State Farm Insurance License Exam
Questions and Answers
Abandonment Condition
A condition often contained in property insurance policies that states that the insured cannot
abandon damaged property to the insurer and demand to be reimbursed for its full value.
Accident
A loss that occurs at a specific time and place
Actual Cash Value (ACV)
Today's replacement cost minus depreciation. Depreciation from wear and tear, or obsolescence.
admitted insurer; authorized insurer
Company that meets a state insurance department's standards and is allowed to do business in that
state.
Adverse Selection
the tendency of insureds with a greater than average chance of loss to purchase insurance
Annual Transit Policy
Nonfiled commercial inland marine transportation form that insures a property owner's incoming or
outgoing shipments of goods during a year
Appraisal Clause
A survey of property to determine the insurable value of the property or the value of the loss
sustained.
Appraisal Condition
Policy condition that outlines a procedure for when the insured and insurer disagree on the amount
of a loss
Assignment
The legal transfer of one's interest in an insurance policy to another person.
Aviation Hull Insurance
Provides coverage for physical damage to an aircraft.
Bailee's Customers Policy
Nonfiled commercial inland marine form obtained by a bailee to cover loss or damage to customers'
property in the bailee's custody without regard to liability.
Appurtenant Structures
Buildings of lesser value that are on the same premises as the main building insured under a property
policy; they are usually covered by the policy.
, Assignment Condition
Condition in insurance policies that specifies that the policy cannot be transferred to another unless
the company consents to the transfer in writing.
Bailee
A person or organization that has temporary possession of someone else's personal property.
Basic Perils in Homeowners Policy
There are 14 perils. Fire, lightening, riot, explosion, vehicles, volcanic eruption, civil commotion,
smoke, hail, aircraft, windstorm, vandalism, malicious mischief, theft.
Basic Property Policy Structure (DICEE)
D - Declarations
I - Insuring agreement
C - Conditions
E - Exclusions
E - Endorsements
Blanket Insurance
Type of insurance policy that covers more than one item of property at a single location or one or
more items of property at multiple locations
Builders Risk Coverage Form
Commercial property coverage forms that covers commercial, residential, or farm buildings that are
under construction or during remodeling.
Cargo Insurance
Type of ocean marine insurance that covers goods while they are in transit over water.
Binder
Oral or written statement that provides immediate insurance protection for a specified period;
designed to provide temporary coverage until a policy is issued or denied.
BOP
Package policy designed to provide broad property and liability coverage for small businesses;
eligibility requirements are stricter than the CPP.
Business Income Policy
Pays for loss of income that the insured sustains due to a direct physical loss from a covered peril that
forces the insured to suspend operations until the property can be repaired, rebuilt, or replaced with
reasonable speed; available with or without extra expense coverage.
Causes of Loss Form
Separate form used with the commercial property coverage part of the commercial package policy
that lists covered perils and exclusions. Several different versions provide increasingly broader
coverage from basic to broad to special.
Questions and Answers
Abandonment Condition
A condition often contained in property insurance policies that states that the insured cannot
abandon damaged property to the insurer and demand to be reimbursed for its full value.
Accident
A loss that occurs at a specific time and place
Actual Cash Value (ACV)
Today's replacement cost minus depreciation. Depreciation from wear and tear, or obsolescence.
admitted insurer; authorized insurer
Company that meets a state insurance department's standards and is allowed to do business in that
state.
Adverse Selection
the tendency of insureds with a greater than average chance of loss to purchase insurance
Annual Transit Policy
Nonfiled commercial inland marine transportation form that insures a property owner's incoming or
outgoing shipments of goods during a year
Appraisal Clause
A survey of property to determine the insurable value of the property or the value of the loss
sustained.
Appraisal Condition
Policy condition that outlines a procedure for when the insured and insurer disagree on the amount
of a loss
Assignment
The legal transfer of one's interest in an insurance policy to another person.
Aviation Hull Insurance
Provides coverage for physical damage to an aircraft.
Bailee's Customers Policy
Nonfiled commercial inland marine form obtained by a bailee to cover loss or damage to customers'
property in the bailee's custody without regard to liability.
Appurtenant Structures
Buildings of lesser value that are on the same premises as the main building insured under a property
policy; they are usually covered by the policy.
, Assignment Condition
Condition in insurance policies that specifies that the policy cannot be transferred to another unless
the company consents to the transfer in writing.
Bailee
A person or organization that has temporary possession of someone else's personal property.
Basic Perils in Homeowners Policy
There are 14 perils. Fire, lightening, riot, explosion, vehicles, volcanic eruption, civil commotion,
smoke, hail, aircraft, windstorm, vandalism, malicious mischief, theft.
Basic Property Policy Structure (DICEE)
D - Declarations
I - Insuring agreement
C - Conditions
E - Exclusions
E - Endorsements
Blanket Insurance
Type of insurance policy that covers more than one item of property at a single location or one or
more items of property at multiple locations
Builders Risk Coverage Form
Commercial property coverage forms that covers commercial, residential, or farm buildings that are
under construction or during remodeling.
Cargo Insurance
Type of ocean marine insurance that covers goods while they are in transit over water.
Binder
Oral or written statement that provides immediate insurance protection for a specified period;
designed to provide temporary coverage until a policy is issued or denied.
BOP
Package policy designed to provide broad property and liability coverage for small businesses;
eligibility requirements are stricter than the CPP.
Business Income Policy
Pays for loss of income that the insured sustains due to a direct physical loss from a covered peril that
forces the insured to suspend operations until the property can be repaired, rebuilt, or replaced with
reasonable speed; available with or without extra expense coverage.
Causes of Loss Form
Separate form used with the commercial property coverage part of the commercial package policy
that lists covered perils and exclusions. Several different versions provide increasingly broader
coverage from basic to broad to special.
