MI Property & Casualty Exam - Property & Casualty Basics Practice Questions And Answers Pass At First Attempt.

If an insured would incur a financial loss if a particular person or property was damaged, they have ____ ____. - correct answers Insurable Interest The process of reviewing applications for insurance is called ____. - correct answers Underwriting The risk selection process to determine whether a policy should be issued is called ____. - correct answers Underwriting The formula used by insurance companies to compare premium income to losses is ____ ____. - correct answers Loss Ratio What is the Loss Ratio formula? - correct answers(Incurred losses + Loss adjusting expense)/Earned premium = Loss Ratio The actuarily concluded unit of cost charged for a particular amount of coverage is the ____ ____. - correct answers Insurance Rate A rate which applies to all applicants possessing a given set of characteristics is a ____ rate. - correct answers Class A Manual rate is the same thing as a ____ rate. - correct answers Class The other type of rate besides class rate is an ____ rate. - correct answers Individual What are the five types of individual rate-making approaches? JSERM - correct answers1. Judgment 2. Schedule 3. Experience 4. Retrospective 5. Merit Applying charges and credits to some base rate is ____ rating. - correct answers Schedule When the insured places a deposit at the inception of the policy, and premium is adjusted at the end of the policy term based on the actual loss experience, that is ____ rating. - correct answers Retrospective When credible statistics are lacking or units are too varied to create a class ____ rating is used. - correct answers Judgment ____ rating is when the insured's premium is based not on the actual loss record, but other factors that indicate the probability that loss will occur. - correct answers Merit Using the insured's loss record to determine premium is ____ rating. - correct answers Experience ____ ____ is a rating method that provides an insurer with that portion of a rate that does not include provisions of expenses or profit and are based on historical aggregate loss and loss adjustment expenses projected through development to their ultimate value and through trends. - correct answers Loss costs Factors that determine rates including: loss reserves, loss adjusting expenses, operating expenses and profits are ____. - correct answers Components What is the coverage that covers only specifically listed perils? - correct answers Named Peril What is the coverage that covers all perils except those specifically excluded? - correct answers Open Peril Define a direct loss. - correct answers Direct physical damage to buildings and/or personal property Define "proximate cause" - correct answers Example: Any damage done by the fire department in the act of putting out a fire is covered, even if not included in the policy, because the fire was the proximate cause. Basically, since the fire causes the need to pour water, smash windows and doors etc., it's all considered to be part of the fire. A single property insurance policy covering multiple classes at one location OR one or more classes at multiple locations is a ____ ____. - correct answers Blanket Policy Insurance that covers a particular kind or unit of property for a defined amount of insurance is _____ insurance - correct answers Specific What are the six basic types of construction? - correct answers1. Fire-Resistive - takes 2 hour or more to burn 2. Modified Fire-Resistive - takes 1-2 hours to burn 3. Masonry-Noncombustible - Non-combustible walls and floors 4. Noncombustible - Does not burn 5. Jointed Masonry - Noncombustible walls, combustible floor & roof 6. Frame - Made entirely of combustible materials. ____ ____ is replacing at today's price without factoring in depreciation. - correct answers Replacement Cost (Loss Valuation) Current Replacement Cost - Depreciation = ? - correct answers Actual Cash Value (ACV) (Loss Valuation) Replacing with less expensive but more modern construction and materials is ____ replacement cost. - correct answers Functional (Loss Valuation) The amount a willing buyer would pay to a willing seller for the property prior to loss is ____ ____. - correct answers Market Value (Loss Valuation) ____ ____ is when an agreed value is set at the start of the policy. - correct answers Agreed Value (Loss Valuation) An amount of insurance scheduled in a property policy that is not subject to con insurance requirements is a ____ amount. This is the ____ the insurer will pay in the event of a loss. - correct answers Stated; Most When it is difficult to establish a value for insured property after a loss, or when it is desirable to agree on a value in advance ____ ____ are used. - correct answers Value Policies The failure to use the care that a reasonable, prudent person would have used in the same or similar circumstances is ____. - correct answers Negligence What are the four elements of a negligent act? - correct answers Legal Duty Standard of Care Proximate Cause Actual Loss or Damage What are the 5 defenses against negligence? - correct answers1. Assumption of Risk 2. Contributory Negligence 3. Comparative Negligence 4. Intervening Cause 5. Statute of Limitations ____ liability is imposed on defendants (insured) engaged in hazardous activities, where the injured party does not have to prove negligence. - correct answers Absolute ____ liability commonly applies in relation to the implied warranty made by a manufacturer/seller that their products are safe. If a product causes injury and the claimant can prove a defect, the defendant is ____ liable. - correct answers Strict; Strictly ___ liability's purpose is to transfer liability from one person to another who would have greater ability to pay damages. The transfer must be to a person in a position of responsibility for the original person. - correct answers Vicarious Name the 7 major components of every Property and Casualty policy. - correct answers1. Declarations 2. Definitions 3. Insuring Agreement 4. Additional Coverage 5. Conditions 6. Exclusions 7. Endorsements Basic underwriting information, such as the insureds name and address, the amounts of coverage and premium and description of insured locations are contained in the ____. - correct answers Declarations The part of the policy that clarifies the terms used in the policy is the ____. - correct answers Definitions The section of a policy containing the insurer's promise to pay, the parties to the contract, effective & renewal dates, description of coverage provided, and perils is the ____ ____. - correct answers Insuring Agreement (Clause) A provision in an insurance policy that provides an additional amount of coverage for specific loss expense, at no additional premium is ____/____ ____. - correct answers Additional/Supplementary Coverage. The ____ are the section of the policy detailing the general rules or procedures that the insurer and insured agree to follow under the terms of the policy. - correct answers Conditions The ____ section of an insurance policy details the perils that are not insured against and what persons are not insured. - correct answers Exclusions _____ are printed addendums to a contract that are used to change the policy's original terms, conditions, or coverages. - correct answers Endorsements Anyone covered under the policy, whether named or not. - correct answers An Insured A person whose name appears on the declaration page. - correct answers A Named Insured The person whose name appears first on the declarations page. - correct answers The First Named Insured Those who are not named on the declarations, but are still protected by the policy. - correct answers Additional Insureds The time period during which the policy is in force; stated on the declarations page - correct answers Policy Period The locations where coverage will be provided. - correct answers Policy Territory ____ is the termination of an in-force insurance policy. - correct answers Cancellation ____ is the termination of an insurance policy at its expiration date. - correct answers Non-renewal The amount the insured is responsible for before the policy pays are the ____. - correct answers Deductibles The ____ ____ provision defines how the policy will respond if there is other valid insurance written on the sam