Property and Casualty Practice Exam Verified Answers

Property and Casualty Practice Exam Verified Answers 1. Estoppel: - Estoppel prevents someone from denying a fact that has been previously established as true. 2. Principle of Indemnity: - The principle of indemnity states that the insured should not profit from an insurance transaction. It aims to restore the insured to the same financial position they were in before the loss occurred, without gaining financially. 3. Insurable Interest: - Insurable interest exists when an individual faces the risk of economic loss in the event of damage to property. It ensures that the insured has a legitimate financial interest in the property being insured. 4. Managing Risk: - Subrogation is not an option for managing risk. Risk management typically involves techniques such as avoidance, reduction, retention, and transfer. 5. Insurance Truth: - Insurance does not eliminate risk but transfers it from the insured to the insurer in exchange for premiums. 6. Law of Large Numbers: - The law of large numbers states that as the number of insured units increases, the predictability of losses improves, allowing insurers to more accurately estimate future claims. 7. Agent Authority: - An agent does not have the authority to represent the insured's interests. They act on behalf of the insurer in selling insurance policies and servicing customers. 8. Mutual Insurance Company: - In a mutual insurance company, policyholders are also owners and share in any profits through dividends. Stockholders do not have ownership in a mutual insurance company. 9. Insurance Type: - Insurance is an example of risk management through the transfer of risk. It shifts the financial burden of risk from the insured to the insurer. 10. Hazard Definition: - A hazard is something that increases the likelihood or severity of a loss. 11. Waiver Definition: - Waiver is the relinquishment of a legal right voluntarily and intentionally. 12. Types of Insurers: - Proprietary insurers are not a type of insurer. Insurers can be classified as mutual, stock, or reciprocal insurers. When both parties to a contract must perform certain duties in order to make the contract enforceable, is known as a(n): ️Conditional contract Which term is defined as the probability of loss ️Risk Which type of risk involves the possibility of loss or gain ️Speculative Which insurance company department determines the probability of loss and sets the premium rates ️Actuarial An agent that enters into agreements with more than one insurer is called ️Independent When a producer exceeds the authority expressed in the agency contract and the insurer does not take action, which of the following types of authority is created ️Apparent A state requiring that the commissioner agree that a company's rates are appropriate before they are made effective uses which type of rating approval ️Prior approval What is true about a stock insurance company ️A stock insurance company is run by officers and directors and has a stated amount of capital stock owned by stockholder