Indiana Property and Casualty Insurance
Exam
Absolute Liability - ANS-exists when a person subjects another party to a dangerous or
hazardous condition present on their property, including the idea of harboring a wild animal on
the premises. When a victim is hurt in an absolute liability situation, they do not have to
establish negligence to collect money damages.
Accounts Receivable - ANS-A $10,000 limit on premises, $5,000 off premises for loss to the
insured from the insured's customer from whom the insured is unable to collect payments due,
includes collection expenses.
Actual Cash Value - ANS-replacement cost minus depreciation
Additional insured - ANS-Additional insured is a third party who is usually added to a
commercial policy because they also have loss potential.
Adverse Selection - ANS-is selection "against the company." Tendency of less favorable
insurance risks to seek or continue insurance to a greater extent than others. Also, tendency of
policy owners to take advantage of favorable options in insurance contracts.
Aggregate Limit - ANS-The aggregate limit is the limit the policy will pay for all covered loss in a
policy period regardless of the total number of claims brought by any number of claimants. The
aggregate limit resets to the original amount on the anniversary of the policy.
Alterations and New Buildings - ANS-Actual loss is covered due to physical loss of new
buildings whether they are completed or still under construction.
Appraisal - ANS-The appraisal clause of a property contract is a condition in the property policy
that addresses a situation in which the insured and the insurer cannot agree on the value
(amount) of the loss.
Arbitration - ANS-settling a dispute by agreeing to accept the decision of an impartial outsider
Bill of Laden - ANS-a shipping contract that contains all shipping information between the
consignor (person sending the goods) of the goods, carrier and consignee.
Binders - ANS-A binder is temporary coverage which allows that coverage to be put in force by
agents who have a binding authority from an insurance company. A binder is the
acknowledgment that immediate coverage is in effect pending the future issuance of a policy.
Blanket limit - ANS-Blanket limit policies cover multiple locations simultaneously under a single
policy with one limit that applies to all locations and all business personal property at all the
insured locations
Blanket vs. Specific Limits - ANS-A commercial enterprise typically insures property it owns by
purchasing a commercial property policy under which coverage may be indicated as either
specific or blanket coverage.
Bond Penalty - ANS-the face amount, or limit, of a surety bond.
BOP Deductible - ANS-The standard deductible in a BOP policy is listed as $500. As in any
policy with a deductible it must be paid first by the insured before any coverage can be enjoyed.
, However, in a BOP the following additional coverages do not require a deductible and will pay
from the first dollar of a covered loss:▪ fire department service charge▪ fire extinguisher systems
recharge expense▪ extra expense▪ business income▪ civil authorityIf any optional coverages are
selected, then the deductible listed in the declarations for the optional coverage will apply. BOP
Optional Coverages are endorsements requiring additional premium. The four main areas a
business may need optional coverage under the BOP are Outdoor Signs, Money and Securities,
Employee Dishonesty and Equipment Breakdown.
Broad form perils - ANS-offer coverage on all of the thirteen perils included in the SFP while
creating and adding a new set of nine perils
Builders Risk (BR) - ANS-policies will pay for direct physical loss of or damage to covered
property at the premises described in the Declarations caused by or resulting from any Covered
Cause of Loss while a building is under construction or being renovated.
Business Income - ANS-Business income is defined as "net income." Net income includes profit
or loss before income taxes which would have been earned by the business but for the
shutdown plus normal operating expenses including payroll costs. Any expenses susceptible to
shut down during loss are not covered (for instance heat and electricity are not covered
because the building is not inhabitable anyway). However, continuing expenses are covered
such as debt service payments, rent and real estate taxes. The insurer determines income
based on the net income before the direct loss to calculate what the continued net income was
likely to be if no loss or damage had occurred. The insured selects their desired limit of liability
and is an endorsement to commercial property coverage. Business income loss is paid only
during the "Period of Restoration" which begins when the direct loss occurs and ends when the
building should be repaired with reasonable speed and to similar quality or if the business is
resumed in a new location. There is a 72 hour "waiting period" after the date physical loss has
occurred before this coverage begins paying on loss to the insured. If the loss happens before
the policy expiration but continues past the expiration, the policy will continue to pay until the
restoration period has ended.
Business Income/Extra Expense - ANS-Either or both of the next two optional coverages,
Business Income and/or Extra Expense, can be added to the Commercial Property and
Business Personal Property Form by endorsement for an additional premium. They can be
purchased together or singly or not at all. Both coverages are for indirect or consequential loss
(loss that is a consequence of a direct covered peril but is not itself direct loss) to a business.
These optional endorsements are referred to as "time element" coverage because of the indirect
loss caused by down time during which the business is unable to operate due to direct building
and or business personal property loss caused by a covered peril. It is also referred to as
business interruption insurance.
Business Owners Policy (BOP) - ANS-The Business Owners Policy is a stand-alone package
policy, designed to meet the comprehensive property and casualty needs of small to medium
sized business that qualify for its very reasonably priced premium. Eligible risks are limited to
35,000 square feet of space (earlier editions of BOP used 25,000) and gross annual sales not
exceeding $6,000,000 (earlier editions of BOP had a limit of $3,000,000). A BOP and a CPP are
mutually exclusive. When a business does not qualify for a BOP, they normally must purchase a
CPP tailored to their business needs.
Exam
Absolute Liability - ANS-exists when a person subjects another party to a dangerous or
hazardous condition present on their property, including the idea of harboring a wild animal on
the premises. When a victim is hurt in an absolute liability situation, they do not have to
establish negligence to collect money damages.
Accounts Receivable - ANS-A $10,000 limit on premises, $5,000 off premises for loss to the
insured from the insured's customer from whom the insured is unable to collect payments due,
includes collection expenses.
Actual Cash Value - ANS-replacement cost minus depreciation
Additional insured - ANS-Additional insured is a third party who is usually added to a
commercial policy because they also have loss potential.
Adverse Selection - ANS-is selection "against the company." Tendency of less favorable
insurance risks to seek or continue insurance to a greater extent than others. Also, tendency of
policy owners to take advantage of favorable options in insurance contracts.
Aggregate Limit - ANS-The aggregate limit is the limit the policy will pay for all covered loss in a
policy period regardless of the total number of claims brought by any number of claimants. The
aggregate limit resets to the original amount on the anniversary of the policy.
Alterations and New Buildings - ANS-Actual loss is covered due to physical loss of new
buildings whether they are completed or still under construction.
Appraisal - ANS-The appraisal clause of a property contract is a condition in the property policy
that addresses a situation in which the insured and the insurer cannot agree on the value
(amount) of the loss.
Arbitration - ANS-settling a dispute by agreeing to accept the decision of an impartial outsider
Bill of Laden - ANS-a shipping contract that contains all shipping information between the
consignor (person sending the goods) of the goods, carrier and consignee.
Binders - ANS-A binder is temporary coverage which allows that coverage to be put in force by
agents who have a binding authority from an insurance company. A binder is the
acknowledgment that immediate coverage is in effect pending the future issuance of a policy.
Blanket limit - ANS-Blanket limit policies cover multiple locations simultaneously under a single
policy with one limit that applies to all locations and all business personal property at all the
insured locations
Blanket vs. Specific Limits - ANS-A commercial enterprise typically insures property it owns by
purchasing a commercial property policy under which coverage may be indicated as either
specific or blanket coverage.
Bond Penalty - ANS-the face amount, or limit, of a surety bond.
BOP Deductible - ANS-The standard deductible in a BOP policy is listed as $500. As in any
policy with a deductible it must be paid first by the insured before any coverage can be enjoyed.
, However, in a BOP the following additional coverages do not require a deductible and will pay
from the first dollar of a covered loss:▪ fire department service charge▪ fire extinguisher systems
recharge expense▪ extra expense▪ business income▪ civil authorityIf any optional coverages are
selected, then the deductible listed in the declarations for the optional coverage will apply. BOP
Optional Coverages are endorsements requiring additional premium. The four main areas a
business may need optional coverage under the BOP are Outdoor Signs, Money and Securities,
Employee Dishonesty and Equipment Breakdown.
Broad form perils - ANS-offer coverage on all of the thirteen perils included in the SFP while
creating and adding a new set of nine perils
Builders Risk (BR) - ANS-policies will pay for direct physical loss of or damage to covered
property at the premises described in the Declarations caused by or resulting from any Covered
Cause of Loss while a building is under construction or being renovated.
Business Income - ANS-Business income is defined as "net income." Net income includes profit
or loss before income taxes which would have been earned by the business but for the
shutdown plus normal operating expenses including payroll costs. Any expenses susceptible to
shut down during loss are not covered (for instance heat and electricity are not covered
because the building is not inhabitable anyway). However, continuing expenses are covered
such as debt service payments, rent and real estate taxes. The insurer determines income
based on the net income before the direct loss to calculate what the continued net income was
likely to be if no loss or damage had occurred. The insured selects their desired limit of liability
and is an endorsement to commercial property coverage. Business income loss is paid only
during the "Period of Restoration" which begins when the direct loss occurs and ends when the
building should be repaired with reasonable speed and to similar quality or if the business is
resumed in a new location. There is a 72 hour "waiting period" after the date physical loss has
occurred before this coverage begins paying on loss to the insured. If the loss happens before
the policy expiration but continues past the expiration, the policy will continue to pay until the
restoration period has ended.
Business Income/Extra Expense - ANS-Either or both of the next two optional coverages,
Business Income and/or Extra Expense, can be added to the Commercial Property and
Business Personal Property Form by endorsement for an additional premium. They can be
purchased together or singly or not at all. Both coverages are for indirect or consequential loss
(loss that is a consequence of a direct covered peril but is not itself direct loss) to a business.
These optional endorsements are referred to as "time element" coverage because of the indirect
loss caused by down time during which the business is unable to operate due to direct building
and or business personal property loss caused by a covered peril. It is also referred to as
business interruption insurance.
Business Owners Policy (BOP) - ANS-The Business Owners Policy is a stand-alone package
policy, designed to meet the comprehensive property and casualty needs of small to medium
sized business that qualify for its very reasonably priced premium. Eligible risks are limited to
35,000 square feet of space (earlier editions of BOP used 25,000) and gross annual sales not
exceeding $6,000,000 (earlier editions of BOP had a limit of $3,000,000). A BOP and a CPP are
mutually exclusive. When a business does not qualify for a BOP, they normally must purchase a
CPP tailored to their business needs.
