q: What is a policy period? ANSWER A policy period is the time
during which an insurance policy provides coverage, typically stated in
the policy's declarations.
24.Q: What is occurrence-based coverage? ANSWER Occurrence-based
coverage provides protection for claims arising from incidents that occur
during the policy period, regardless of when the claim is made.
25.Q: What is claims-made coverage? ANSWER Claims-made coverage
provides protection only for claims that are made during the policy
period, regardless of when the incident occurred.
26.Q: What is the loss payee? ANSWER A loss payee is a person or
entity with a financial interest in insured property who is entitled to
receive insurance proceeds when a loss occurs.
27.Q: What is a mortgagee clause? ANSWER A mortgagee clause is a
property insurance provision that protects the mortgage lender's interest
in the property, allowing the lender to receive payment even if the
insured's claim is denied.
28.Q: What is the fair claims practices act? ANSWER Fair claims
practices acts are state laws that establish standards of conduct for
insurers in handling claims and provide penalties for violations.
29.Q: What is bad faith? ANSWER Bad faith is an insurer's intentional or
unreasonable failure to meet its obligations to the insured, such as
denying a valid claim or failing to investigate properly.
30.Q: What is a declaration page? ANSWER A declaration page is the
portion of an insurance policy that contains specific information about the
insured, coverage limits, premiums, and the policy period.
