THE PROPERTY CASUALTY INSURANCE CRAM SHEET

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EXAM QUESTIONS

Actual Qs and Ans - Expert-Verified Explanation -Guaranteed passing score -100 Questions and Answers

-Format: Multiple-choice / Flashcard

Question 1: Homeowners Coverage

Answer:

(A) Dwelling. (B) Other Structures. (C) Contents. (D) Rental Value. (E) Additional living expense, (available only with broad & special forms).

Question 2: Supplementary payments

Answer:

Expenses included in a liability insurance policy that are paid in addition to the policy's regular limit of liability. Typically includes defense costs, claim investigation expenses, bond premiums, first aid, expenses, expenses incurred by the insured at the insurer's request loss of earnings, prejudgment interest, and post/judgment interest.

Question 3: Fidelity Bond

Answer:

A class of bonds which guarantees an employee's honest discharge of duty.

Question 4: Surplus Lines Insurance

Answer:

Insurers risk that may be unavailable in the standard market, due to unusual characteristics, such as aviation, earthquake or professional exposures. Agent must 1st try to secure coverage with an admitted carrier.

Question 5: Indirect Loss

Answer:

Is a consequence of a direct loss, such as expenses required to stay at a motel while tornado damage to a home is repaired.

Question 6: Short Rate Cancellation

Answer:

When an insured cancels the policy the company may keep part of the premium.

Question 7: Punitive Damages

Answer:

Money awarded in a civil court to punish the wrongdoer because of actions thought to be greater than simple negligence. This is thought of as "punishment".

Question 8: Reinsurance

Answer:

The process of finding other insurers to share a risk exceeding the company's retention limit. The re-insurer assumes a portion of the risk & receives a pro rata portion of the premium paid.

Question 9: Admitted or Authorized Insurer

Answer:

Licensed by the state of Arkansas to sell insurance to Residents of Arkansas.

Question 10: Pro Rata Cancellation

Answer:

When the insurer cancels the policy before the expiration date, the insurer must return the unearned premium to the insured.

Question 11: Obligee

Answer:

The party to whom the principal makes the promise, and for whose protection the bond is being written.

Question 12: Indemnity

Answer:

Insurance policies are contracts of indemnity because they restore the insured to approximately the same financial condition he or she was in before a loss. A person whose two year old car is totaled in an accident will be paid the value of that car, not the amount required to purchase a new car.

Question 13: Section One Homeowners

Answer:

Property Section.

Question 14: Reciprocal (Assessment) Companies

Answer:

Non incorporated associations of individuals or businesses called subscribers, engage in cooperative insurance programs. Each policyholder is insured of all others, & each insures the others. The company is managed by an attorney-in-fact who can assess the policyholders for additional premiums if underwriting losses have been too high.

Question 15: Broker

Answer:

Someone who represents the customer and not the insurance company.

Question 16: The Last Clear Chance Defense

Answer:

Holds that if the injured party had the last clear chance to avoid the cause of a loss & did not exercise that chance, his loss was caused by his own failure to act.

Question 17: Valued Policy

Answer:

Certain hard-to-value items, such as art work, may be insured under a _____ _____ to avoid the difficulty involved in determining the property's value after it is damaged. The property is written for a specified amount that is used to value losses.

Question 18: Foreign Insurer

Answer:

A ____ company is domiciled & organized under the laws of One state but is licensed to do business in another state.

Question 19: Contract of adhesion

Answer:

A contract in which only one party draws up the terms and the other party simply consents to them; ambiguities in the terms are interpreted by courts in favor of the party who did not write the terms. This "one sided" process makes insurance a ____ __ ____.

Question 20: Replacement Cost

Answer:

Losses may be reimbursed on a ____ ____ basis, without deduction for depreciation, if the insured agrees to maintain insurance equal to a specified percentage of the property's value.

Question 21: Representations versus Warranties

Answer:

A ______ is a statement in an application the insured believes is true. A ____ is a specific agreement between the insured and insurer that contain conditions will be met. The key difference between the two is that ____ is not a part of the contract, but a ____ is. A policy cannot be voided on the basis of a _____, but it can be voided for breach of _____.

Question 22: Parol (Oral) Evidence Rule

Answer:

The rule of law that says once a contact has been placed in writing, all oral agreements are deemed to be included and are barred from being introduced as terms of the contract.

Question 23: Misrepresentation

Answer:

Written or verbal misstatement of a material fact involved in the contract on which the insurer relies. Can be grounds for the insurer to void the policy. Might be intentional or unintentional.

Question 24: Other Insurance

Answer:

Policy Condition that stipulates how losses will be paid when more than one policy applies to the loss.When losses are paid on a "pro rata" basis, each policy pays a proportion of the loss based on the amount of coverage under its policy.

Question 25: Direct Loss

Answer:

A financial loss resulting directly from a loss to property, such as a tornado damage to a home.

Question 26: Declarations Page

Answer:

Identifies the parties to the policy, property covered, premium and location.