An insured's 9 year-old son threw a ball, accidentally breaking a neighbor's plate glass window. The insured was found legally liable for the cost of replacing the window. This is an example of
Vicarious Liability
Which of the following best expresses the purpose of a stated value contract?
To pre-establish the amount of coverage available for property items that are difficult to value.
Liability imposed on one party as a result of the actions of another person is known as
Vicarious Liability
Which of the following is not an element of negligence?
Libel
What is a Certificate of Insurance?
A written document showing the types and amounts of insurance that have been issued to the insured.
An insured's business is damaged because of a fire, and he is forced to close the business temporarily for repairs. As a result, the insured lost income. What type of loss is this?
Consequential
What types of compensatory damages will pay for pain and suffering and disfigurement?
General
When a parent is required to pay for damages caused by his or her children, this is an example of
Vicarious Liability
Which of the following does the term proximate cause refer to?
Negligence that leads to an injury.
Events or conditions that increase the chances of an insured loss occurring are referred to as
Hazards
Three years ago, an insured moved to an unfinished apartment. She bought new furniture that cost $9,000. Last week, there was a fire in the apartment that destroyed the furniture. Replacement cost is $10,500. The adjuster told the insured her furniture de
$8,000
An additional loss that results from a direct loss of property is called a/an
Indirect loss
Events in which a person has both the chance of winning and losing are classified as
Speculative risk
The legal process that gives the insurer, after payment of a loss, the right to seek recovery from a third party that was responsible for the loss is known as
Subrogation
In property insurance, actual cash value is defined as which of the following?
Replacement cost at the time of the loss, less depreciation.
Which of the following is most likely occur if it is determined by the audit that the deposit premium was too high?
The insured will receive a return premium.
The transfer of an insured's right to seek damages from a negligent party to the insurer is found in which of the following clauses?
Subrogation
Burglary is defined as
Taking of property from within the premises leaving visible signs of forced entry.
The risk of loss may be classified as
Pure risk and speculative risk
What type of insurance policy insures against all risks of loss that are not specifically excluded by the policy?
Open peril policy
Which of the following coverages in dwelling and homeowners policies is for indirect losses?
Loss of use
Which of the following types of valuation works best for property whose value does not fluctuate much?
Agreed value
An insured carries a property policy on her home in the amount of $250,000. A bank is shown as the mortgagor in the policy. Last month, the insured made her final mortgage payment, but did not remove the bank from the policy. In the event of a covered los
Nothing
A $100,000 house insured on a policy with an 80% coinsurance requirement has a fire that caused $40,000 of damage; the owner has a policy with $60,000 coverage. How much can the owner collect for his loss?
$30,000
An insured is applying for a casualty insurance policy. One of the conditions of the policy allows the insurance company to inspect the insured's books at the end of the policy term to make sure sufficient premium has been collected for the exposure she p
Deposit premium audit
An insured relocated to another state for work. However, she still owns and insures a house in this state, but has had no one living in it for 3 months. She is also storing furniture and clothes in the house. From an insurance standpoint, the insured's ho
Unoccupied
In which of the following types of property valuation will the policy pay the full value as specified on the policy schedule, regardless of the insured property's appreciation or depreciation?
Agreed value
What type of damages may be awarded by the court to create disincentives that discourage behavior that is deemed highly undesirable by society?
Punitive
Replacement cost is defined as
Full replacement of property at its current cost, new and without reduction for depreciation.
Which method of loss valuation is contrary to the basic concept of indemnity?
Replacement cost
Insurable interest in the property covered in a policy must be proven when?
At the time of loss.
Losses caused by continuous or repeated exposure to conditions resulting in injury persons or damage to property that is neither intended nor expected is the definition of
Occurence
Robbery is
Taking of property by use of force, violence, or fear.
What is defined as the maximum limit of coverage available under a liability policy during a policy year, regardless of the number of claims that may be made or the number of accidents that may occur?
Aggregate limit of liability
What type of liability would a person who owns a swimming pool have?
Absolute
What insurance policy provision defines how the policy will respond if there is more than one insurance policy written on the same risk?
Other insurance
A person who is not named as an insured on the declarations page of a policy but is protected by the policy is known as the
Additional insured
What is a method of claim settlement used when the insured and insurer cannot agree on how to settle a claim?
Arbitration
The Federal Fair Credit Reporting Act does what?
Regulates consumer reports
An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which insurance principle has the insurer violated?
Consideration
The section of an insurance policy that details what perils are not insured against and what persons are not insured is known as the
Exclusions
Under the professional liability loss settlement provision, what must an insurer do before offering to pay a claimant to settle a claim?
Get the insured's consent
The part of the policy that sets forth the rules of conduct, duties, and obligations of the parties is called the
Conditions
What protects consumers against the circulation of inaccurate or obsolete personal or financial information?
The Fair Credit Reporting Act
What describes the transfer of a legal right or interest in an insurance policy?
Assignment
What clause establishes the procedure for determining the amount of loss when the insurer and the insured cannot agree on the value of property or the amount of loss?
Appraisal clause
The part of the insurance contract that describes the covered perils and the nature of coverage of the contractual agreement between the insurer and insured is called the
Insuring agreement
When an insurance policy does not offer a continuation or replacement at its expiration date, it is considered a
Nonrenewal
When forming an insurance contract, when does acceptance usually occur?
When an insurer's underwriter approves coverage.
The part of a property policy that shows the amount of insurance, premium, and policy term is the
Declarations
Something of value exchanged between the insurer and the insured is considered a/an
Consideration
When applying for an individual life insurance policy, an applicant states that he went to the doctor for nausea, but fails to mention that he was also having severe chest pains. This is an example of
Concealment
What is a mandatory part of an insurance policy that varies with each individual policy?
Declarations
What would modify the original insurance contract by either adding or removing coverage?
Endorsement
An insured intentionally did not disclose a material fact on an application for insurance. This would be considered
Concealment
Termination of an in-force insurance policy prior to the expiration date shown in the policy is known as
Cancellation
In insurance, an offer is usually made when
The completed application is submitted
Which part of an insurance policy covers claims-related expenses, reasonable expenses incurred by an insured to protect damaged property from further loss, or defense expenses?
Additional coverage
The Gramm-Leach-Bliley Act was passed to
Protect private customer information filed with a financial institution.
A sworn written statement that must be furnished by the insured to the insurer before any loss under a policy can be paid is
Proof of loss
The policy conditions define
How parties to the contract must act following a loss
When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as
Consideration
Who is responsible for filling out the Notice of Claim Form?
The insured
In return for premium, an insurance company must
Be fair in underwriting and pay covered losses.
When would a misrepresentation on the insurance application be considered fraud?
If it is intentional and material.
Persons covered under an insurance policy, whether named or not, are known as
Insureds
What is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract?
Warranty
What would be named on the declarations page of a property or liability policy?
First name insured
Before an insurer will pay any loss under a policy, what is usually required from the insured?
Proof of loss
In the event of a loss covered by the policy, if the insurer requests a signed sworn proof of loss, the named insured is required to submit it within
A specified time
An advertising company has its annual holiday party for employees and customers, after which a customer who had too much to drink is involved in an automobile accident. Occupants of the other car involved in the accident sue the company for serving the cu
Yes, none of the exclusions will apply.
The regular National Flood Insurance Program would insure an eligible single-family dwelling for up to
$250,000
Under which condition can broad theft coverage be added to a dwelling policy?
If the insured is owner-occupant of the dwelling.
Which property coverage would provide protection to contents damaged by fire? (Coverage A, B, C, or D)
Coverage C
A specific coverage part is listed on the commercial package policy declarations page, but there is no premium shown. What does that mean?
There is no coverage.
Under business owners policy Section I, if an insurer wants to nonrenew a policy, how many days before the expiration date must the insurer notify the mortgage holder?
10 days
An insured with a homeowners policy has removed property from the insured location to protect it from loss that could be caused by a covered peril. The removal coverage applies for how many days?
30 days