The term "Time element Coverage" is used when the amount of loss depends on what?
The time it takes to repair, rebuild, or restore damaged property.
The term time element coverage is used for many indirect losses, such as a business income loss, because the amount of loss might not be directly related to the amount of property damage that occurred, but it is related to the time it takes to repair,, re
Which is NOT one of the common law defenses against an employer's liability?
Proximate cause
Assumption of risk, contributory negligence, and the fellow servant rule are the traditional common law defenses against employer liability.
Are Vehicles eligible for a Personal Auto Policy PAP if used in a delivery business?
No. Vans used in a delivery business are not eligible for coverage.
Generally, four-wheel private passenger autos, pickups, and vans owned by an individual or married couple are eligible if used for pleasure or general transportation. Pickups and vans used in a business, other than farming or ranching, are not eligible.
Business owners policies provide an additional coverage for preservation of property when it is removed from the premises to protect it from loss by a covered peril. The coverage will apply at other locations for up to?
30 Days
The preservation of property additional coverage under a BUSINESS OWNERS POLICY covers direct physical loss or damage from an cause if the property has been removed to another location in order to protect it from loss by a covered peril. Coverage applies
Which losses are excluded under the physical damage coverage of a personal auto policy?
Loss of custom furnishings in a customized van
loss caused by freezing of the cooling system
Damage to equipment designed for the detection of Radar.
Damage to a covered auto while being used as apart of a car pool is not excluded.
Under the BUSINESS AUTO COVERAGE PART, liability insurance applies to mobile equipment while it is:
Being carried or towed by a covered auto.
Although mobile equipment exposures are usually covered by CGL insurance, it is covered by business auto insurance while being carried or towed by a covered auto because in such cases it is considered an extension of the covered auto.
Insurance is a mechanism used to manage which type of risk?
Pure risks.
Insurance is only used to manage pure risks that involve only the possibility of loss and no opportunity for gain.
Coverage for Vandalism and malicious mischief is attached to a policy, it will be suspended whenever the building has been vacant for more than how many days?
30 Consecutive days.
If a dwelling policy includes the extended coverage (EC) perils, coverage for vandalism and malicious mischief (V&MM) may also be added. However, this coverage will not apply whenever the building has been vacant from more than 30 consecutive days.
Commercial general liability coverage provides medical expense payments for accidental injuries if the expenses are incurred and reported to the insurer within what date?
One year after the accident date.
CGL insurance policies provide coverage for medical expense payments for accidental injuries if the expenses are incurred and reported to the insurer within one year after the accident date.
An employer purchased a fidelity bond to protect against potential losses by employee dishonesty. In this situation, each of the employees covered by the bond is considered?
A Principle.
Fidelity bonds are contracts between three parties. The employees who are required to act honestly are the principals. The surety or guarantor, which is usually an insurance company, agrees to be responsible for a loss if a principal violates the terms of
When insurance is written on a dwelling form, each of the following types of property would be insured under Coverage A (Dwelling Coverage).
A Laundry room ATTACHED to the building
Building Equipment and outdoor equipment
Materials and supplies used for c
The storage shed connected to the dwelling by a utility line would be considered an "other structure" available for insurance under Coverage B.
On Homeowners policies, "insured location" is a broad term describing where liability coverage apply.
Family cemetery plots
Any newly acquired premises
A non owned premises used as a temporary residence by an insured.
Family cemetery plots, newly acquired premises, and premises used as a temporary residence by an insured are all included in the policy definition of "insured location." Farm exposures are specifically excluded by the homeowner eligibility rules.
The most common definition of actual cash value (ACV) in the property insurance field is?
Replacement cost, less depreciation.
Actual cas value is usually calculated by determining an item's replacement cost and subtracting an amount for depreciation.
The National Flood Insurance Program.
There are maximum limits on the amount of coverage available.
Coverage may be written by private insurance carriers.
The federal government reimburses insurance companies for losses that exceed premiums collected.
The Federal insurance Administration sets rates, eligibility requirements, and coverage limitations fro flood insurance. Maximum limits do apply to the amount of coverage available. coverage may be written by private insurance carriers, and the FIA reimbu
What is meant by the term "Adverse Selection"?
The Tendency of people with greater than average exposure to loss to purchase insurance.
Adverse selection means the tendency of people with a greater than average exposure to loss to purchase insurance coverage. For example, if insurers only sold earthquake coverage to applicants in earthquake prone areas, or flood insurance only to those in
A commercial building valued at $300,000 is insured for $200,000. If the policy is written with an 80% coinsurance percentage and a standard deductible, how much would be paid for a $60,000 loss?
$49,500
The coinsurance requirement is for the insured to carry 80% of the $300K building value. or %240K of coverage. Because the insured only has 200K of coverage, a penalty applies. The formula is that the amount actually carried (200K) is divided by the amoun
Under homeowners coverage for medical payments to others, necessary medical expenses for treating an accidental injury will be covered if it incurred within how many days?
3 Years of the accident date,
Coverage for medical payments to others under a homeowners policy applies to necessary medical expenses incurred within three years of an accident that causes bodily injury.
Under a Personal Umbrella policy, a self insured retention is an amount that is in effect a deductible for insured losses.
A personal Umbrella may cover losses that are excluded by underlying insurance- in which case, a self insured retention limit applies. This operates similar to a deductible because it is the out of pocket amount the insured must absorb before the umbrella
Ocean Marine PROTECTION AND INDEMNITY (P&I) coverage usually insures the ship owner against liability for all of the following :
Cargo lost or damaged through negligence.
damage to other vessels when casued by collision.
Job related injuries to sailors.
Damage to the insured ship is not covered under P&I, but the insurance is available under hull coverage.
National flood insurance is available for Residential and nonresidential buildings and contents.
Almost any building that is walled and roofed, is principally above ground, and is fixed to a permanent site is eligible to ce covered by a flood policy. A policy may cover a building, its contents, or both.
Which dwelling forms can provide replacement cost coverage for buildings.
The broad and special forms only.
Although all dwelling forms settle personal property losses at actual cash value, under the broad and special forms (DP2 and DP3), replacement cost coverage for buildings is provided if the insured carries insurance equal to at least 80% of the full repla
Under the commercial property conditions, the coverage territory includes all of the following:
United States, Puerto Rico, and Canada.
Mexico is not a covered territory.
What risk might qualify for coverage under a business owners policy?
An apartment building of any size.
Under the BOP (Business Owners Policy) eligibility rules, there is no size limitation on apartment buildings, but a size limit does apply to office buildings. Banks, saving and loan associations, bars, and pubs are specifically described as ineligible ris
Under a BUSINESS AUTO LIABILITY coverage, if an insured takes time off from work at the request of the insurer and suffers loss of earnings, as a supplementary payment, the insurer will pay up to how much?
$250 a day for lost earnings.
The business auto coverage from includes supplementary payments under the liability section that state the insurer will pay expenses incurred by an insured at the insurer's request, including up to $250 a day for lost earnings because of time off from wor
The primary purpose of insurance is to do what?
Transfer Risk.
The purpose of insurance is not to avoid or eliminate risk, but to transfer risk. Risk reduction efforts play a part in loss control,. which helps to keep insurance costs down, but insurance itself is not an example of reducing risk.
Restoring an insured to approximately the same condition that existed before a property loss is an example of what principle?
Indeminty
The principle of indemnity states that when a loss occurs, an individual should be restored to approximately the same financial position he or she was in before the loss. Insurable interest is a requirement for the insurance to apply. Salvage and subrogat
Which DWELLING FORMS provide coverage for loss of fair rental value when a dwelling becomes uninhabitable?
The basic, broad, and special forms.
All dwelling policies provide coverage for the loss of fair rental value if a building or other structure becomes uninhabitable because of an insured cause of loss. A limited amount of coverage is provided under the OTHER COVERAGES section of the policy,
On a COMMERCIAL PACKAGE policy, interline endorsements can?
Apply t more than one line of insurance.
Interline endorsements attached to a commercial package policy are endorsements that can apply to more than one line of insurance or coverage part.
On HOMEOWNERS POLICIES, personal property used for business purposes is:
Covered up to $2,500 on the premises and up to $500 off the premises.
HOMEOWNERS POLICIES do cover some property used for business, by the coverage is subject to special limitations. The policy will only provide up to $2,500 of coverage for business property on the residence premises and $500 of coverage for business proper
When an insured cancels a policy prior to its expiration date, the insurance company will return a portion of the unused premium on a short rate basis, What does the term "short Rate" mean?
The insurer will keep the earned premium plus an additional amoun
when an insured cancels a policy prior to expiration, the unearned premium may be returned on a short rate basis. This means that the company not only keeps the earned premium for the insurance provided, but also keeps an additional amount for expenses of
he taking of money or other property from inside a premises by someone who has unlawfully and forcefully entered or exited is an example of what kind of crime?
Burglary.
Burglary is the taking of money or other property from inside a premises by someone who has unlawfully entered or exited the premises. There must be visible evidence or forced entry or exit. Robbery is taking money or property by force or threat.
Embezzle
Which method of risk management best describes the use of high deductibles or elements of self insurance to reduce insurance costs?
Retention.
Risks may be retained in whole or in part by intentionally self insuring or selecting high deductibles. The other risk management options are not examples of risk reduction. Transfer refers to the purchase of insurance , where the risk of loss is assumed
Office buildings are eligible for coverage under a BUSINESS OWNERS POLICY if the do not contain more than 100,000 square feet of space and do not exceed:
6 Stories in height.
Under the eligibility rules, office buildings may qualify for coverage under a BUSINESS OWNERS POLICY if they do not exceed 100,000 SQ Feet of space and do not exceed 6 stories in height.
An insurance company has made an underwriting profit when...
Its combined ratio is less than 100%
The combined ration is the sum of the loss ration and the expense ration. A combined ratio of less than 100% indicates that the company had an underwriting profit. A combined ratio of more than 100% indicates that the company has had a net loss.
The COMMERCIAL COMMON POLICY declarations would include all of the following types of info:
The policy period
the coverage parts purchased and their premiums
the identity and mailing address of the named insured.
The COMMON POLICY DECLARATIONS contain vital summary info about the contract, such as mane and address of the named insured, policy period, coverage parts attached, premiums, and a list of forms attached to the policy. Exclusions are found in the individu
Under the loss sustained version of COMMERCIAL CRIME COVERAGE FORMS, the policy will cover losses sustained during the policy period and discovered either during the policy term or no later than:
One year after the policy expiration.
Crime insurance written under a loss sustained form covers losses sustained during the policy period and discovered either during the policy period or up to one year after the policy expires.
Under the NCCI workers compensation and employers liability policy form, the employers liability coverage excludes any claim for:
Liability assumed under contract.
Liability assumed under contract is specifically excluded under the employers liability section of a workers compensation policy.
Each of the following is true about farm coverage:
Livestock and equipment may be insured.
Property and liability overages may be included
The principal residence may NOT be covered by farm or homeowners forms.
Farm coverage may be written as a mono-line
Farm property, including the principal residence and other structures, may not be covered by homeowner forms.
Because an insurer writes the policy language and the insured has little or no control over the content, any ambiguity in the wording is usually resolved in favor of the insured.. Because the design and wording of a policy are in the hands of the insurer,
Insurance policies are contracts of adhesion. The insurer draws up the contract language and the insured simply adheres to the terms. For this reason, any ambiguity in the wording is usually resolved in favor of the insured by the courts.
Which COMMERCIAL PROPERTY CAUSES OF LOSS FORMS provide theft coverage?
The special form only.
Only the special causes of loss form provides theft coverage for commercial property.
After a homeowners policy has been in effect for at least 60 days, when the insurer cancels for any reason other than nonpayment of premium, it must give the insured advance written notice of at least how many days?
30 Days
The insurance company is only required to give notice of 10 days in advance when it cancels a policy for any reason during the first 60 days of coverage or for nonpayment of premium at any time during the policy term. However, after a policy has been in e
Under which policy provision is an insured's right to recover for a loss from a third party transferred to the insurance company?
Subrogation.
The TRANSFER OF RIGHTS OF RECOVERY clause, also known as subrogation, gives the insurance company the right to recover from a third party who was at fault for a loss, up to the amount that the insurer has paid the insured for the loss. The abandonment pro
A businessowners policy may provide additional coverage for increased cost of construction when required to comply with an existing ordinance or law. However, this coverage is available only for buildings that are insured on a replacement cost basis and i
If a building is insured on a replacement cost basis, a BUSINESSOWNERS policy will provide additional coverage for increased cost of construction when required to comply with an existing ordinance or law. This coverage is limited to 10,000.
The following are available as one of the farm liability coverage's included in an ISO policy.
Medical payments to others
bodily injury and property damage
personal injury and advertising injury
NOT AVAILABLE: Injury to farm employees.
Similar to CGL coverage, the farm liability form provides coverage for bodily injury and property damage, personal injury and advertising injury, and medical payments to others. Coverage for injury to farm employees is specifically excluded.
The following are an optional PROPERTY COVERAGE on HOMEOWNERS POLICIES:
Personal property replacement cost.
permitted incidental occupancies
increased limits for jewelry, watches, and furs
NOT COVERED: Loss of use of the premises.
All homeowner policies provide some coverage for loss of use. The others listed are all optional.
The following is true about commercial crime coverage written on a DISCOVERY POLICY FORM:
A loss discovered during the policy period will be covered even if it was sustained years earlier.
COMMERCIAL CRIME COVERAGE written on a DISCOVERY POLICY FORM will cover a loss discovered during the policy period even if it was sustained months or years earlier. It will also cover a loss discovered up to 60 days after the policy expires. Exclusions do
Withholding, rather than misstating a material fact on an insurance application is an act of which of the following?
Concealment
Concealment is similar to misrepresentation, except that it involves withholding a material fact where misrepresentation involves misstating a material fact. Fraud has a more extensive definition, which includes the insurance company relying on an being h
When an insurer cancels a commercial package policy for resons other than nonpayment of premium, it must give written notice to the first named insured at least how long?
30 days in advance.
If the insurer cancels a c COMMERCIAL PACKAGE POLICY, it must mail a written notice to the last known address of the first named insured, Ten days' notice is required for cancellation for nonpayment of premium; 30 days notice is required for cancellation
The following coverage may be included in a PERSONAL AUTO POLICY without the necessity of issuing an endorsement:
Transportation expenses.
Coverage for transportation expenses is included in the physical damage section of a PERSONAL AUTO policy. The following may be added for additional premium:
Miscellaneous type vehicles
towing and labor cost
Named nonobservant coverage
The COMMERCIAL BUILDING and PERSONAL PROPERTY COVERAGE FORM provides a number of coverage extensions but only if...
AN 80% or higher coinsurance percentage or a value reporting symbol is sown in the declarations.
The COMMERCIAL BUILDING and PERSONAL PROPERTY COVERAGE FORM does provide a number of coverage extensions but only if an 80% or higher coinsurance percentage or a value reporting symbol is shown in the declarations.
Which type of insurer consists of an unincorporated group of members who share losses and provide insurance to each other?
Reciprocal exchange
Reciprocal insurers consist of members who are unincorporated and collectively share losses and provide insurance to themselves. Lloyd's associations are syndicates of insurance underwriters and mutual and multi-line insurers are examples of traditional i
Medical payments under a HOMEOWNERS policy are available for expenses resulting from an injury to:
A resident employee.
Under homeowners coverage for medical payments to others, injuries to the named insured, family members, and any other regular residents are specifically excluded. However, although residents are not usually covered, an exception is made for "resident emp
Some property insurance policies provide for payment of the full policy limit in the event of a total loss by a covered peril,. regardless of the actual value of the property,. Thee policies are known as:
Valued or agreed amount policies.
For certain hard to value items, the insurance company may issue a valued or agreed amount contract for a specified amount agreed to by both parties., If the item is lost of completely destroyed, the insurer will pay this amount as settlement.
Which part of an insurance policy sets the rules of conduct, duties, and obligations of the insured and insurer under the terms of the contract.
Conditions.
The CONDITIONS state the ground rules for the contract and spell out the responsibilities and obligations of both the insurance company and insured.
When an uninterrupted chain of events resulting from a negligent act causes a loss, that act is considered to be:
Proximate Cause of Loss.
To establish that one person's actions toward another were negligent and caused injury or damage, the negligent act and the damage must be tied together. If there was no intervening cause and the negligent act led directly to the loss in an unbroken seque
Policies issues under the National Flood Insurance Program provide removal coverage from property removed to protect it from flood. This coverage applies at another location for up to how many days?
45 days
Under flood policies, property is also covered at another place, either above ground or outside of the special flood hazard area, for 45 days when removed by the insured to protect it from flood.
In legal terms, the actions by one party might have the effect of giving up a known right. When this occurs, the party has created a:
Waiver
The legal definition of "waiver' is the intentional relinquishment of a known right. Sometimes an insurer or its agent might overlook a provision that might have been grounds for denying coverage or increasing the premium. By doing so, the insurer might h
When the special causes of loss form is attached to a commercial property coverage part, coverage for theft of furs and fur garments is limited to how much.
$2,500
The special form is the only causes of loss form for commercial property coverage that provides theft coverage. However for certain classes of property, various limitations apply and coverage for theft of furs and fur garments is limited to $2,500.
An insurer's loss ratio is determined by dividing what?
Underwriting losses by total premiums.
The loss ratio is used to compare the company;s loss experience from year to year. It is calculated by dividing the amount of incurred underwriting losses by the earned premium. It can be calculated separably for individual lines of insurance or the compa
Under most property insurance policies, the policy territory includes:
All but mexico and Europe.
The policy territory typically includes the united states, its territories, and possessions. and Canada. Mexico and Europe are not included.
Apparent authority of an insurance agent is the authority
that members of the public can reasonably assume that the agent has.
Apparent authority is a doctrine that holds an agent may have whatever authority a reasonable person would assume he or she has. An agent acting under apparent authority may bind an insurer as fully as one acting under expressed or implied authority.
Claims-made GENERAL LIABILITY coverage does not apply to bodily injury or property damage that occurs when?
Before the policies retro active effective date
A retroactive date on a claims made liability policy marks the date on which coverage for reported claims begins. An occurrence on the retroactive date would be covered,. but there would be no coverage for bodily injury or property damage that occurred pr
Under liability insurance policies, what does an "aggregate limit" mean?
It is the most the insurer will pay for all losses during any one policy period.
An aggregate limit is a maximum limit that applies to all losses during a policy period. Each individual loss is subtracted from the aggregate limit and reduces the remaining coverage. At each policy anniversary or renewal the aggregate limit is reinstate
The purpose of FAIR Plans (Fair Access to Insurance Requirements) is to do what?
make property insurance available to risks that were otherwise considered uninsurable because of environmental hazards.
Essentially, a FAIR plan makes insurance available to risks that were previously considered uninsurable because o environmental hazards.
In the event of a physical damage loss that makes a covered auto unavailable for a period of time, a personal auto policy will provide coverage for transportation expenses at the rate of $20 per day up to ho much?
A maximum payment of $600.
In addition to collision and other than collision coverage, if a covered loss makes an insured auto unavailable, a personal auto policy will provide coverage fro transportation expenses up to $20 per day, subject to a maximum payment of $600.
Under the business auto coverage part, each of the following is true about the classifications of covered autos, which are designated by numerical symbols shown in the declarations:
An insured can select different classifications for various coverage.
"an
An insured can select which vehicles are to be "covered autos" for each individual coverage. Different symbols can be used for various coverage's and autos. With the exception of specifically described autos, autos acquired during the policy period are au
Something that might increase the likelihood that a loss will occur:
Hazard.
A hazard is something that increases the chance of loss, such as a loose step or flammable materials. A peril is the cause of loss, such as a fire. Risk is any outcome that involves uncertainty. A catastrophe is an unexpected event, such as a earthquake o
Tom Baxter has an automobile insured by a personal auto policy. He trades in his car and purchases a new private passenger auto as a replacement vehicle. If he does not notify the insurance company, the liability coverage for his replacement vehicle will
Under a personal auto policy, if a newly acquired auto replaces another auto, the new vehicle automatically has the broadest coverage fro liability, medical payments, and uninsured motorist coverage for any auto shown in the declarations until the end of
A device that is used to minimize small nuisance claims and that helps to keep insurance premiums down:
Deductible
Deductibles reduce the cost of insurance by eliminating small claims. The amount of the deductible is stated in the declarations. Arbitration is a means of settling claims deputes when the insured and the company disagree on the value of property. A value
Homeowners coverage for loss of personal property because of "mysterious disappearance" is provided by what
The comprehensive form (HO-5) is the only homeowner s policy that insures loss of personal property items by what is known as "mysterious disappearance" because it covers loss by theft, misplacing, or losing. The other policy forms only cover loss because
Which type of insurance professional does not actually sell insurance coverages, but sells advice about insurance coverages?
Consultant
Insurance consultants do not actually sell insurance; they sell advice. Agents, brokers, and solicitors are all producers who sell insurance.
Which of the following is not excluded under commercial general liability coverage for bodily injury and property damage liability?
Injury or damage caused by the operation of mobile equipment
(BI) BODILY INJURY & (PD) PROPERTY DAMAGE coverage for the ownership, operation, or use of mobile equipment is covered by Consumer Gross Liability policies. All of the other answer choices are specifically excluded.
Most liability claims are based on negligence that results in injury or damage. An act of negligence is considered to be a tort. What does the term "tort" mean.
A tort is a criminal act committed with the intent to cause injury.
A tort is a civil wrong that violates the rights of another. Unlike the commission of a crime, in which the government may prosecute the wrongdoer, torts are in part of civil law that is concerned with private relationships between people.
Various types of domestic shipments may be covered under a number of inland marine forms. Which of the following is not one of the nonfiled marine forms used to insure domestic shipments.
Mail Coverage Form, only covers postage
Annual transit policies, trip transit policies, and motor truck cargo policies are all examples of nonfiled inland Marie forms used to cover domestic shipments. Although some some types of property may be covered in transit by the mail coverage form, it i
Claims that are paid by general liability coverage are charged against the aggregate policy limits and reduce the amount of insurance remaining to pay future claims. However, CGL aggregate limits will be reinstated in full.
On the next policy anniversary
Claims paid under general liability coverage are charged against the applicable aggregate policy limit and reduce the amount of insurance remaining to pay future claims during the policy period, but they apply separately to each consecutive policy period
Under the DWELLING PROPERTY FORMS, personal property moved to a new principal residence will be automatically covered at the new location for a period of how long?
30 days.
Coverage is provided for personal property moved from the described location to a new principal residence. This coverage applies only for 30 days and not beyond the policy period.
...What is not true about insurance binders?
Binders are only valid when issued in writing.
Binders can be issued in writing, but oral binders are valid if the agent is acting within the scope of his or her authority. Binders are temporary contracts of insurance and can be given by agents or insurers.