PROPERTY & CASUALTY CHAPTER 2 2026 |
COMPLETE STUDY GUIDE & PRACTICE
QUESTIONS
| GRADED A+ | GUARANTEED SUCCESS
Updated 2026 Questions and Answers
100% Verified Exam Prep and Comprehensive
Rationales Included
,earned premium the portion of premium paid in advance that now belongs to the insurer for
providing coverage for a specified period of time
exposure units used as a measure of the rating units or the premium base of a risk (exposure
units multiplied by the rate results in the premium)
implied warranty a legal term meaning that a product is suitable for its intended purpose and
that it fits an ordinary buyer's expectations
inception the date at which the insurance policy goes into effect
obsolescence depreciation in the value of a property due to becoming outdated
statute a written law passed by a legislative body
,insurable interest the insured must have this in the person or property covered by an insurance
policy. This must exist at the time of the loss in regards to property and casualty
insurance.
elements of insurable interest 1. Financial (a money interest)
2. Blood ( a relative)
3. Business (a business partner)
underwriting the process of reviewing applications for insurance and the information on the
application. In other words, it is a risk selection process.
underwriter's function refers to the operations of an insurance company where an employee, called
an underwriter, is responsible for evaluating applications submitted to the
insurer and determining whether a policy should be issued, and if so, the terms,
conditions and rates for that policy
insurance rate the amount charged for a particular amount of coverage. It is the actuarially
concluded unit of cost that is applied against the rating basis from which a
policy premium is developed, or the charge per unit of exposure.
, class rates (manual rating) refers to the practice of computing a price per unit of insurance that applies to
all applicants possessing a given set of characteristics. It is the most common
approach in use by the insurance industry
individual rates Used by underwriters when there are not enough similar exposures to justify a
class rate. Underwriters start with a class rate, but then modify it according to
the specific risk factors: lowering or raising the rate based on the types of risk.
They are unique to each insured.
5 basic individual rate-making approaches 1. Judgement rating
2. Schedule rating
3. Experience rating
4. Retrospective rating
5. merit rating
judgment rating Used when credible statistics are lacking or when the exposure units are so
varied that it is impossible to construct a class.
Schedule Rating the rates are developed by applying a schedule of charges and credits to
some base rate to determine the appropriate rate for an individual exposure.
Used less frequently today because of ISO's class rating program for many
types of commercial insurance.
COMPLETE STUDY GUIDE & PRACTICE
QUESTIONS
| GRADED A+ | GUARANTEED SUCCESS
Updated 2026 Questions and Answers
100% Verified Exam Prep and Comprehensive
Rationales Included
,earned premium the portion of premium paid in advance that now belongs to the insurer for
providing coverage for a specified period of time
exposure units used as a measure of the rating units or the premium base of a risk (exposure
units multiplied by the rate results in the premium)
implied warranty a legal term meaning that a product is suitable for its intended purpose and
that it fits an ordinary buyer's expectations
inception the date at which the insurance policy goes into effect
obsolescence depreciation in the value of a property due to becoming outdated
statute a written law passed by a legislative body
,insurable interest the insured must have this in the person or property covered by an insurance
policy. This must exist at the time of the loss in regards to property and casualty
insurance.
elements of insurable interest 1. Financial (a money interest)
2. Blood ( a relative)
3. Business (a business partner)
underwriting the process of reviewing applications for insurance and the information on the
application. In other words, it is a risk selection process.
underwriter's function refers to the operations of an insurance company where an employee, called
an underwriter, is responsible for evaluating applications submitted to the
insurer and determining whether a policy should be issued, and if so, the terms,
conditions and rates for that policy
insurance rate the amount charged for a particular amount of coverage. It is the actuarially
concluded unit of cost that is applied against the rating basis from which a
policy premium is developed, or the charge per unit of exposure.
, class rates (manual rating) refers to the practice of computing a price per unit of insurance that applies to
all applicants possessing a given set of characteristics. It is the most common
approach in use by the insurance industry
individual rates Used by underwriters when there are not enough similar exposures to justify a
class rate. Underwriters start with a class rate, but then modify it according to
the specific risk factors: lowering or raising the rate based on the types of risk.
They are unique to each insured.
5 basic individual rate-making approaches 1. Judgement rating
2. Schedule rating
3. Experience rating
4. Retrospective rating
5. merit rating
judgment rating Used when credible statistics are lacking or when the exposure units are so
varied that it is impossible to construct a class.
Schedule Rating the rates are developed by applying a schedule of charges and credits to
some base rate to determine the appropriate rate for an individual exposure.
Used less frequently today because of ISO's class rating program for many
types of commercial insurance.
