Methods of risk management include: A. Transfer; B. Sharing; C. Avoidance; D. All of the Above
D. All of these are methods of avoiding risk.
An insured has suffered a fire loss to his/her dwelling. This insured is which party to the claim? A. Third party; B. First party; C. Second party; D. Loss payee
B. The insured is the first party to an insurance contract. The insurer is the second party.
Mr. Jones, a pedestrian, was injured by Mr. Smith while driving his vehicle. Mr. Smith is insured by I Am Bogus Insurance Company. The insurance company would be which party to the claim? A. First party since they are the one that has to pay; B. The secon
B. The insurance company is the second party to the contract.
Which of the following is NOT included in the Declarations section of an insurance contract? A. The identity of the named insured; B. The policy period; C. The covered perils; D. The policy premium
C. The covered perils are contained in the insuring agreement and do not appear on the declarations page.
Which of the following is the section of an insurance contract that contains the provisions, rules of conduct, duties, and obligations of the parties? A. The Insuring Agreement; B. The Conditions; C. The Exclusions; D. The Limitations
B. The conditions clause stipulates the duties of the insured and the insurer. For example: The insured is required to report a claim in a timely fashion.
A loss that is a direct consequence of a particular peril is called a (n): A. Indirect loss; B. Peril; C. Hazard; D. Direct loss
D. A loss to property caused directly from an insured peril would be a direct loss. For example, an explosion causes building and contents damage. The loss of use or loss of income would be considered an indirect loss.
Which of the following is a clause in property and casualty contract which states that if policy or endorsement forms are broadened and no additional premium is required, then all existing similar policies or endorsements will be construed to include the
A. This is called the liberalization clause. Most policies contain this clause.
Which of the following provides written evidence of coverage pending the issuance of a policy? A. Cause of Loss form; B. Assignment; C. Binder; D. Blanket coverage
C. A binder is a form of temporary insurance that is provided as evidence of coverage until the policy has been received. Once the policy is received, the binder is voided.
Which of the following is an example of a Loss Evaluation Method? A. Liberalization; B. Cause of Loss form; C. Stated amount; D. Conditions
C. Some types of property are insured for a stated amount. This is a value agreed to by the parties to the contract.
The cost of replacement minus depreciation is the definition of: A. Valued Policy; B. Market Value; C. Replacement Cost; D. Actual Cash Value
D. This is the definition of actual cash value. If the property is insured on replacement cost, the depreciation is not deducted.
Which of the following is a method of requiring the insured to insure at least 80% of the value of the covered commercial property? A. Cause of Loss form; B. Standard Mortgage clause; C. Loss Payable clause; D. Coinsurance clause
D. Most commercial property insurance policies require the insured to carry 80% to value. This is called the coinsurance clause.
Which of the following is NOT a factor in determining negligence on the part of the insured? A. Legal duty is owed; B. There is a breach of protection; C. Proximate clause; D. Damage
B. This is called the reporting form basis. It requires the insured to carry 100% to value. The insured reports either monthly or quarterly and pays a premium based on their actual inventory values. In most cases, the insured saves money when they have in
Which of the following is NOT a factor in determining negligence on the part of the insured? A. Legal duty is owed; B. There is a breach of protection; C. Proximate cause; D. Damage
B. A breach of protection (failure to carry insurance) is not a factor in determining negligence.
In liability insurance, policy limits that apply one limit to each person injured, another for bodily injury claims of all persons injured in a single accident, and a separate limit for all property damage arising out of a single accident is: A. Aggregate
B. Split limits provide separate bodily limits and separate property damage limits. For example: An auto policy may provide limits of 25/25/20. This means the most that will be paid per person for bodily injury is $25,000. If more than one person is injur
An insurance contract that is contingent on an uncertain event is referred to as? A. Executory; B. Aleatory; C. Contract of adhesion; D. Conditional
B. An insurance contract is referred to as being aleatory, which means it is contingent on an uncertain event (a loss). An insurance contract is one of unequal value in that the insured pays a premium which is considerably less than the obligation of the
Mr. Jones is involved in an at-fault accident. The other party was also at fault. The method to determine damages due each party based on a percentage of negligence is known as: A. Contributory negligence; B. Intervening negligence; C. Comparative neglige
C. This is called comparative negligence. Most states use this as a defense in determining negligence on the part of the parties involved in a claim to determine damages.
The insured owns a filling station and an employee causes bodily injury to a third party. The insured is held legally liable for the employee's acts. This is called: A. Contributory negligence; B. Joint and several; C. Contingent liability; D. Vicarious l
D. This is called vicarious liability and occurs when one is responsible or can be held legally liable for the acts of others.
One characteristic of an insurance contract is that both parties must perform certain acts to make the contract legally enforceable. This is called: A. Personal aspect; B. Aleatory; C. Executory; D. Utmost good faith
C. An executory contract is one in which both parties must perform certain acts to make the contract valid and enforceable.
A church has hired a painting contractor to stain and varnish the woodwork in the building. He leaves the rags and brushes used to apply the painting materials in a small storage area. This is an example of: A. A peril; B. A hazard; C. Assumption of risk;
B. This is an example of a hazard. Hazards increase the likelihood that a loss may occur such as a fire from spontaneous combustion.
The insurance company is the author of the insurance policy. The insured buys what is offered by the company and accepts it as is. This is called: A. Executory; B. Conditional; C. Contract of adhesion; D. Aleatory
C. The insurer and not the insured writes the policy language. The insured must accept the policy as is. In cases where the policy contains ambiguous (vague) language, the court normally rules in favor of the insured.