Washington State Property & Casualty Insurance Exam 100% correct answers
Authorized Insurer An insurer that has qualified and received a Certificate of Authority from the Department of Insurance to transact insurance in the state.
Contact adhesion “the accepter of the contract must “”adhere”” to the written contract”
inducement An action aimed at persuading
insolvent Bankrupt; unable to pay debts.
Transacting Insurance Conducting insurance business, such as soliciting or negotiating to buy or sell an insurance policy.
Unauthorized Insurer Is held personally liable. Each violation is separate and can result in suspension, revocation of license, and a min fine of $25,000. (Class B Felony)
When would a commissioner order a replacement policy? When a unauthorized insurer improperly placed a policy. Would be replaced by a policy with a legal insurer.
Surplus Lines Insurance that is not available or offered in the regular marketplace from admitted insurers.
Insurance Commissioner (IOC) State elected term of 4 years.
insurance Commissioner duties -Protects the Public from unfair trade practices- Examinations/investigations- Hearings – Cease and Desist orders- Public information – Appoints Dep. Chief Commissioner-
How often must the Insurance Commissioner examine companies? As often as deemed necessary, but MUST be done every 5 years
Receiving Written Notice from Commissioner the person must respond within 90 days. if not made the request is considered waved.
Notice of Hearing – must state grounds of hearing (can be written demand by aggrieved person)- Right to request administrative law judge
Licence Suspension Hearing Commissioner must hold a hearing within 90 days.
Insurance Producer A person required to be licensed under the laws of this state to sell, solicit, or negotiate insurance.- Must be 18+- has not had a license denied, suspended, or revoked- completed Pre-licensing/ exams- paid fee(s)- Fingerprinted/ background check
FINRA (Financial Industry Regulatory Authority) solicits licences for variable life and variable annuity
Temporary Insurance Producers Licence Commissioner may issue temp. license for a max of 180 days. usually in event of producers recovery, sale of a business, training and licencing of new personal to operate a business.
Non-Resident Producer a producer who lives (domicile) and conducts business from another state other than Washington. Will receive a non resident producers license.
When is a insurance license exempt? When they work at a company or themself but do not conduct the solicitation, sale, negotiation of insurance.
Appointing a insurance producer – notice of appointment within 15 days- Commissioner will verify within 15 days- if deemed ineligible commissioner will notify within 10 daysIf approved it must e renewed every 2 years, and will receive notice within 60 days of the renewal date.
Business Entity Affiliates A business must have AT LEAST 1 affiliated individual licence to transact insurance
If business Entity Affiliate is terminated The commissioner must receive notice within 30 days of termination.
Renewal The initial licenses are valid from the date that they are issued until the last day of the licensee’s birth month.
Renewal Fees for Licences (Every 2 years)Producer- $55Limited insurance- $20Surplus lines broker- $20 Ajuster- $50Late Fees:30 days: 50% of renewal 31-60 days: 100%61-12 months 200% (12+ months must restart licensing process)
Continuing Education (CE) Every 2 years. 24 hours total, 3 hours in ethics.must hold on to certificate for 3 years
Change of Address Must contact commissioner within 30 days. this includes a change of residence, mailing, business, or email
Reporting of Actions You must report to the commissioner within 30 days of any administrative action taken on them by another jurisdiction or governmental agency
Convicted of a felony Commissioner may revoke or refuse insurers licenses immediately. Within 15 days may revoke a ordered licence or by ordering a hearing within 10 days.
Suspended license period up to 12 months
Guilty of violations each fine of up to $1,000, must be paid within 15-30 days
Place of Business Requirements Must be accessible to the public. Does not apply to life and disability insurance.
Record Retention Requires insurer to maintain records for 5 years.
(DRPL) Designated Responsible Licensed Person Responsible for insurers compliance with insurance laws/ rules
Misrepresentation Materials that are false, misleading, or deceptive of policy benefits, terms, payment of dividends. Also includes oral statements.Knowingly committing this is considered a gross misdemeanor, and licences can be revoked
False Advertising Advertising that is misleading, deceptive, and untrue.Ex: newspaper add with untrue statements about terms and benefits of a policy.
Rebating the practice of giving an individual a premium reduction or some other financial advantage not stated in the policy as an inducement to purchase the policy.It May not exceed $100 per person in a 12 month period.
Inducement illegal action. referring to rebating to have someone purchase a policy for a reward.
Twisting Misrepresentation for the purpose of inducing a person to purchase, lapse, forfeit, surrender or change an insurance policy. Twisting is an unfair trade practice.
Deformation An oral or written statement of insurance policies that persuades a person to engage in insurance. including financial conditions of people or another company.
Excess Charge allowing insurers to charge a reduction fee, overall charges must be reasonable to the value of work.
Claimant either the first party, third party or both. can include immediate family members designated by client
First Party Claimant The insured is the first party claimant.Ex: Making a claim to your own insurance company
Third Party Claimant the opposite party of the first party claimant. Ex: James has a policy with Goosehead (first-party) and gets into an accident, hitting Coles car (third party), cole then makes a claim on James’s Goosehead policy.
Unfair Practices Illegal business practices that exploit the unequal bargaining position of consumers
Unreasonable Denial of Claim May be taken to supreme court, if determined the claim denial was unfair insurer could pay 3x the amount of claimfirst party must submit claim within 20 days prior to filing for action
Insurance Code: Remedies & Penalties – Cease and desist order form commissioner- if not followed within 10 days of order a max fine of $250 will be issued for each violation
Can you keep or retain a policy for safekeeping? No, not under any circumstance
Fiduciary Capacity When the business a person transacts or the money or property which he handles is not for his own benefit but for another person-Agent/producer represents the insurance company- Any diversion of funds is considered larceny by embezzlement and will be prosecuted accordingly
Separate Account Requirement Withing Fiduciary Capacity: all premium or returned premiums must be accounted for and in a seperate account. (may be intrest barring accounts and held by producer to help with bank fees/charges)
Reply to the Insurance Commissioner must be done within 15 days
Display of license each broker and salesperson must display their license customarily where the public can see it
Federal Regulations: Fair Credit Reporting Act Purpose is to protect the public. Reports fall into two categories:- Consumer- Investigative consumer
Consumer Reports Written and /or oral statements regarding a consumer’s credit, character, reputation, or habits collected by a reporting agency from employment records, credit reports, and other public sources.
investigative consumer reports A report similar to a consumer report, but one that also provides information on the consumer’s character, reputation, and habits. (insurer must share report within 5 days) The customer has a right to know what was in the report
Individual unknowingly violates the Fair Credit Report Act is liable for the amount equal to the loss as well as any legal fees
Individual knowingly (willfully) violates the Fair Credit Reporting act Agent: 2 years in prison individual: a $2,500 fine
Fair Credit Act: Prohibited Info – Bankruptcy more then 10 years- 150,000 or less in credit transactions – civil suits, records of arrest/convictions/crimes- any negative information older that 7 years
Unlawful Insurance Fraud May be fined, imprisoned for up to 10 years or both . if they endanger a accompanied insurer up to 15 years.* if the embezzlement amount is less then $5,000 prison time may be reduced to 1 year.
1033 waiver a personal convicted of a felony may apply for a _ to transact insurance business. cannot be 50k+ for each violation. Unilateral Contract promise in exchange for an act (NFIP)National Flood Insurance Program Identifies floodplains and maps thru FEMA. the community must meet the federal requirements and must purchase within 1 year after becoming available. *- structures must have two solid walls and a roof. be partially above ground, and not entirely over water. (WYO) Write Your Own insurance program the same insurance you would receive in the NFIP…non risk baring though the FIA NFIPNational Flood Insurance Program Limits Single Family: Building-$250,000. Contents- $100,000Other Residential: Building- $250,000. Contents- $100,000Small Businesses: Building- $500,000 Contents: $500,000Other Non Residential: Building- $500,000 Contents- $500,000 *if a community has NFIP they must purchase flood insurance as part of the mortgage process. Federal EMERGENCY Flood Program *in effect after all NFIP criteria has been met.Single Family: Building-$35,000 Contents- $10,000Other residential: $100,000 and $100,000Small Businesses: $100,000 and $100,000Other Non Residential : $100,000 and $100,000 Define flood partial or complete inundation of 2 or more acres normally in a dry land area, or 2 or more properties (at least one being the insured’s) Exclusions of a flood landslides, sewer backups unrelated to a flood, windblown rain, snow or sleet and flooding within the insureds control. Single-family dwelling are automatically provided with replacement cost insurance to % of the replacement value maximum allowed under FIP. 80
There is a 30 day waiting period after the applicant has been accepted before the coverage goes into effect except under the following conditions: -first 30 days of a community enters emergency or normal programs. the coverage is applied 12:01am the day after- when existing policy is assigned to the property purchaser and at 12:01am after the 5th day the endorsement requests and premium has been mailed for policy.
Overinsurance An excessive amount of insurance that would result in overpayment to the insured in the event of a loss. * it is prohibited as it violates the principle of indemnity
Overinsurance Provision (property insurance) the use of the special provision to cover the cost of repair or replacement of property
If an insurer cancels a contract, written notice must be provided to the insured within what a certain period of time. 45 days prior to cancelation *unless from non paid premiums (10 days)
Fire Policy Cancelation 5 days prior notice needed
medical malpractice insurance a type of liability insurance that covers physicians and other health care professionals for liability claims arising from patient treatment.
medical malpractice insurance cancelation 90 days notice of cancelation
Notice of Cancellation To cancel your policy, your insurance company must mail notice or be delivered
“””unsured”” portion of premium” money must be returned to the insured no later then 45 days after date of cancelation.
Cannot deny based on gendersexagecredit score
Binder A temporary written or oral agreement to provide insurance coverage until a formal written policy is issued.- may not extend more then 90 days- premium can only differ $10 from actual policy
Insurer terminates independent agents contract Must give 120days written notice unless:- Abandonment of agency- gross and willful misconduct – loss of licences via commissioner – change of ownership/ sale of agency-Fraud or material misrepresentation- default in payments due to insurer
After insurer termination of independent agent they must: permit renewal of all polices in insurance book for 1 year. – rate of commissions transfers- must assign policy to nearest located insurer
Guaranteed Association Non Profit that protects insured claim payments and avoid financial losses if insurer becomes insolvent. within 30 days of liquidation.-claims in excess of $100 but not more then $300,000- should never be claimed as guaranteed backing to insurance (unfair trade practice)
Homogeneity the degree to which terms are similar
Obsolescence depreciation in value of the property due to becoming outdated
3 Elements of insurable risk 1. Financial (a monetary interest)2. Blood (a relative)3. Business (a business partner)
Accident An unexpected happening that may result in injury, loss, or damage.
Occurrence A loss that occurs at a specific time and place or over a period of time.
proximate cause of loss An unbroken chain of events leading from the negligent act to damage sustained.Ex: Building catches fire, due to the fire department putting out the flames the walls and floors have water damage. An incident creating another loss
Consequential Loss A loss not directly caused by a peril insured against but arising indirectly. Ex: Store catches fire, creating loss of income after fire
Actual Cash Value (ACV) The required amount to pay damages or for property loss, which is calculated based on the property’s current replacement value minus depreciation.
Replacement cost The cost to repair or replace property using new materials of like kind and quality with no deduction for depreciation.
Market Value the amount for which something can be sold on a given market prior to loss
Underwriting the process of selecting, classifying, and pricing applicants for insurance
Underwriter’s Function evaluating applications submitted to the insurer and determining the policy whether a policy should be issued and the terms conditions and rates for that policy
Loss Ratio a formula to show a quick analysis of the insurance company’s financial performance for a certain period.Formula:(incurred losses + loss adjusted expenses)/ Earned Premium
Class rating (manual rating) The practice of computing a price per unit of insurance that applies to all applicants possessing a given set of characteristics.
5 basic individual rate-making approaches 1. Judgment rating2. Schedule Rating3. Experience Rating4. Retrospective Rating5. 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 Rates are developed by applying a schedule of charges and credits to some base rate to determine the appropriate rate for an individual exposure.
Experience Rating The insured’s own past loss experience enters into the determination of the final premium.
Retrospective rating A self-rating plan under which the actual losses during the policy period determine the final premium (subject to a minimum and maximum premium).
Merit Rating base on not having an actual loss record but other factors that indicate the probability loss will occur. Ex: Bad driving record, but no at fault accidents
loss costs A rating method developed by ISO 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 trending to a future point in time
Components factors that determine rates, including loss reserves, loss adjusting expenses, operating expenses and profits
Waiver the voluntary relinquishment of a known legal right, claim or privilege
Estoppel is a legal process that can be used to prevent a party to a contract from re-asserting a right or privilege after or after that right or privilege has been waved.The legal consequence of waiver
Policy Structure 1. Declarations2. Definitions3. Insuring Agreement4. Additional Coverage5. Conditions6. Endorsements7. Exclusions and Policy Limits
Declarations Contains the basic information about the policy: names, legal reps, premise info, policy effective dates, limits, coverage, deductible, premium.
Definitions sections that describes the essence, precise meaning, or scope of a word or phrase
Insuring Agreement The section of an insurance policy containing the insurer’s promise to pay, the description of coverage provided and perils insured against.
Additional/Supplementary Coverage A provision in an insurance policy that provides an additional amount of coverage for specific loss expense, at no additional premium.
Conditions The section of an insurance policy that indicates the general rules or procedures that the insurer and insured agree to follow under the terms of the policy.
Examples of Conditions – Inspections- Changes to the policy- Liberalization clause- Return of premium
Exclusions Section of an insurance policy that lists property, perils, persons, or situations that are not covered under the policy.
Endorsements printed addendums to a contract that are used to change the policy’s original terms, conditions, or coverages. must be attached to the policy and signed by executive officer. It may be used to add or cancel parts of policy as well as correct mistakes/ typos.
Named Insured The individual(s) whose name appears on the policy’s declaration.
First Named Insured The individual whose name appears first on the policy’s declaration
Additionally Insured Individuals or businesses that are not named as insured on the declarations page, but are produced by the policy, usually in regard to a specific interest. Additionally insured are added though endorsements.
Policy Period The time period, stated on the declarations page, during which the policy provides coverage.
Policy Territory Defines the location where coverage will be provided.
cancellation The termination of an in-force insurance policy by either the insured or the insurer prior to the expiration date shown in the policy.
Non-Renewal The termination of a policy at the expiration of its term. The policy does not renew and no coverage is provided after the expiration date.
Deductible A dollar amount that the insured is responsible for paying when an insured peril occurs. The insurance company will pay for any amount over the deductible, up to the maximum amount of coverage.
Coinsurance a provision under which both the insured and the insurer share the covered losses.This encourages the insured to ensure the property closer to its full value
Coinsurance Penalty the amount of insurance carried over the amount of insurance should have had, multiplied by loss, which equals the reduced payment of loss. Example: for a $100K building insured at 80% coinsurance. the insured would carry at least $80K ($100K x.80) to meet the insurance requirement.Example 2: only carried $40K of insurance and had a 10K loss, they would bear 50% of the loss due to deficiency, or 5K and any deductible
Other Insurance a provision in an insurance policy that defines how the policy will respond if there is other valid insurance written on the same risk
Nonconcurrency A situation in which other insurance is written on the same risk, but not on the same coverage basis.
Primary Policy A policy that pays first in the event of a covered loss or, in a layered program of insurance, the policy that covers the first layer of loss.
Excess Policy A policy that only pays for loss after the primary policy has paid its limit.
Pro Rata A provision found in some property insurance policies that provides for the sharing of loss with other insurance that may be written on the same risk in the same proportion as their limits of insurance bear to the total of coverage of all policies covering the risk, whether collectible or not.
Limits of Liability The insurer’s liability for payment as stated in the policy
Per Occurrence (Accident) A sublimit in a liability policy that puts a ceiling on the payment for all claims that arise from a single accident/occurrence
Aggregate Limit The maximum amount an insurer will pay for all covered losses during the covered policy year.
Split Limits the limits of liability for different coverages. The limits my be stated per person, per occurrence, or per period basis. (many auto polices) Example: 25/50/2525k for single person50k for bodily injury to 2+ people25k for damaged property of others
Combined Single A single dollar limit of liability applying to the total of damages for bodily injury and property damage combined, resulting from one accident or occurrence.
vacancy refers to an insured structure in which no people have been living or working, and no property has been stored for the period of time required as stated in the policy (usually 60 days)
Unoccupied A property that has contents or furnishings in it, but is not being used or lived in.
Vacant vs Unoccupied if someone moves completely out it is considered vacant. if they go on vacation for two weeks it would be considered unoccupied.
Duties after a loss – Protect the damaged property from further damage – Prepare an inventory of damaged property- Cooperate with the insurer in settling the loss- Notify the police in case of a theft loss- Submit to the insurer a signed sworn proof of loss within an allotted amount of time after being requested to do so.
Assignment transfer if legal tight or interest in an insurance policy. only valid with the prior written consent of the insurance
Abandonment The relinquishing of insurance legal right or interest in an insurance policy. In property and casualty insurance, assignments of polices are valid
Insurer Provisions used in the event of loss to repair or replace damaged property with property of like kind and quality or to adjust the loss and make payment to the insured or a person legally entitled to receive payment within 60 days of receiving the insured’s proof of loss
Liberalization is a property insurance clause that extends broader legislated or regulated coverage to current policies as long as it does NOT result in a higher premium
Subrogation The insurer’s legal right to seek damages from third parties, after it has reimbursed the insured for the loss. based on the principle of immediately
Claim Settlement Options – the value of loss or damaged property – cost of repair or replacement- cost of taking all or part of the property at an agreed or appraised value- cost of repairing, rebuilding or replacing the property of like kind and quality
Duty to Defend Insurer’s duty to assume the expense of defending the insured in litigation and lawsuits.
Third-Party Provisions Address the rights of a third party that may have a secured financial interest in the insured property.
Standard Mortgage Clause (loss payable clause) “basic provision for all property policies for “”Real”” Property”
Loss Payable Clause the clause used to cover the interest of a secured lender in personal property
No Benefit to Bailee A provision that excludes any assignment or granting of any policy provision to any person or organization holding, storing, repairing, or moving insured property for a fee.
Tort a wrongful act or the violation of someone’s right that leads to legal liability
Intentional Tort any deliberate act that causes harm to another person
Unintentional tort The result of acting without proper care, generally referred to as negligence.
Elements of Negligence Act 1. Legal Duty2. Standard of care3. Unbroken chain of events4. actual loss or damage
Proximate Cause Legal cause; exists when the connection between an act and an injury is strong enough to justify imposing liability.
Intervening Cause bars or reduces recovery to an injured person if an intervening cause interrupted the chain of events and sets in motion a new chain of events.
Strict Liability an implied warranty that the product is safe. businesses are liable for defective products, regardless of fault or negligence.
Vicarious Liability when one person is liable for the torts of another(usually acts of children)
Personal Auto Policy (PAP) An insurance policy for the owners of private passenger vehicles. combines physcal damage insurance on the auto.
PAP Parts Part A- Liability CoveragePart B- Medical Payments CoveragePart C- Uninsured Motorist Coverage Part D- Coverage for Damage to your autoPart E- Duties after an Accident or Loss Part F- General Provisions
Coverage will be extended to newly required auto for replacement vehicles as follows – coverage will be broadest offered on the existing vehicles on dec page- if the vehicle is in addition to the listed vehicles the policy will grant coverage only if insured is notified within 14 days of becoming the owner
Auto Symbol 1 any auto – any auto covered for liability arising out of maintenance, use or ownership of
Auto symbol 2 owned only – owned by the insured
auto symbol 3 owned private passenger – only owned private passenger autos covered
Auto symbol 4 owned other than private passenger – only owned nonprivate passenger autos covered
Auto symbol 5 owned autos subject to no fault – select personal injury protection coverage, applies only to those owned vehicles subject to no fault laws
auto symbol 6 owned subject to compulsory uninsured motorist law – covers designed vehicles subject to a compulsory uninsured motorist law to ensure there will be some degree of protection for victim of uninsured motorist
auto symbol 7 specifically described auto – limits coverage to autos owned by the insured that are listed & described in the policy declaration
auto symbol 8 hired auto only – protection for vechiles hired, leased, rented or borrowed
auto symbol 9 non owned autos only – covers designed non owned vehicles used on the insured’s behalf in the course of the insured’s business
Policy limits expressed 25/50/25 mean what? 25k for bodily injury per person50k for all bodily injures25k for property damage
Dwelling Policy Policy that provides Property coverage to individuals and families. Covers dwellings, other structures, personal property, and fair rental value. Some versions also cover additional living expense. The unendorsed policy does not provide liability coverage.
DP-1 Basic Form Perils insured against are fire, lightning, and internal explosion.
DP-2 Broad Form This dwelling coverage form covers perils included under the DP-1 with ECE and optional VMM endorsement attached, plus: burglars; falling objects; weight of snow, ice, sleet; accidental discharge or overflow of water or steam; sudden and accidental tearing apart, cracking, burning or bulging of a steam or hot water heating system, or an air conditioning or automatic fire protective sprinkler system, or an appliance for heating water; freezing of a plumbing, heating, air conditioning, or automatic fire protective sprinkler system, or of a household appliance; and sudden and accidental damage from artificially generated electrical current.
DP-3 Special Form An all risk policy (on the structure coverage only), in which anything not excluded is covered. Contents (if covered) are still named peril, as in the DP-2. Includes all DP-1 and DP-2 coverage.
What can DP policies cover? – up to 5 boarders- up to 4 residential units- prop in construction- owner occuped, tenant ccuped or both-mobile homes (DP-1) -Seasonal Dwellings 3-12 months
WHARVES WindstormHailAircraft/vehiclesRiot/civil commotionVolcanic eruptionExplosionSmoke
BB BICE GOLF (broad) Bursting of heating systBurglary damageBreaking of water heatersIce, snow, or sleet weightCollapse of building/part of buildingElectrical damageGlass breakageObjects falling from outsideLeakage of water or steam damageFreezing of plumbing
Dwelling Coverage A The Dwelling itself and attached structures, materials and building equpment
Dwelling Coverage B Other Structures such as detached garages and other outbuildings (e.g. sheds & fences) or structures with used for business with defined parameters
Dwelling Coverage B NOT Included – Land where other structures are located – structures rented or held for rental- other structures that are used for business (commercial, manufacturing and farming) – Grave Markers
Dwelling coverage A NOT included Land, including land on which the dwelling described in the declarations is located
Dwelling Coverage C – personal property. located on described location – model or hobby aircraft including parts- motor vehicles but only if servings handicapped or the premise. -Rowboats/canoes- Blank storage media an pre packaged computer software- property moved to a newly acquired residence for 30 days
Dwelling Coverage C: Exclusions – Coins, currency, bills, deeds passports, manuscripts- Animals-aircraft flyable- watercraft (with motor) – motor vehicles – restoration of data- credit cards etc- water or steam- grave markers and mausoleums
Coverage D – Fair Rental Value available if a covered property loss to the dwelling or other structure makes the building uninhabitable and the insured cannot collect the rent he would have been able to receive if the loss had not occurred.
Dwelling Coverage E Additional Living Expenses on broad or special form. The policy is triggered only with direct damage claim (A,B,C) is covered by this policy.- repairs- payment for loss 2 weeks
DP Other coverages – Other structuresDebris removal – Improvements, alterations and additions- worldwide coverage- rental value +add live expenses- Reasonable repairs – property repairs- property removed
other coverages DP broad & special forms – Lawns, trees, shrubs, and plants $500 per or 5% of amount of coverage-Breakage if glass -Collapse
Ordinance or Law Broad and Specialty form polices allow up to 10 allow up to 10% of coverage A (orB if there is no coverage limit for A) if owned. Clean up of pollutants.
homeowners policy may be used for the following – 1 to 4 family owner-occupied residences – no more then 2 families or 2 roomers/boarder- various ownership types and building stages-construction, townhomes, and duplexes.
Homeowners Forms HO2- namedH0-3 open and named perilH0-4 named (renters) H0-5 Open peril, 1-4 unit owner occupiedHO-6 named peril, condosHo-8 Named peril (historic/elabrit home)
HO-2 (broad form) covers the dwelling, other structures, and personal property on a named perils basis
HO-3 (special form) covers the dwelling and other structures on a risk-of-direct-physical loss basis. All direct physical losses are covered except those losses specifically excluded. Personal property is covered on a named perils basis
HO-4 (contents broad form) covers a tenant’s personal property on a named perils basis
HO-5 Comprehensive Form “provides open perils coverage (“”all-risks coverage””) on the dwelling, other structures and personal property.lanlord furnishing uo to $2,500″
HO-6 Unit Owners Form (condo users) covers personal property on a named perils basis. A minimum of $5,000 of insurance is also provided on the condominium unit that covers improvements and additions
HO-6 Coverage A – Land, structures rented/private garage. – Business structures solely owned by insured or tenant and used to store business property
HO-6 COVERAGE C -Personal Property-guests property
HO-6 Coverage D (loss or use) – Additional living expenses – Fair rental value – Civil authority prohibits use
HO-8 Covered Perils -Theft coverage $1,000- Worldwide coverage, limited to 10% or $1,000- Debris Removal -Trees, plants and shrubs ($500 max each) – Property Guests or employees- Coverage A&B functional replacement cost basis- Glass or safety glazed materials limited to $100
Coverage C: Personal Property limits
Gravemarks pay up to $5,000
Coverage E: Personal Liability Insurance that protects an insured when a claim or suit for damages is brought because of bodily injury or property damage allegedly caused by an insured’s negligence. Base coverage is $100,000 per occurrence but can be hirer
Coverage F: Medical Payments to Others “Coverage F is “”good will”” coverage that pays the medical bills incurred by others in an accidnet, regardless of the fault or liability of the insured. The minimum limit of $1000. Coverage F will pay for the following as long as they are claimed within 3 years of the date of the accident, and the loss occurs to a guest, other individuals or residence employees: medical and surgical care; x-rays; dental services; ambulance, hospital and professional services; funeral services.”
Insured’s duties after a loss -give prompt written notice to insurer of facts relating to the claim.-notify police-protect the property from further damage- if examination under other within 60 days send a signed sworn proof of loss ect.
Earth Movement (earthquake) excluded in all polices but usually can be purchased separately.72 hours is considered a single incident
Home daycare coverage may be attached to the policy to cover the liability exposer associated with the busniess.
Identity Fraud Expense Coverage Provides for reimbursement of expenses incurred as a result of identity theft or fraud. Covered expenses up to the $15,000 limit, including reasonable attorney fees to defend suits.
Scheduled Personal Property endorsement – provides broader coverage for personal jewelry, furs, cameras, musical instruments, silverware, fine arts, golf equipment, and stamp/coin collections. must be insured on full value basis.25% of the amount or $10,000
Commercial property form structure 1. general liability2. commercial property3. inland marine4. commercial auto5. equipment breakdown6. crime7. farm
Examination of books and records The insurer is granted the right to audit books and records of the insured relating to the policy for a period of up to 3 years (36 months) after the end of the policy
Inspections and Surveys insurer’s right, but not duty, to inspect the insured operations during the policy period; insurer may give insured the report and recommendations but is not required to do so. cannot warrant that conditions are safe and comply with laws, codes etc.
Interline Endorsement A written amendment designed to eliminate redundancy and minimize the number of endorsements in the policy.
Debris Removal pays for the expense of removing debris resulting from a loss that is covered by the policy (must be within 180 days of loss)
Pollutant Cleanup and Removal covers the costs to extract pollutants from land or water at the insured’s premises if the pollution was caused by a covered cause of loss. This coverage is subject to a $10,000 limit per policy period that applies in addition to the policy limit. The expenses must be reported to the insurer in writing within 180 days of the loss.
Increased Cost of Construction This additional coverage covers the additional costs required to a comply with building codes when a building is damaged by a covered cause of loss. It is only available for buildings on a replacement cost basis and maximum amount payable is 5% of the building or $10,000.
electronic data pays up tp $2,500 per year for data losses. Can be increased.
Newly Acquired or Constructed Property This coverage extension applies to Coverage A and Coverage B. It provides up to $250,000 for each new building for up to 30 days. It also provides for Coverage B Business Personal Property up to 30 days located at newly acquired or constructed buildings up to $100,000.
Property Off Premises Up to $10,000 for Property that is away from its described location temporarily.
Outdoor Property “outdoor fences, radio and television antennas, signs which are not attached to buildings, and trees, shrubs and plants (other than “”stock”” held for sale).. The most the insurance company will pay for loss under this extension is $1,000, and not more than $250 for any one tree, shrub or plant.”
nonowned detached trailers This coverage extension covers up to $5,000 (unless higher limit shown in declarations) for when a nonowned trailer is left with the insured to unload.
Business Personal Property Moveable property used for business within 100 feet of premises max coverage is 10k
Agreed Value the accepted value of a non-cash asset at the time of its contribution by the owner
Inflation Guard a coverage extension that automatically increases amounts of insurance on buildings by an agreed upon percentage annually
Builders Risk Coverage Form A form that covers buildings in the course of construction, including additions or alterations to existing buildings.
Period of Restoration Begins 72 hours after the direct physical loss for business income. It begins immediately for extra expense coverage.
business income agreed value financial data for the previous 12 months
Spoilage Endorsement Adds coverage for the insured’s perishable stock
Peak Season Endorsement Endorsement that covers the fluctuating values of business personal property by providing differing amounts of insurance for certain time periods during the policy period.
Value Reporting Form A commercial property form that bases the insured’s premium for business personal property on the values that the insured reports to the insurer periodically during the policy period.
Contractors Equipment Floater A policy that covers mobile equipment or tools while located anywhere in the coverage territory.
Signs Coverage Form covers neon, mechanical, and electrical signs fir $2,500
Equipment breakdown insurance covers losses due to the accidental breakdown of covered equipment
Farm Coverage Part of the Commercial Package Policy that provides Property and Liability insurance to farmers for both their personal and business exposures like livestock
Farm – coverages (A-J) A – private dwellingsB – private other structuresC – household personal propertyD – loss of useE – scheduled farm propertyF – unscheduled farm propertyG – barns/silos/outbuildingsH – BI/PD liabilityI – personal/advertising injuryJ – medical payments
Express Authority the authority of an agent, stated in the document or agreement creating the agency
Apparent Authority The appearance or the assumption of authority based on the actions, words, or deeds of the principal or because of circumstances the principal created.
Implied Authority 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.
how many days to share a customer report? 3 days
commercial policy cancelation written notice (no time limit)
Methods of Handling Risk AvoidanceRetentionSharingReductionTransfer
Avoidance eliminating or avoiding the risk by discontinuing the activity
Rentention A method of dealing with risk by intentionally or unintentionally keeping a portion of it for the insured’s account; the amount of responsibility assumed but not reinsured by the insurance company.
Sharing A method of dealing with risk for a group of individual persons or businesses with the same or similar exposure to loss who share the losses that occur within that group.
reduction reducing the amount of exposer to risk
Avoidance the act of evading something to reduce risk
Failure to issue proper receipts producers must provide proper receipts for premiums paid. It is a violation of the law. (conditional receipts, etc.)
Policy Delivery delivered by: 1)certified or registered mail 2) personally delivered by the agent3) 1st class mail with a signed receipt 4) by any other means approved by commissioner
Homeowners cancellation The effective date of cancellation cannot be before the 10th day after the insurer mails notice if the insurer cancels for non-payment of premium; or the 30th day after the insurer mails notice if the insurer cancels for any other reason.
Cancelation/Nonrenewal (auto) 10 days notice for nonpayment20 days for any other reason (auto)
Commercial Property Insurance covers property losses resulting from fire, storms, accidents, theft, and vandalism
Personal Lines Insurance Property and casualty insurance for an individual. Policies include Property and Casualty coverages.
Fair Access to Insurance Requirements (FAIR) plans States created these plans to make essential property insurance available to consumers in areas where coverage had become unavailable or hard to obtain due to conditions that are beyond the control of property owners
Total Loss A loss that exists when the cost to repair a damaged vehicle (or other property) equals or exceeds the value of said property
Underinsured and Uninsured Motorist coverage that helps an insured with bodily injury when another motorist has insufficient coverage. Coverage will pay the difference between the UIM and the at fault drives bodily injury limits
Stacking (auto insurance) The ability to combine the limits of two or more applicable auto insurance policies for a single incident. If there is more than one auto policy in force at the time of loss, stacking those policies’ limits may be possible in some circumstances
Covered Auto any vehicle shown in the declarations; newly acquired auto; trailer the insured owns;any auto/trailer not owned by insured while being used as a temporary substitute for any other vehicle which is out of normal use because of: breakdown, repair, servicing, loss, or destruction
financial responsibility A driver’s (or car owner’s) ability to payfor damage caused by an accident when he or she is at fault. It is usuallyin the form of liability insurance.
Proof of Financial Responsibility is an individuals ability to cover liability arising out of the ownership, maintenance, or use of a motor vehicle
Methods of satisfying financial responsibility Split limits: 25/50/25or combined single: One lump sum to cover bodily injury and property damage.
Personal Injury Protection (PIP) coverage for medical, hospital, and funeral costs of the insured and passengers in the event of an auto accident (Endorcment Auto symbol 5)
Risk uncertainty concerning the occurrence of a loss
Hazard A condition that increases the frequency or severity of a loss.
Peril causes of loss insured against in an insurance policy
Loss The reduction, decrease, or disappearance of value of the person or property insured in a policy, by a peril insured against.
Mutual Insurance Company A type of insurance company owned by its policyholders. Can share dividends
Stock Insurance Company An incorporated insurance company with capital divided into shares and owned by the shareholders. Profits are shared by the stockholders. Policyholders are NOT entitled to share in company profits.
Admitted Insurer An insurer to which a state insurance department has granted a license to do business within that state.
Non-admitted Insurer an insurer that is not licensed to business in a particular state. (a surplus lines broker works with non-admitted carriers)
Foreign Insurer An insurer licensed to operate in a state but incorporated in another state. (ex Gooshead is out of texas and works in Washington)
Domestic Insurer An insurer doing business in the jurisdiction in which it is incorporated. (insurers in Washington and office as well)
Alien Insurer An insurance company that is incorporated outside the United States and does business within.
Elements of a Contract offer, acceptance, consideration
Consideration something of value exchanged for something else of value
Competent Parties Those entering into the contract must be of legal age and must be mentally competent and not under the influence of explicit drugs
Legal Purpose In contract law, the requirement that the object of, or reason for, the contract must be legal.
offer A promise or commitment to perform or refrain from performing some specified act in the future.
The law of agency The law that governs the relationship between a principal and his or her agent.
Acceptance when underwriting approves the application and approves a policy
Reasonable Expectations A concept which states that the insured is entitled to coverage under a policy that a sensible and prudent person would expect it to provide. Reinforces the rule that ambiguities in insurance contracts should be interpreted in favor of the policyholder.
indemnity reimbursement; the principle of insurance to take you back to the state prior to the loss.
Utmost Good Faith The fair and equal bargaining by both parties in forming the contract, where the applicant must make full disclosure of risk to the company, and the insurance company must be fair in underwriting the risk.
Fraud intentional misrepresentation of an existing, important fact. Grounds for termination of insurer or the insurance contract.
Warranties absolutely true statement upon which the validity of the insurance policy depends
Representations are statements believed to be true to the best of ones knowledge, but are not guaranteed to be true.
Material Misrepresentation – a false statement that changes the outcome of issuing a policy – generally with the health statement- if found to be intentional is considered fraud
Concealment or Fraud Specifies that the policy may be voided if there is material concealment, misrepresentation, or fraud on the part of the insured.
Compensatory vs Punitive Damages Compensatory: are intended to compensatePunitive: are intended to punish
General vs Special Damages General – compensate for pain suffering, mental anguish, or disfigurementSpecial – out of pocket expenses for medical, mischances expenses, or for loss of wages
Moral Hazard When the act of insuring an event increases the likelihood that the event will happen
Morale Hazard A condition of carelessness or indifference that increases the frequency or severity of loss.
Named Peril A specific cause of loss listed and described in an insurance policy. Also used to describe policies containing named perils.
Special Peril/Open Peril (All Risk) cover all perils except for those that are specifically excluded. If it doesn’t state it’s not covered then it is covered. **
Valued Policy Provides for payment of the full policy amount in the event of a total loss without regard to actual value or depreciation (used primarily in marine coverage)
Specific Insurance A property insurance policy that covers a specific kind or unit of property for a specific amount of insurance.
Scheduled insurance is an insurance policy that lists specific items that will be covered by the insurer. Scheduled property is often included as a supplement to a primary insurance policy.
Blanket Insurance A single property insurance policy that provides coverage for multiple classes of property at one location, or provides coverage for one or more classes of property at multiple locations.
Joint Ownership Coverage (personal auto) endorsement used when individuals own a vehicle together but do not meet the traditional def. Applies to people living together who reside in the household but are nonresident relatives. Limited to that vehicle
Mobile Equipment Various types of vehicles designed for use principally off public roads, such as bulldozers and cranes.
Commercial Package Policy (CPP) A policy that covers two or more lines of business by combining ISO’s commercial lines coverage parts.
Commercial Package Policy Coverages 1. commercial general liability 2. commercial property 3. inland marine 4. commercial auto5. equipment breakdown6. crime7. farm
Commercial General Liability Section I – Coverages Coverage A – Bodily Injury and Property Damage liability Coverage B – Personal and Advertising Injury Coverage C – Medical ExpenseSection II – Who is an InsuredSection III – Limits of InsuranceSection IV – ConditionsSection V – Definitions
Business income and extra expenses provides coverage for expenses incurred as a result of extortion threat or ecommerce incident
Spoilage Endorsement Endorsement used with the Building and Personal Property and Condominium Commercial Unit-Owners Commercial Property coverage forms. It adds coverage for the insured’s perishable stock – personal property that must be maintained under controlled conditions to protect it from loss or damage.
Retroactive date endorsement Limits coverage under the discovery form version by providing a cutoff date for losses that occurred before the policy inception.
Business Owners Policy (BOP) Package policy designed to provide broad property and liability coverage for small businesses.
BOP Coverages Buildings, business property or both.
BOP Exclusions 1. money and securities2. aircraft and vehicles 3. watercraft while afloat 4. accounts, bills, and other evidence debts5. computers installed in any aircraft, watercraft, or vehicle 6. contraband or property in course of illegal trade/transport7. land, water, crops, or lawns 8. outdoor fences, radio, and television antennas, satellite dishes, detached signs, trees, plants and shrubs9. electronic data, except as covered under the electronic additional coverage and pre packaged software10. Animals (unless owned by others and boarded with the insured)
Commercial Crime Insurance Insurance that covers (1) money and securities against numerous perils (not limited to crime perils) and (2) property other than money and securities against crime perils, such as employee theft, robbery, theft by outsiders, and extortion.
Commercial Crime Form Classifications (two types) 1. Discovery Form2. Loss Sustained Form
Discovery Form Form that covers losses discovered during the policy period even though they may have occurred before the policy period.
Loss Sustained Form Form that covers losses actually sustained during the policy period and discovered no later than one year after policy expiration.
Commercial Crime (Employee Dishonesty) (ISO) Coverage Aalso known as Fidelity, is defined as the loss of company money, securities, and other property caused by employee theft, burglary, or robbery
Directors and Officers Liability Applies to officers/directors of corporations or non-profits if there is a suit claiming they managed the business w/o proper regard for the rights of others.Coverage is activated by wrongful acts rather than an accident or occurrence(can be in past or present). Such as misstatements from directors & officers, as well as neglect and breach of dutydoes not pay fines, penalties or punitive damages
Internet Liability and Network Protection Policy Provides liability coverage on a claims-made basis for risks that are specific to business use of the internet, such as network security, electronic publishing liability, and loss of data.five agreements:1. website publishing liability (publishing copyright etc.)2. Network security liability (computer breaches)3. Replacement or restoration of electronic data4. cyber extortion 5. business income and extra expense (e-commerce or extortion)
Personal & Commercial Umbrella 1,000,000 minimum in excess coverage (SIR)
Define: Surety A written promise or BOND by a person or entity who guarantees the performance of an obligation of another party. It can protect an owner’s interests by ensuring that the contractor fulfills the requirements of the contract documents.
According to the state regulations pertaining to claim settlements, after receiving a notification of claim from an individual policyholder, the insured must acknowledge the notice within how many days? 10 working days (business days)
An insured has a personal auto policy with both comprehensive (other-than-collision) and collision coverage. His car is stolen and recovered five days later. If the insured claims transportation expenses of $20 per day, how much will his policy pay?a)$45b)$60c)$75d)$100 The policy will pay $20 per day after 48 hours, not to exceed 30 days in total. b)$60.The policy will pay $20 per day after 48 hours, not to exceed 30 days in total.
TermText TermText 2
Assignment The transfer of a policy to another party. Often done when commercial property is sold to a new owner.
Building & Personal Property (BPP) The commercial property policy for larger businesses.
Business Income Policy A commercial policy covering the indirect loss of income following a loss.
Cancellation Termination of a policy during the policy period.
Casualty Insurance A broad term which includes all of the policy types that may be sold with a Casualty License – in most states this includes auto, liability, work comp, commercial crime, and surety bonds.
Claims Made Form A policy that pays according to the coverage in effect in the year the claim is made rather than according to the coverage in effect at the time of the loss. Professional Liability policies are usually written on a Claims Made basis, while other Liability Policies are written on an Occurrence Basis.
Coinsurance Clause The policy provision which sates that if the Insured has less than a specified amount of coverage (usually 80%), the Insurer will not fully cover a partial loss.
Commercial Package Policy (CPP) A bundling of commercial policies
Competent Party A person who is capable of entering into an insurance contract. Such a person must be sane, sober, and of age of majority (age 15 in most states).
Employers Liability The section of a Work Comp policy covering the employer for claims made by the injured worker’s family members.
Fair Credit Reporting Act What an item would sell for in the marketplace.
Fidelity Bond A contract sold by a Surety Producer to cover employee theft.
Gramm-Leach-Bliley Act A federal law which protects consumer privacy and which encourages the states to adopt uniform licensing standards.
Hazzard Any factor that increases the likelihood that a peril will occur.
Twisting Is the illegal and means that no person can, by misrepresentations or misleading comparisons, induce, or tend to induce any insured to lapse, terminate, forfeit, surrender, retain or convert any insurance policy.
Law of Large Numbers The maximum the policy will pay for any one loss – this amount will be stated on the Declarations.
Medical Payments “A liability insurance term which refers to payment for a victim’s medical bills without regard to fault. The policy will have a specified Limit of Liability for “”med pay.”” Medical payments are never made to the Insured.”
Morale Hazzard An Insured’s carelessness or indifference which will make a loss more likely to occur.
Moral Hazzard Refer to the fact that we all act differently when we have insurance. We are simply less likely to prevent a loss if we know that the Insurer will pay the claim. Moral Hazzard may also refer to a thief or arsonist who intentionally causes a loss.
Mutual Insurer An insurance company owned by the policy holders.
Inherent Vice A loss caused by natural deterioration. Insurers will not pay claims for inherent vice.
Extra Expense Policy Commercial property coverage to pay for the extra cost of continuing a business after a loss.
Business Income Policy A commercial policy covering the indirect loss of income following a loss.
Comprehension Coverage “Physical damage insurance that covers all property losses except collision. Also known as “”Other than Collision.”””
Concealment Intentionally hiding the truth or intentionally telling only a partial truth.
Conditions Section The part of the policy containing the details of the policy, including the duties of the Insured.
Consent to Settle Provision The provision in an E&O policy or Employment Practices Liability Policy requiring the Insured’s consent prior to any claim settlement.
Consideration Something of value given by each party in a contract.
Declarations “The “”Dec Sheet”” is the first page of the policy and includes the “”fill-in-the blanks”” information obtained by the Producer, including the names of the parties, the description of the covered property, the policy’s limit of liability, the duration of the policy, the amount of the premium, and the amount of the deductible.”
Deductible The amount of loss that the insured must pay before the policy will begin to pay.
Direct Loss Damage to property from a covered peril. Property policies typically cover Direct Losses and exclude Indirect Losses.
Stock Insurer An insurer owned by investors, as opposed to a mutual insurer which is owned by the policy holders.
Uninsured Motor Vehicle A vehicle driven by one who has the state required amount of liability insurance but who does not have adequate insurance, or who is a hit and run driver.
Unilateral Contract A contract which contains only one promise. Insurance policies are unilateral because they contain the Insurer’s promise to pay a claim but do not contain a promise by the Insured to pay future premiums.
Underwriting The process of selecting and classifying risks.
Underinsured Motor Vehicle A vehicle driven by one who has the state required amount of liability insurance but who does have adequate insurance to cover a liability claim.
Strict Liability A legal concept holding manufacturers, distributors, and retailers of products liable for products which are defective and unreasonably dangerous.
Supplemental Payments The part of a liability policy which pays for the Insured’s defense costs.
Vicarious Liability Liability for the wrongs of another. For example, an employer is vicariously liable for the negligent acts of on=the-job employees.
Theft A broad form referring to any unauthorized taking of property. It includes robbery, burglary, shoplifting.
Subrogation The Insured’s transfer to the Insurer of any claim against a third party. When a property or liability Insurer pays a claim, the Insurer may then sue any responsible third party under the concept of subrogation.
Terrorist Risk Insurance Act (TRIA) A federal law requiring Insurers to offer property and liability coverage for acts of foreign terrorism .
Other Than Collision (OTC) An auto insurance term which refers to coverage for the insured auto against all perils except Collision.
Peak Season Variable The BOP’s additional 25% coverage for personal property – designed to eliminate the need to send in a monthly reporting form.
Penal Sum The limit of liability under a surety bond.
Personal Injury Protection (PIP) A term used to refer to-fault auto insurance legislation in several states. This term isn’t in the text because it isn’t used in most states.
Other Insurance Clause “The “”cheapskate”” provision which states that if the Insured has more than one policy, the policies will share in the loss (usually on a prorated basis). This concept applies to property, casualty, and health insurance but does not apply to life insurance.”
Section II Personal Liability of the Homeowners Policy.
Section I Covers the Insured’s own property losses.
Principal In a fidelity bond, the Principal is the person whose performance is being guaranteed (typically a contractor).
Reporting Form An addition to a commercial property policy which increases or decreases personal property coverage limits as inventory values changes.
Representation Statements that the applicant believes to be true to the best of the applicant’s knowledge and belief. Statements made on the application and proof of loss form are presumed to be representations.
Robbery The taking of property by violence or threat of violence.
Risk The chance of a loss occurring.
Scheduled Policy A property policy covering only the listed items, such as a Scheduled Personal Property Floater.
Second Injury Fund A state fund encouraging employers to hire workers previously injured in work-related accidents.
Service Fee Or Direct premium The premium paid for a surety bond.
Pure Risk The chance of loss that does not involve any possibility of a gain (Such as a fire). Property policies cover Pure Risk but do not cover Speculative Risk where there is the possibility of a gain.
Peril The cause of a loss – if the peril isn’t covered by the policy, the Insure won’t pay the claim.
Speculative Risk “If an activity (such as gambling or starting a new business) may result in either a gain or a loss, the insurance industry won’t provide coverage of such a “”speculative”” risk.”
Standard Mortgage Provision A property insurance provision protecting the mortgagee.
Occurrence A property insurance concept describing slow, gradual, repeated events which cause a loss. Insurers usually try to exclude occurrences from the policy’s coverage.
Indemnity Agreement The provision in a surety bond requiring the Principal to indemnify the Surety of any loss.
Hostile Fire A fire which was not intended to cause the resulting damage. Property insurance policies cover hostile fires but will not cover friendly fires.
Friendly fire A fire which is not covered by a property policy because the fire was intentionally started and is burning where it was intended (such as a candle on the dining room table).
Insuring Agreement Section The portion of the property or casualty insurance policy which describes the perils insured against.
First Named Insured The person listed first on the Declarations as an Insured – this person usually has the total control over policy decisions.
Fraud A broad term used to refer to an Insured’s misrepresentation or concealment.
Named Peril Policy A Basic or Broad form policy which covers only the listed perils (as opposed to an All Risk policy which covers all perils except the exclusions).
Equipment Breakdown the new name for the Boiler Policy.
Endorsement An addition which changes the original policy (also known as a Rider or Extension).
Expediting Expenses A boiler’s policy’s coverage for the expense of temporary repairs.
Burglary The illegal taking of property from a locked building after business hours.
Binder An agreement by a Producer to provided temporary property or liability coverage, usually while waiting for the customer to complete an application form.
Basic Form Property insurance that insures against a list of 11 perils.
Adverse Selection The Insureds who are most likely to file claims are the ones most likely to purchase insurance.
Adhesion “A contract law concept which refers to the fact that some contracts are “”Take it or Leave it”” contracts that give the consumer virtually no power to negotiate terms. The result is that any ambiguity in a contract of adhesion will be interpreted in favor of the consumer.”
Agreed Value The value of insured property is agreed to in advance by the Insurer and the Insured – often done with fine art and antiques.
Title 48 Is the Washington Insurance Doe that pertains to insurance. Title 48 is to protect the public.
The Insurance Commissioner Is elected by the people of Washington and is an elected position. The term is for 4 years and must post a $25,000 bond. Powers to issue orders and make rule but he cannot enact laws.
Misdemeanor The violation of insurance law.
The Insurance Commissioner Can revoke an insurance company’s license for failure to make books records available. He / she does not set rates & does not write policy forms.
Larceny of Embezzlement To misuse a client’s money
Domestic Insurer has their home office in the state of Washington
Certificate of Authority An insurer with a Certificate of Authority is considered authorized to do business in this state, it is not approved. They may be renewed every July 1st.
Unauthorized Insurer If an insurer should be licensed but is not.
The Guaranty Association May not be used in advertisements.
Insurance Contract Between 2 people: the insurer and the insured (the policyowner).
Insurer In the business of selling insurance contracts.
Fraternal Benefit Society A nonprofit organization that does not issue stock, is only available to its members, operates a lodge system, has a representative form of government, and provides for the payment of insurance benefits. A fraternal is not considered and insurer.
Stock Insurer is owned by its stockholders. And will never pay dividends to its policyowners.
Mutual Insurer Is owned by its policyholders. And may pay dividends to its policyowners (participating policy).
Dividends May never be guaranteed. Dividends paid by mutual insurers are viewed as a return of premium and are not taxable to the recipient. They may be projected on a participating policy.
Producer “You must be a minimum age of 18. May lose his / her license if found guilty of “”twisting.”” A producer is required to file his / her CE hrs when the license renews.”
Twisting Is prohibited. No persons shall by misrepresentations or by misleading comparisons, induce to tend to induce any insured to lapse terminate, forfeit, retain, or convert any insurance policy.
Misrepresentation Is to make, issue, circulate or cause to be made, issued or circulated any misrepresentation of the terms of any policy or the benefits or advantages promised thereby, or the dividends or share of surplus to be received thereon, or use any name or title of an policy or class of policies misrepresenting the nature thereof.
Gross Misdemeanor A person who knowingly makes a false or misleading statement or impersonation, or who will willfully fails to reveal a material fact, in or relative to an application for insurance to an insurer, is guilty of a gross misdemeanor, and the license may be revoked.
Unfair Discrimination it is not allowed for an insurer to refuse to issue any contract of insurance or cancel or decline to renew such contract because of the physical handicap of the insured or prospective insured. Fair Discrimination is allowed.
Fair Discrimination State law does not prohibit fair discrimination on the basis of sex, or marital status, or the presence of any sensory, mental, or physical handicap when bona fide statistical difference in risk or exposure have been sustained.
Illegal Inducement it is considered an Illegal inducement for a producer to give a client any goods worth more than $25.00 an inducement to a sale.
Mutual insurers “May apportion their dividends based upon their “”divisible”” surplus.”
Rebating Giving illegal inducements to a sale.
Temporary License may be issued, without exam, to the surviving spouse of a producer who died. The Commissioner may issue a temporary license for a term of 180 days.
Premium Receipts Must include the name of the insurer, the name of the person for whom payment is made, the name of the producer and the generic name of the policy. When ever a producer receives a premium from an inured or applicant, they must deliver or email a receipt as soon as possible.
The Washington Insurance Guaranty Association Protects the customers of insolvent (bankrupt) property/casualty, life & Disability insurance companies. It does not cover claims against fraternal benefit societies, HMO’s, health care service contractors, non-bulk reinsurance, a group annuity contract issued to an employee benefit plan protected under the federal Pension Benefit Guaranty Corporation, or a government lottery.
Guaranty Association All authorized insurers must become members of the Guaranty Association as a condition of their Certificate of Authority.
Defamation A producer to state or publish information that is false or maliciously critical which is designed to injure the reputation of an insurer or raise questions about the character of another producer.
Transacting Insurance “Discussing policy coverages is considered to be “”transacting”” insurance, which requires a producer’s license.”
CE Requirement Requirement is per person, not per license. Wa producers must earn 24 hrs of continuing ed every 2 years, 3 of which must be related to ethics. Producers must keep their CE completion certificates available for the inspection by the Commissioner for 3 years.
Producer Appointments Insurers must renew producer appointments every 2 years.
Class B Felony A person who knowingly sells, solicits, or negotiates insurance for a line of authority in which he/she is not currently licensed. And can be fined up to $25,000 for each violation.
License Suspension The maximum license suspension is 12 months. Producers may not solicit, negotiate or sell insurance on a suspended license. A Commissioner may give 3 days notice an emergency action is required to protect the public. In all other situations, notice must be given at least 15 days prior to revocation of a license.
Illegal Inducement “Sharing part of your commission with a customer as an inducement to the sale is an unfair marketing practice. And may also be called “”Rebating.”””
Fiduciaries “Insurance producers are considered to be “”fiduciaries””, who must handle premiums in an honest and trustworthy manner.”
Illegal Dealings in Premiums Over charging a customer and depositing the overcharge in your personal account is an unfair marketing practice.
Public Adjuster represents the insured, not the insurer.
Independent Adjuster Represents the insurer, not the insured.
Appointed Producers may represent only the insurers who appoint them.
Unfair Trade Practice A producer who offers prizes, goods or merchandise with a total value over $25 as an inducement to the purchase of insurance.
Surplus Lines Insurers are not required to have a Certificate of Authority. Premiums taxes are due annually by March 1st.
Surplus Lines Insurers Write Insurance that authorized insurers won’t accept, generally due to the risk involved.
Surplus Lines Broker A Licensed surplus lines broker may accept and place surplus lines business from any producer licensed in this state for the kind of insurance involved, and may compensate producers for the business placed.
Declaration Name of Insurer, name of insured, Description, Time period, Amount of Premium, Amount of deductible.
Alleatory Can collect more or less than we paid
Occurence Amount per accident
Aggregate Amount of ALL accidents
Coverage Territory US, Cananda & Puerto Rico
Farm Property Coverage A Dwellings
Farm Property Coverage B Private Structures
Farm Property Coverage C Household Personal Property
Farm Property Coverage D Loss of Use
Farm Property Coverage E Scheduled Personal Farm (Livestock/ Machine)
Farm Property Coverage F Unscheduled Personal Farm (Tools/water)
Farm Property Coverage G Barns & other Buildings
Farm Property Coverage H Bodily Injury & property damage
Farm Property Coverage I Personal & Advertising
Farm Property Coverage J Medical Payments
Personal Auto Policy + Liabilty Covers ONLY Bodily Injury
Single Limit Better Coverage than split
Medical Payments Covered Insured + Passengers ONLY
Dwellings Property (DP 1) Basic + Basic
Dwellings Property (DP 2) Broad + Broad
Dwellings Property (DP 3) Special + Broad
Dwellings A House
Dwellings B Detached Structure
Dwellings C Personal Property
Factories, restaurants, Beauty Parlors DO NOT NEED INSURANCE
Dwelling E (Homeowners Only) Personal Liability
Dwelling F (Homeowners Only) Medical payments
Coinsurance Can be: 50%, 70%, 80%, or 90%
Stock Company Owned by Stockholders/ Nonparticipating
Mutual Company Owned by Policyholders/ Participating
Termination by Insurer Written Notice needed
Termination by Insured No notice needed
Cancellation by Insurer Requires 10 days Notice prior to Cancellation
Cancellation by Insured Requires written notice
Risk Avoidance Staying away from Risk
Risk Reduction Actions taken to Reduce Rick
Risk Shifting Waiver of liability
Risk Retention Self-insuring
Risk Transfer of Insurance
Speculative Risk Loss with GAIN
Pure Risk Chance of loss with no gain
NAIC Advises state insurance companies
Insurance Regulation Done by state Legislator
Fines Go to General Fund & State Treasure
Reciprocal Cooperative Company
Broker Represents Insured
Fiduciary Duty Duty of Faithful Representation
Express Authority “Authority expressed orally or in writing by the Insurer to the Agent, usually through the Agent’s employment agreement. Example: the Principal says to the agent, “”You may adjust claims only up to $5,000.00″””
Implied Authority the automatic incidental authority necessary to complete routine assigned tasks. This is implied by the Principal’s conduct toward the agent.
Alien Insurer One formed under the laws of another nation
Foreign Insurer One formed under the laws of the United States or District of Columbia
Domestic Insurer One found under the laws of this state
Mutual Insurer Owned by its members who hold insurance policies. And the (policy holders) elect its board of directors. They may only pay dividends out of suprlus funds. And they cannot make the payments of dividends contingent upon the renewal of policy.
Fraternal Insurer Is an insurer that doesn’t sell stock to investors and is operated on a non-profit lodge system witha ritualistic form of work, having a representative form of government, and thaht provides insurance for its members.
An applicant for a Producer’s lincense May be denied a license due to ethical issues, such as felonies, must complete a prelicensing course and pass the exam, must be 18 yrs old, complete a license application at the Commissioner’s website, submit the score report from testing and get fingerprinted.
Every Producer must pass the licensing examination Except A business entity and a Producer licensed in another state who moves to Washington and requests licensure within 90 days.
Temporary Producer License The Commissioner may issue a licnese up to 180 days without passing an examination to the surviving spouse or court appointed personal representative of a producer who dies, is mentally or physically disabled, to a member or employee upon death and to the designee of a licensed Producer entering active military service.
Rebating Is illegal for a Producer to offer applications illegal inducements or rebates to purchase insurance such as shares of stock, a position on an advisory board, promise of special dividends, goods or merchandise in ecess of $100.00 in value. It is also illegll for the Insured to receive a rebate or illegal inducement from an Insurer or Producer. Also referring to an illegal inducement.
Statue of Limitations Expiration The Insurer must warn the claimant 30 days prior to the expiration of any statute of limitations applicable to the filing of a lawsuit.
Completion of Claim Investigations Insurers must normally complete claims invesetigations within 30 days.
Fair Payment of Claims The Insurer must fully disclose all policy coverages and benefits. An Insurer cannot issue a claim check in partial settlement of a claim if the language of the check releases the Insurer from other liability.
Premimum Receipts A Producer who receives a premium on behalf of an Insured or applicant for homeowners’, dwelling fire, private passenger automoibile, motorcycle, msut deliver or mail a signed receipt as PROMPTLY as possible, which should generally be no later than 1 BUSINESS DAY. It must be dated, signed, indentify the Producer, and the Producer’s address, Whom the payment is made by, sate the amount received, identify the Insurer by full legal name, identify the policy and include a brienf discription of the coverage.
Separate Account “When a Producer receives a premium payment made papyable to the Insurer, the Producer may forward the instrument directly to the Insurer, if it can be done without endorsement or alteration. The funds must be accounted for and maintained in a “”premium trust account”” separate from all other business and personal funds. All premiums such as return premiums received by a Producer; and premiums; or premium taxes received by a Surplus Lines Brokers.”
Insurer / Cancellation / Nonrenewal 5 days notice to a Producerwhenever the Insurer provides the insured with an offer to renew, or a notice of cancellation or nonrenewal, the Insurer must provide a paper or electronic copy to the Producer within 5 working days.
Insurer Cancellation of Private Auto Insurance – Special Rules An Insurer may cancel a private auto policy by fiving written notice, 10 days in advance if the reason is for nonpayment of premium, 10 days in advance if the policy has been in effect less than 30 days, 20 days advanace notice if the cancellation is for any other reason.
P&C Cancellation / Nonrenewal – General Rules May be effected only if the Insurer delivers or mails advance written not, including actual reasons describing the significant risk factors. 10 days notice for nonpayment of premium, a private auto policy is 20 day’s notice, or for medical malpractice policy which is 90 days notice.
Homesowner Coverage and Day Care Facilities It is an unfair practice for an Insurer to use the operation of a day care facility to deny a homeowner insurance policy or; to cancel or nonrenew a homeowner insurance policy. An insurer may, however, exclude property or liability losses arising out of the Insured’s business pursuits.
Binder Contentes Must be dated, identify the Insurer; briefly describe the coverage bonds, state the date and time of coverage is effective; and acknowledge receipt of any premiums. The applicant must be mailed a copy of the application promptly following its execution; its execution no later than the next business day. It must be replaced with an insurance policy within 90 days, unless the Commissioner grants written approval for an extension.
Guaranty Assoication is to provide a mechanism for the payment of covered claims in the event of the insolvency of an Insurer. It is funded by up to 2% premium assessment against the remaining solvent insurance companies.
Illegal Whispering “It is illegal to advertise or “”place before the public,”” or disseminate, state or annouce the existence of teh Guaranty Association for the purpose of soliciting, selling or inducing the purchase of insurance.”
Guaranty Association Coverage Covers property, casualty, and long shore and harbor workers’ compensation claims but does not cover life insur, disability insur, Worker’s Compensation because Wa is a monopolistic state; title insur, surety bonds; credit insur or mortgage guaranty insur.
Guaranty Association Payment limits It will pay only that portion of a claim that exceeds $100,000 but is less than $300,000
Licnesed Adjusters “Does not include a Salaried adjuster working for an Insurer; a lawyer or marine adjuster (not licensed), or a independent adjuster who represent the Insurer or “”Public Adjuster”” who represents the Insured and who has posted a $5,000 surety bond to protect the Insureds. They may be employed by the Insuer, the Insured but not the Producer or the local insurance firm.”
Overinsurance Regulation It is illegal for a Proudcer, Insurer, or Insured to knowingly insure a property in execess of its value.
Fair Access to Insurance Requirements Washington Fair Plan or Washington Essential Property Insur Insepection & Placement Program is to provide basic property insurance to residential or commercial applicants who cannot obtain insurance in the voluntary market. Automobile, farm, and manufacturing properties are not eligible for Fair Plan Coverage. All property Insurers and fraternals selling proeprty insurance must participate by paying loss assessments proportional to their premiums in the voluntary market.
The Fair Plan Coverage “Will cover direct loss coverage only; cover Builders Risk; Will provide only basic coverage (Fire Extended Coverage), it does not cover theft or liability or indirect loss and does not cover automobile, farm, or manufacturing property. Polices must be for at least 12 months. Policies may be cancelled due to nonpayment of premiums but not for claims filed. Producers are not “”agents”” have no authority to issues Fair Plan Binders.”
Producer Commission on Fair Plans Producers who place policies with the Fair Plan are entitled to a 10% premium.
FEMA Flood Training Requires Producers selling flood insurance to complete a one-time 3-hour flood course.
PIP Who Is Covered The Person named on the policy, household residents related by blood marriage or adoption; step or foster childern, any non-family passengers and pedestrians involved in an accident.
PIP Doesn’t Cover Injuries caused by Farm equipment, recreational or off-road vehicles, mopeds or motorcycles, a person who intentionally causes injury, while participating in or practicing for a prearranged racing or speed contest, bodily injury due to war or act or condition incidnt to such circumstances and bodily injury results from radioactive, toxic, explosions, or other hazardous properties of nuclear material, the named insured or a realtive while occupying a motor vehicle owned by the named Insured or furnished for the named Insured’s regular use. It is not described on the declarationpage of the policy under which a claim is made, a relative occupying a motor vehicle owned by the relative or furnished for the relative’s regular use, or an insured whose bodily injury results or arises from the Insured’s use automobile in the commission of a felony.
PIP Basic Limits Auto Insurers must offer the following minimum PIP such as medical and hospital benefits of $10,000, funeral expense benefits of $2,000; loss of income benefits of $10,000 for one year with a 14-day deductible subject to a limit of $200 per week and loss of services benefit of $5,000, subject to a limit of $200 per week. 3 year limit on driving record for accidents or tickets.
PIP Endorsement Traditionally Medical Payments covered the Insured without regard to fault but only medical bills and funeral expenses. Medical Payments have been replaced with auto PIP Coverage. It also covers loss of income, loss of service (household services). Liability coverage is still needed.
PIP Must Be Offered As an optional coverage, the named Insured may reject PIP Coverage in writing, the Insurer is not obligated to offer PIP at renewal. The Insurer may require that the applicant purchase a PIP coverage for each vehicle listed on the policy.
PIP Higher Limits If requested by the Insured, an auto Insurer must offer the following coverage per Insured: medical and hospital benefits of $35,000, Funeral Expense benefits of $2,000, income continuation benefits of $35,000 subject to a limit of $700 per week, and loss of service benefits of $14,000
PIP Claim Payments Must pay benefits only if they are incurred within 3 years of the auto accident. The Insurer must disclose to the Insured in clear language the true and actual reason provided to the Insurer by the Insurer’s medical or health care consultant, so that the Insured will not need to resort to additional research to understand the reason for the Insurer’s reponse to the claim.
Worker’s Compensaton The Washington Department of Labor and Industries administer the state’s work comp system. Washington follows a monopolistic work comp system – private work comp companies are not permitted to operate in Washington. However, employers with at least $25 million in assets may receive permission to self-insur. Washington is a compulsory in that employers with 1 or more employees are required to provide work comp coverage for almost all employees. Disability benefits from a work-related accident will be paid only after 3 day waiting period.
Autos – Proof of Financial Responsibility “Show proof of insurance requested by a police officer; and at the time of of accident. Insurers must provide each policyholder with an Insur ID card, Personal auto policies must be issued for a period of at least 6 months. The following are exempted from the Proof of Financial Responsibility requirement is “”horeseless carriages”” at least 45 years old; antique cars, and motorcycles, motor drive cyceles (Scooters) up to 5 horsepower, mopeds up to 2 horsepower or government owned vehicles.”
Washington Proof of Financial Responsibility Laws Requires Purchasing liability Insurance or a liability bond in the amount of $25,000 for injuries or death to another person, $50,000 for injuries or death to all other people in any one accident and $10,000 for damage to another person’s property in any one accident or Pledging $60,000 in securities or cash through the Department of Licensing or a Certificate of Self-Insurance obtained from the Department of Licensing if one owns 25 or more vehicles.
Security Following An Accident A driver in an accident involiving bodily injury or death or at least $1,000 property damage will be required to post with the Licensing Dept a security deposit of at least $500. Wa residents who have met the Wa Financial Responsibilty requirements are usually $25/50/10 or Nonresidents who have the equivalent coverage through an Insurer authorized to do business in Wa or an unauthorized Insurer that has given the Director of Licensing authority to accept service of process in a lawsuit.
Bodily Injury + Property Damage The auto Insurer must offer Underinsured Motorist limits at least equal to the limits of the Insured’s auo liability policy to cover the perils of Uninsured Motor Vehicles, Underinsured Motor vehicles with less coverage than needed to cover the victim’s injuries or damages; hit-and-run vehicles; phantom vehicles (an accident casued by a vehicles that had no contact with the Insured’s vehicle); and an insured vehicle where the Insurer is insolvent.
Auto Assigned Risk Plan The Commissioner must develop a Assigned Risk Plan. Applicants who are in good faith entitled to but are unable to procure auto insurance through the ordinary market. All auto Insurers must subscribe to the Assigned Risk Plan.
Underinsured Motorist & Uninsured Motorist “Combines Uninsured and Underinsured motorist in one policy called “”underinsured motorist.”” Producers must offer this and it may be rejected by the Insured only in writing.”
Licensing Surplus Line Brokers “To obtain a Surplus Line Broker’s license, a candidate must: have bother property and casualty licensees; separate surplus lines exam. The Surplus Lines Brokers must have $20,000 bond protects the State becasue the Broker is supposed to collect a sales tax on the policy and the remit the tax to teh State and a bond of at least $2,500 protects the Insured in the event that the Broker misrepresents the policy coverage or steals the policy premium. A Surplus Line Broker doesn’t represent partiular Insurer and isn’t “”appointed”” by the Insurer.”
When Surplus Lines May Be Sold “If coverage is unavailable from authorized Insurers. Coverage may be procurred from “”approved”” unauthorized Insurers. The Insurance must be procured through a Licensed Surplus Line Broker in WA. Unauthorized insurer must be approved by the Commissioner. Coverage cannot be procured from an approved insurer for the purpose of securing a lower premium rate or better terms or higher commissions than would be avialable through an authorized insurer. The Surplus Line Broker certify the facts supporting the line broker’s diligent effort to place the poliy with an authorized insurer, and the certificiation must be filed with the Commissioner within 60 days after the unauthorized insurance is procured.”
Cease & Desist Orders The Commissioner may issue a cease and desist order and then issue a fine of $250 per violation. There are 3 separate civil fines: $250 for violating a cease and desist order, $1000 for violating any insurance law, $25,000 for selling insurance without a Producer’s license.
Refund of Unearned Premium Upon cancellation by the Insurer, a pro rata refund of unearned premium must be given to the Insured within 45 days. Upon cancellation by the Inured, a short rata refund of unearned premium must be given to the Insured within 30 days.
Credit Scoring or Personal Line Policies An Insurer may use a person’s credit history to deny personal insurance only if the credit history is used in combination with other substantive underwriting factors. An Insurer cannot deny personal insur based in whole or in part on a consumer’s lack of credit history; insur scores based on medical industry codes, credit inquires, a particular type of credit or debit card; or credit history or insur score identified with medical industry code.
Commissioner Power to Regulate It is illegal for an Insurer or Producer to engage in: unfair methods of competition or unfair deceptive acts or practices. The Commissioner may adopt rules to implement the Insurance Fair Condut Act. New Commissioner Rules become effective 30 days after promulation.
Bonded Producers Are not appointed becasue they don’t represent the Insurers; must be paid by either the client or the Insurer (requires written notification) and must post a bond of at least $2,500 but not more than 5% of the premiums brokered in the previous calendar year.
Producer License Renewal Are valid from their date of issuance until the date of Producer’s next birthday plus 1 year. Renewals are valid for 2 year. The Fee for a Producers license and for renewal is $55.00.
Producer Late Renewal The Commissioner will send at least 60 days’ notice of renewal via email. A late fee is acceptable for renewals up to 12 months late. After that, the Producer must retake the exam.
Debris Removal Buidling Coverage pays for removing junk. The maximum amount an Insurer will pay is the dollar limit of the entire poliicy or 25% of the total loss (whichever is greater) plus $10,000.
Removal or Preservaton of Property This additional coverage protects the property from all perils while it is being moved and for 30 days of ensuing storage at some other location.
Fire Dept Surcharge Coverage puts the Insurer on the hook for the first $1,000 of such charges with no deductible applied. This extends the Insurer’s liability beyond the limit stated in the policy. This service charge has a $1,000 limit liability, has no deductible and pays above the policy’s overall limit of liability.
Coverage Extensions Buy coverage equal to the coinsurane requirement (80% of the proeprty’s value) & you get the 5 Coverage Extensions. They provide additional preotection becasue they go beyond the stated policy limits. The are available only to Insured’s who meet the coinsurance requirement and encourage the Insured to insure for full value.
If A Policy is Being Cancelled for Non-Payment Only 10 days advance notice is required.
Marine Aviation & Ocean Marine Insurance Is written as surplus lines.
If An Insurer Cancels a Fire Policy For vacancy or foor poor physical lcondition including risk of fraud , only 5 days advance written notice is required. .
IF the Insurer is Going to Increase the Premium At renewal the insured must be given 20 days advance written notice.
A Producers’s Change of Address must be made promplty (no later than 30 days)
When An Insurer Cancels Unearned premiums must be calculated on pro-rata (proportionate) basis and refunded to insured no later than 45 days after the date the cancellation notice was sent.
If An Insurer Non-Renews a Commerical Line Policy They must send the named insured at least 45 days in advance in written notice, along with the reasons for the non-renewal.
Notice of Cancellation or Non-Renewal Is furnished to an insured, a copy of such notice shall also be provided with 5 working days to the producer on the account.
Personal LInes Policy Includes personal auto, homeowners and dwelling fire.
Commerical Lines Includes commerical liability, commerical fire and surety.
If an Insurer Cancels a Commerical Line Policy For any reason other than non-payment of premium, they must give at least 45 days advance written notice to the name insured.
Insurer May Cancel a HO Policy By sending the named insured at least 45 days advance written notice of cancellation, along with reasons why.
Canceling A HO Policy The insurer must send 45 days advance written notice to the mortagagee and refund any unearned premium due on a pro-rata basis no later than 45 days after notice was sent.
An Insured May Cancel A HO Policy At anytime by sending written notice to the insurer prior to the effective date of Cancellation.
When the Insured Requests Cancellation “Any return of unearned premium is calculated on a “”short-rate””basis and the insurer must send the refund within 30 days of receiving the insured’s request.”
An Insurer May Non-Renew A HO Policy by sending the named insured at least 45 days advance written notice along with the reasons for the non-renewal.
An Insurer Cancels for Non-Payment of Premium “Any refund or unearned premium mus be calculated on a “”pro-rata”” proportionate) basis.”
Premiums Earned By an Insurer on the date a binder comes effective.
Copies of Applicaton Must be given to the applicant promptly upon completion. Applicants for insurance must contain a clear statement as to whether or not coverage has begun.
Claims Prior to Determination of Solvency Are covered by the fund as well as those that occur within 30 days of the liquidation order.
The P&C Insur Guaranty Association Is run by a Board of Directors that includes no less than 5 nor more than 9 persons, as approved by the Commissoner.
Producers Must Display Their License In a conspicuous location in that part of their palce of business that is customarily open to the public. Producers must keep a record of all TRANSACTIONS under their licenses at their place of business for 5 years. The producer must notify the Commissioner of any change in address promptly, within 30 days.
An Insurer Terminate a Producer’s Contract As An Independent Producer They must give the producer at least 120 day’s advance written notice, unless the producer loses his license, sells or abandons his agency, or is guilty of misdconduct, fraud or material misrepresentation.
A Non-Resident Producer May maintain a principal place of business in this state or in their home state.
If a building under a BPP has been vacant over 60 days, the BPP will cover? Fire, Wind, Explosion, and Volcano are all covered after 60 days of vacancy
A CGL provides liability coverage for: A person whose reputation is harmed by the insured’s innocent dissemination of information.
Law of Large Numbers A principle stating that the larger the number of similar exposure units considered, the more closely the losses reported will equal the underlying probability of loss.
Insurable losses will be listed where? Insuring agreements
Commercial Liability Purchased to cover completed operations/ products liability
Is crime covered under a CPP? Yes, crime is covered under a CPP
Insured’s Responsibilities are listed where? Conditions
Policy coverages will be found where? Insuring agreements
Does a broad form policy cover volcano Yes
Strict Liability The legal responsibility for damage or injury even if you are not negligent – a lawnmower manufacturer is liable if a blade flies off the mower.
Seasonal inventory variable 25% in addition to the policies limit of liability. Ex: $200,000 limit of liability, for total loss policy pays $250,000 (200,000×25%)
Is homeowners personal property covered on an ACV or RC basis? It’s covered to 50% of A on an ACV basis. ($100,000 limit of liability x 50%) covers up to $50,000
Who is the principal in a principal agent relationship? The insurer is the principal in a ..
Under HO policy, coverage for removal of a fallen tree may apply if Tree blocks: access to driveway, handicap ramp, or tree damages a covered structure. But NOT if the tree is blocking access to the front steps.
Adverse Selection A high-risk person benefits more from insurance, so is more likely to purchase it.
Manual Rates “Insurance rates according to a company Rate Manual that vary from company to company. Also known as “”Standard Rates””. Most rates must be filed with the state Insurance Commissioner, but the insurance companies actually set their own rates in the competitive marketplace.”
Contract – Good Faith All parties DO NOT rely on the contract to provide for an equal transfer of values between the parties
utility services – time element endorsement an endorsement that covers loss of business income or extra expense at the insured premises caused by the interruption of utility services to or from the insured premises
MCS-90 Endorsement Used to certify that a motor carrier meets the federal minimum liability coverages
General damages Are intangible
Utility Services – Direct Damage Endorsement Covers damage to covered property caused by interruption of utilities, such as water, communication, or power to the insured premises – perishable goods spoil due to no power
Commercial ordinance or law endorsement cover extra expense? No, will not cover extra expenses insured to operate at a new location
Compensatory Damages money intended to restore a plaintiff to the position he was in before the injury
If a tree falls, a covered peril includes Wind, hail, or weight of ice, snow, or sleet
Joint Ownership Coverage optional endorsement added to PAP when two unmarried individuals own a car
Reasonable Expectations A concept which states that the insured is entitled to coverage under a policy that a sensible and prudent person would expect it to provide. Reinforces the rule that ambiguities in insurance contracts should be interpreted in favor of the policyholder.
Spoilage Endorsement Covers damage to perishable stock caused by breakdown or contamination and power outages (on and off premises). NOT if the refrigerator is left open though
What is used to develop rates? Business expenses, loss costs, and profits. NOT loss reserves
Loss Payable Clause An insurance provision authorizing payment in the event of loss to a person or entity other than the named insured having an insurable interest in the covered property
Special Damages economic losses such as loss of earnings, property damage and medical expenses
Forgery or Alteration provides worldwide coverage for loss of money resulting from forgery and alteration of outgoing checks, drafts, or promissory notes
Funds Transfer Fraud This coverage will pay for loss of funds resulting directly froma fraudulent instruction directing a financial institution to transfer, pay or deliver fundsfrom the insured’s account.
Owners and Contractors Protective Liability “Part of a commercial general liability policy that protects an owner or general contractor against liability arising out of the acts of contractors or subcontractors. It is also known as “”independent contractors liability”” coverage.”
computer fraud Computer hacker uses his computer to transfer money from an insureds bank to an account in Cayman Islands. Covered by what?
Following auto accident involving death bodily injury or more than $1000 on property damage, and out of state driver must post at least $500 security deposit unless The out of state driver has auto liability insurance exceeding the amount required in Washington
If you are the guardian. A WA producer may Hold a policy without delivering the policy to the insured
How often is a commissioner required to examine financial records of insurers? Every 5 years
PIP covers Funeral expenses, loss of income plus loss of services, medical and hospital expenses, but NOT bodily injury to others
Larcenous theft A producer who converts to his own use funds received in a fiduciary capacity is guilty of
If an insurers proposed premium rates are too low, the commissioner will Reject the proposed rates
UIM Property Damage deductible for a phantom or hit and run vehicle Can not exceed $300
The commissioner could suspend or revoke license for Twisting, rebating, guaranteeing dividends. NOT for waiting 1 business day before putting premium in the premium trust account
Under WA law, UIM coverage covers An insureds vehicle where the insurer is insolvent and can’t pay.
What is eligible for coverage under the WA Fair plan? Residential property
The insurer doesnt need a reason to cancel an auto policy that has been in effect less than 60 days
Every insurer ad must state The full name of the insurer
If an insureds check is made payable to the insurer, the funds may be Sent to the insurer without first depositing the check in the premium trust account
A WA driver may be required to post a minimum $500 security deposit with the DOL if the accident Involves BI or PD in the amount of at least $1000
The commissioner may Approve premium rates
Is the producers address required to be on a binder premium receipt? No. It needs to briefly describe the coverage bound, state that it is a binder, identify the insurer.
Is a surplus line broker required to be bonded? Yes
Can PIP be rejected orally? No. It must be rejected in writing
A producer can be paid by both the insurer and insured as long as The arrangement is reasonable
The financial responsibility law requires Drivers to show a certificate of insurance.
If the premium trust account is interest bearing The interest may be kept by the producer but shouldn’t be commingled with the funds in the separate account
When must the producer notify the applicant of the insurers practices regarding collection of personal information? No later than when delivering the policy to the applicant
The purpose of requiring Surplus Line Brokers to have a bond protect the state is to Ensure that the surplus line broker will pay the sales tax owing on the policies sold
If a insurer is selling policies at a lower premium than those contained in its rate filing then the commissioner may Suspend the insurers certificate of authority until it once again charges the filed rates.
How much notice must an insurer provide notice of cancellation or non renewal? At least 45 days in advance
How long is a temporary agent license effective for 180 days only
If an applicant is eligible for FAIR plan coverage, the policy must provide coverage for how long At least 12 months
Illegal Inducement • Offer during the recruiting process to provide something outside of NCAA guidelines in exchange for signingOffering $150 rebate as an incentive to purchase
WA FAIR plan is designed to cover Property coverage only
Both PIP & UIM cover The insured
Can an insurer discriminate on race? No, but they CAN on the basis of sex, marital status, and geographical location.
An insurer can cancel a policy if a drivers license is suspended and the policy has been in force how many days At least 60 days or more
Who can receive a combination of a commission paid by the insurer and a fee paid by the insured? Either an appointed producer or a bonded producer
Who are licensed adjusters Public adjusters and independent adjusters
Who are non licensed adjusters Salaried adjusters working for insurers
To non renew a private auto insurance policy in WA, the insurer must give how much notices explaining the reasons for non renewal At least 20 days notice
The commissioner may order the immediate cancellation of a policy if The policy violates any WA law
Binders should be replaced promptly with insurance policies within 90 days
When initiating a sales presentation while away from the office, a producer must disclose what? The full name of the producers company, and that the producer is an insurance agent
The insured may cancel a policy by providing Written notice to the insurer OR surrendering the policy to the insurer.
What does WA call a producer who doesn’t have an appointment yet is permitted to represent insureds and collects a commission from both the insurer and insured? A bonded producer
Under the WA FAIR plan, only what is eligible for coverage? Residential and commercial properties
A binder must contain? and be given to the insured within 1 business day The date the coverage becomes effective
An insurer may be Domestic, foreign, or alien
To be eligible to sell federal flood insurance through FEMA, a property producer must complete A one time 3 hour flood course, but there are no required refresher courses
Does a binder need to contain the amount of the deductible No
Rebating includes Giving the applicant part, or all of the commission, and giving an applicant a gift of over $100
Punitive damages are intended to do all of the following EXCEPT1. compensate for actual financial losses.2. discourage others from doing wrong.3. discipline the insured.4. make an example of bad behavior. compensate for actual financial losses
When an insured selects symbol 2 on the automobile declarations, indicating coverage for any auto titled to the insured, which of the following automobile types will be covered?1. any auto2. mobile equipment3. owned autos only4. temporary substituted owned autos only
All of the following are exclusions are found under the personal auto policy Part A liability coverage, EXCEPT1. damage to property owned or being transported by the insured.2. damage to property rented to, used by, or in the care of the insured.3. motorized vehicles with fewer than four wheels or designed for off road use.4. bodily Injury to an insured?s nonresident family member or relative. bodily injury to an insureds non resident family member or relative
All of the following would be found on a declarations page EXCEPT1. limits of insurance.2. address of insured.3. policy exclusions.4. costs for coverage. policy exclusions
Which of the following would be covered perils under the DP-1 Basic policy form?1. falling objects2. freezing of plumbing3. riot or civil commotion4. weight of ice or snow riot or civil commotion
Which of the following is TRUE when the insured?s limits of insurance apply per occurrence?1. The insured pays one deductible for grocery cart damage to a car occurring on different days.2. Coverage is triggered for smoke damage to siding caused by repeated acts by insured’s neighbor.3. The insured?s claim for damage to his basement walls caused by settling is approved.4. Liability is NOT covered in a second crash because limits were exceeded in a previous crash coverage is triggered for smoke damage to siding caused by repeated acts by insured’s neighbor
For the purpose of workers? compensation insurance all of the following are subject to the workers? compensation laws, either as an employer or employee EXCEPT1. an insurance agent.2. a building contractor.3. the employee of a party store.4. a crew member of an ocean going vessel. a crew member of an ocean going vessel
Which characteristic of an insurance contract states that when a loss occurs the insured should be restored to the financial condition he was in before the loss?1. contract of indemnity2. personal contract3. contract of adhesion4. unilateral contract contract of indemnity
Which of the following limits of insurance on the dwelling are available and apply to Coverage D-Fair Rental Value?1. 10%2. 15%3. 20%4. 25% 20%
How does the BOP differ from the CPP?1. The BOP covers property damage only.2. The BOP is specifically designed for larger companies.3. The BOP covers small businesses that have multiple locations.4. The BOP prepackages a group of coverages desirable to small businesses. The BOP prepackages a group of coverages desirable to small businesses
Which document would a lender ask an insured for as evidence that a policy has been written?1. Certificate2. Declarations3. Endorsement4. Policy certificate
Which of the following best describes the CGL?s general aggregate annual limit as it applies to the coverage parts of the CGL?1. Coverage A and C limits are excess of the general annual aggregate limit.2. Coverage B limit is not subject to the general aggregate annual limit.3. Coverage A, B and C apply separately to non-consecutive annual periods.4. Coverage A, B and C apply in sum and are the most that will be paid subject to the general aggregate annual limit. Coverage A, B and C apply in sum and are the most that will be paid subject to the general aggregate annual limit
When an employer sends employees out of state on work related business, which of the following must he do to ensure the appropriate workers? compensation coverage?1. purchase a separate policy for the state in question2. list the names of the employees sent out of state3. list the state on the information page for other states’ coverage4. report the work to the insurance company as soon as it is completed list the state on the information page for other states’ coverage
Which of the following forms trigger coverage for a loss under the commercial general liability policy if a loss happens during the policy period?1. claims made form2. occurrence form3. period certain form4. static form occurrence form
All of the following are responsibilities of the insured listed in the loss provisions for most property insurance contracts EXCEPT1. to give prompt notice of claim.2. to submit to examination under oath.3. to protect property from further damage.4. to determining adequate indemnification. to determining adequate indemnification
Which of the following is the chance or uncertainty of loss?1. exposure2. hazard3. risk4. speculation risk
A woman slips on icy steps and breaks her leg. Which of the following is the peril in this situation?1. the fall2. the icy steps3. the broken leg4. the season of the year the fall
The insured has a commercial auto policy with a drive other car broadened coverage liability for named individuals (DOC) endorsement. In which of the following would the named individual be covered?1. racing company car2. driving neighbor?s auto3. any vehicle owned by insured4. family member driving company vehicle driving the neighbors auto
Which of the following created The National Flood Insurance Program?1. an association of mortgage banks2. the United States Congress3. governors of flood prone states4. a consortium of insurance companies the United States Congress
What is the purpose of the causes of loss form that lists specific exclusions?1. to inform the insurer what the loss is in a claim2. to state which properties are covered in a loss3. to state which perils are insured against4. to inform the insured whether the loss in a claim is covered to state which perils are insured against
Which of the following are defined as a part of the policy and can void the policy if they are breached, whether the breach was intentional or unintentional?1. material facts2. representations3. waivers4. warranties warranties
Which situation is an example of vicarious liability?1. The insured injures a friend in hunting accident.2. The insured?s employee causes an injury while on the job.3. The insured damages a neighbor’s building while trying to enter. 4. The insured loans a defective ladder to neighbor that results in an injury. The insured’s employee causes an injury while on the job
An insureds place of business is broken in to and merchandise unlawfully taken during the night, the insured is the victim of which type of crime?1. robbery2. burglary3. breaking and entering4. safe cracking burglary
Which of the following does HO-6 provide?1. coverage for tenant living in a condominium2. coverage for personal property of a condominium owner3. broad dwelling coverage for a condominium owner4. coverage for the rehabilitation of a condominium structure coverage for personal property of a condominium owner
Employees are barred from suing employers in court to obtain compensation for injuries covered by workers? compensation because of which of the following doctrines?1. employer liability2. exclusive remedy3. workman liability4. no fault insurance exclusive remedy
The Causes of Loss form for farm property lists which of the following?1. the type of property insured2. the amount of insurance provided3. perils property is insured against4. exclusions to named insureds perils property is insured against
All of the following perils are specifically listed in the policy as being other than collision losses EXCEPT1. fire.2. windstorm.3. freezing or road damage.4. malicious mischief or vandalism. freezing or road damage
All of the following are elements of a valid contract EXCEPT1. competent parties.2. consideration.3. legal purpose.4. provisions. provisions
Under the CGL which one of the following is covered under supplementary payments?1. cost of bail bonds2. defense costs for the plaintiff3. court costs taxed against a third party4. loss of earnings expense of over $250 a day cost of bail bonds
All of the following demonstrate insurable interest EXCEPT1. purchasing fire insurance on a newly acquired cottage.2. adding collision coverage on auto due to a new loan.3. deciding to insure an inherited firearms collection.4. insuring an engagement ring given to fiancée. insuring an engagement ring given to fiancee
All of the following describe a nonowned auto under the commercial auto policy symbol 9 EXCEPT1. auto not titled to an insured but available for regular use of named insured or family member.2. nonowned auto is designated for liability coverage only.3. includes autos owned by employees but used in the insured?s business.4. autos used in the insured?s business that are not leased, hired, rented, or borrowed. auto not titled to an insured but available for regular use of named insured or family member
Which of the following types of policy BEST describes the DP-2 Broad form policy?1. all risk2. expanded3. named perils4. open perils named perils
The Terrorism Risk Insurance Act and the National Flood Insurance Program are similar by providing which of the following?1. relief for victims of flood loss2. coverage for loss caused by terrorism acts3. subsidies, loss sharing or excess coverage4. government oversight of specialized insurance subsidies, loss sharing or excess coverage
Mobile homes can be insured in all of the following ways EXCEPT1. with a HO-8 Modified Coverage form.2. on a separate mobile homeowners package policy.3. with a DP-1 if the mobile home is on a foundation.4. on a mobile homeowners endorsement to a HO-3 form. with a HO-8 Modified coverage form
The claims-made liability form provides coverage from a date that precedes the policy effective date. Which of the following defines that date?1. anniversary date2. retroactive date3. occurrence date4. claims date retroactive date
When does the coverage begin for a builders risk form?1. The date the policy premium is paid2. On the date any construction begins3. On the date construction starts above the highest basement floor if there is a basement4. On the date construction starts above the lowest basement floor if there is a basement On the date construction starts above the lowest basement floor if there is a basement
Which of the following situations under dwelling policy conditions describe how the insurance company will settle a loss?1. pay the full value of a pair of earrings when only one is lost2. company has the option to repair to pre-loss condition3. if loss is covered by other insurance the other insurance pays full loss4. property is replaced by company at full replacement value at loss company has the option to repair to pre-loss condition
Which of the following business liability exposures does a slip and fall loss fall under?1. indirect and contingent2. medical expense3. premises and operations4. retail hazards premises and operations
Workers? compensation benefits for loss of wages include which of the following?1. reimbursement for medical bills2. complete replacement for lost wages3. replacement of a portion of lost wages4. income stream for survivor replacement of a portion of lost wages
Which of the following would be eligible to collect survivor and death benefits from workers? compensation in the event of the covered injury resulting in the death of an employee? 1. medical provider2. insured’s legal team3. spouse of employee4. owner of the business spouse of employee
An insured with split liability limits of 100/300/100 is at fault in an automobile accident and the other vehicle sustains $6,500 in property damages as well as two occupants have bodily injury and are claiming $150,000 each. What is the most insurance will pay to each occupant?1. $100,0002. $150,0003. $200.0004. $300,000 $100,000
Which one of the following persons would be covered for accidental injury on the insured?s premises under Coverage C of the CGL Medical Payments?1. a tenant of the premises2. an employee of the insured3. person injured in warfare4. a volunteer worker a volunteer worker
When the policy term ends and either the insured or the insurance company wants to discontinue coverage which provision is applied?1. expiration2. flat cancel3. cancelation4. nonrenewal nonrenewal
Workers? compensation coverage is rated on the basis of which of the following?1. employer?s payroll2. employee’s earnings3. employer?s gross claims4. employer?s years in business employers payroll
Which of the following would trigger coverage under business income form with extra expense coverage? 1. Carpet cleaning after a water main break2. Employee pay after a building structure is damaged3. Building inspectors fees after a loss4. Unit rent when tenant is liable carpet cleaning after a water main break
Which part of the CGL designates who is an insured?1. conditions2. declarations3. definitions4. insuring agreement declarations
Which of the following is considered a hired auto under the commercial auto policy symbol 8?1. any auto the insured owns and rents2. autos rented or borrowed from employees3. autos the insured leases, borrows or rents4. any auto the insured will use during the policy period autos the insured leases, borrows or rents
Which coverage forms are used when the insured sustains loss of revenue due to direct physical loss from a peril insured against that forces the insured to suspend operations during the period of restoration?1. Causes of Loss forms2. Business Income Coverage forms3. Suspension forms4. Commercial Casualty forms Business Income Coverage forms
When an insured is driving his covered automobile causes an accident that results in injury, his automobile medical payments will pay medical expenses for all of the following EXCEPT1. the insured?s own injuries.2. the brother’s injury, an occupant in insured?s vehicle.3. his daughter’s injuries, an occupant in insured?s vehicle.4. any occupant of the other not at fault vehicle. any occupant of the other not at fault vehicle
All of the following are considered an insured under Part A liability coverage, of the personal auto policy EXCEPT1. owners of a vehicle the insured is using.2. employer while insured is driving a company car.3. anyone using the insured?s car with permission.4. others to the extent that they share liability with the insured. employer while insured is driving a company car
Which of the following is an example of replacement cost valuation?1. fair market value of item at time of loss2. actual cash value of item at time of loss3. cost new without depreciation at the time of loss4. cost of functional value of item at time of loss cost new without depreciation at the time of loss
All of the following would be eligible expenses after a loss under Coverage E Additional Living Expense EXCEPT1. laundry expense.2. mortgage expenses.3. restaurant dining expenses.4. storage expenses. mortgage expenses
Which of the following hazards is an example of a physical hazard?1. burning debris near the building on a calm sunny day2. leaving the shed unlocked at night because contents are insured3. backing into the garage door because you want insurance to pay for a new one4. leaving the keys in the car and doors unlocked burning debris near the building on a calm sunny day
Determining adequate indemnification after a loss is a principle duty of which of the following?1. agent2. insured3. contractor4. insurance company age, race, religion
An extended reporting period attached to a general liability policy provides coverage in which of the following ways?1. It provides coverage for claims made outside the policy term.2. It gives an additional 30 days coverage beyond the policy term.3. It gives an additional 10 years coverage beyond the policy term.4. It covers any gap between the claims-made and occurrence forms. it provides coverage for claims made outside of the policy term
The insured carries uninsured motorist coverage limits of 100/300/100 and is struck by an uninsured motorist, who will pay insured?s bodily injury damages claimed for $100,000?1. the state?s uninsured motorist fund2. the uninsured driver3. the insured?s insurance company4. the insured has no avenue to recover the insured’s insurance company
Underwriters are permitted to use all of the following when underwriting an application for insurance EXCEPT1. age, race, and religion.2. inspection services.3. credit reports.4. claim history.
Which of the following professionals would purchase Errors And Omissions insurance to manage the liability risk associated with their business endeavors?1. attorney2. caregiver3. doctor4. fireman attorney
Which of the following does Homeowners Special form (HO-3) cover that Homeowners Broad form (HO-2) does not?1. broken glass2. personal property3. tenants living in condominiums4. structures other than the dwelling structures other than dwelling
Which policy condition is invoked when parties to an insured loss cannot agree?1. Arbitration2. Assignment3. Liberalization4. Subrogation arbitration
A bank customer?s identity was compromised and the thieves made numerous purchases from a retailer by signing the customer?s checks. When the bank refused to make payment for the goods, the retailer brought suit against the bank. Which coverage indemnified the bank for liability in the suit?1. shopkeeper?s coverage2. forgery and alteration3. lender?s liability4. anti fraud coverage forgery and alteration
Which of the following represents the primary amount of insurance for the HO-4?1. Coverage A2. Coverage B3. Coverage C4. Coverage D Coverage C
Which of the following is EXCLUDED as a covered loss under the DP-3 coverage?1. Freezing of pipes when water is shut off during a vacancy2. Vandalism in a house vacant for 30 days3. Sudden seepage from an air conditioning system4. Damage by ice to outdoor radio and television antennas and aerials Damage by ice to outdoor radio and television antennas and aerials
All of the following are the most commonly used personal inland marine forms EXCEPT1. personal property form.2. personal articles form.3. builder’s floater form.4. personal effects form. builders floater form
All of the following are correct for towing and labor costs coverage on the personal auto policy EXCEPT1. settlement is by reimbursement.2. coverage is available by endorsement.3. towing and labor are combined per occurrence.4. labor costs are performed at the shop are limited to $25. labor costs are performed at the shop are limited to $25
All of the following are common exclusions in a liability policy EXCEPT1. damage to property owned by the insured.2. losses covered under workers’ compensation laws.3. damage caused by acts of civil disobedience and riots.4. damage to property in the insured’s care, custody, or control. damage caused by acts of civil disobedience and riots
Which exposure is unique to mobile homes?1. loss from foreclosure2. loss from collapse of awnings3. loss from flood damage4. loss from collision damage loss from collision damage
Which of the following is the special limit of coverage on the homeowners policy form for property damage to personal watercraft?1. $1,0002. $1,5003. $2,0004. $2,500 $1,500
Which of the following terms refers to the transfer of the insured?s right of recovery against others to his insurance company?1. abandonment2. legal release3. loss transfer4. subrogation subrogation
As a general rule, inland marine insurance covers all of following EXCEPT1. domestic shipments of goods.2. merchandise while it is being manufactured.3. musical instruments for professional use.4. contractor tools used on a job site. merchandise while it is being manufactured
The State highway department is rebuilding a roadway and the general contractor winning the bid will be required to purchase a bond guaranteeing the work will be completed according to specifications and on time. Which of the following types of bonds will the general contractor need to purchase?1. contract bond2. fidelity bond3. indemnity bond4. surety bond surety bond
Mysterious disappearance in insurance refers to which occurrence?1. someone fleeing the scene of a crime without explanation2. a kidnapping and constitutes a felony for the individuals involved3. the disappearance of property without any explanation of what happened4. the disappearance of a person with no clues to their whereabouts or well being the disappearance of property without any explanation of what happened
Which of the following would be covered by a commercial package policy?1. small to medium sized businesses2. ocean marine3. loss due to crime4. injury to worker on the job loss due to crime
Which of the following defines a loss which is consequential and comes as a result of an original loss?1. direct loss2. indirect loss3. partial loss4. total loss indirect loss
What does an application for insurance contractually represent for the insured?1. an offer2. a promise to pay3. an agreement of terms4. a primary source of information an offer