Property and Casualty Insurance
1. A $100,000 house insured on a policy with an 80% coinsurance require-ment 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
- For the total amount of a partial loss to be paid, a house must be insured for at least 80% of
its value on the date of loss. In this case, because the house is insured
for only $60,000 (75% of the minimum requirement), the policy will pay only 75% ofthe loss,
or $30,000.
2. An insured stated on her application for life insurance that she had neverhad a heart
attack, when in fact she had a series of minor heart attacks last year for which she sought
medical attention.Which of the following will explainthe reason a death benefit claim is
denied?: Material misrepresentation
3. All of the following are conditions commonly found in the insurance policyEXCEPT:
Insuring agreement
-subrogation, appraisal, cancellation and nonrenewal are all found
4. Duties of the insurer found in property policy conditions include all of thefollowing
EXCEPT: -Notify the insured in the event of financial difficulty
5. All of the following are considered parts of the policy structure EXCEPT: -
Provisions
-conditions, exclusions, and insuring clause are found
6. Representations are written or oral statements made by the applicant thatare: Considered
true to the best of the applicant's knowledge
7. The part of a policy that clarifies terms in the policy is the: Definitions
8. In forming an insurance contract, when does acceptance usually occur?-
: When an insurer's underwriter approves coverage
9. In insurance, an offer is usually made when: The completed application issubmitted
10. Which of the following is NOT the consideration in a policy?: The applicationgiven to a
prospective insured
11. Before an insurer will pay any loss under a policy, what is usually requiredfrom the
insured?: Proof of loss
12. An insurer neglects to pay a legitimate claim that is covered under the terms of the policy.
Which of the following insurance principles has the insurerviolated?: Consideration
13. When an insured makes truthful statements on the application for insur- ance and pays
the required premium, it is known as which of the following?-
,: Consideration
14. Which of the following is a statement that is guaranteed to be true, and ifuntrue, may
breach an insurance contract?: Warranty
15. The other insurance provision that limits the liability of the insurer to aportion of the loss
no greater than the amount the insurer bears to all the insurance covering the property is
called: Pro rata liability
16. 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'sconsent
17. In terms of parties to a contract, which of the following does NOT describe acompetent
party?: The person must have at least completed secondary education
18. When would a misrepresentation on the insurance application be consid-ered fraud?: If it
is intentional and material
19. An insured intentionally did not disclose a material fact on an applicationfor insurance.
This would be considered: Concealment
20. The ABC Corporation has $100,000 of coverage on its building through insurance
Company A, and $50,000 of identical coverage on the same buildingthrough insurance
Company B. Assuming coinsurance is not an issue, whena $24,000 loss occurs and the pro
rata method is used, how much will each insurer pay?: Company A will pay $16,000 and
Company B will pay $8,000
( Each policy pays its pro rata share of the loss based upon each policy's share ofthe total
amount of coverage.)
21. A person who is not named as an insured on the declarations page of apolicy but is
protected by the policy is known as the: Additional insured
22. Elements for a contract:: 1) Agreement - offer and acceptance
2) Consideration
3) Competent parties
4) Legal purpose
23. Payment for medical expenses, loss of wages, funeral expenses, or the cost to repair or
replace damaged property are known as what type of compensato-ry damages?: Special
24. Which method of loss valuation is contrary to the basic concept of indem- nity?:
Replacement cost
25. An insured owns several buildings, each at a different location and insured on a separate
policy. What type of coverage does the insured have?: Specific
26. The policy provision found in property insurance policies that prevents the insured from
collecting twice for the same loss is called: Subrogation
, 27. 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 which of the
following terms?: Occurrence
28. 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 some of
furniture and clothes in the house. From an insurance standpoint, the insured's house is
considered: Unoccupied
29. An insured's roof cost $4,000 when installed 5 years ago. It has been damaged by hail
and must be replaced.The new roof will cost $6,000 at today'sprices. If the roof has been
depreciating at $200 per year and the insured's policy is written on the actual cash
value(ACV), how much will the policy paytoward the insured's new roof?: $5,000
30. 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 loss to her home, how much
will the bank receive?: Nothing
31. What type of damages may be awarded by the court to create disincentives that discourage
behavior that is deemed highly undesirable by society?: Puni-tive
32. A tornado that destroys property would be an example of which of thefollowing?: A Peril
33. The insured's house is located one mile from the county's new landfill andacross the road
from the entrance of a rock quarry. It would cost $150,000
to rebuild the house if something happened to it, but when the insured triedto sell it, the best
offer he received was $80,000. The insurance company will
insure the house for only $80,000. What method of valuation is used to insurethis property?:
Market Value
34. An insured is applying for a casualty insurance policy. One of the con- ditions 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 beencollected for the exposure she plans to insure.
Which condition is part of theinsured's policy?: Deposit premium audit
35. All of the following statements concerning coinsurance are true EXCEPT-
: The coinsurance formula will also be applied to total losses.
36. A situation in which a person can only lose or have no change represents-
: Pure risk
37. A policy condition that stipulates how the amount of damaged or lost property will be
determined if the insured and the principal do not agree isknown as: Appraisal
38. An insured has a liability policy that sets the amount for all claims that arise from a single
incident at $50,000. Which type of limit of liability does thisinsured's policy have?: Per
1. A $100,000 house insured on a policy with an 80% coinsurance require-ment 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
- For the total amount of a partial loss to be paid, a house must be insured for at least 80% of
its value on the date of loss. In this case, because the house is insured
for only $60,000 (75% of the minimum requirement), the policy will pay only 75% ofthe loss,
or $30,000.
2. An insured stated on her application for life insurance that she had neverhad a heart
attack, when in fact she had a series of minor heart attacks last year for which she sought
medical attention.Which of the following will explainthe reason a death benefit claim is
denied?: Material misrepresentation
3. All of the following are conditions commonly found in the insurance policyEXCEPT:
Insuring agreement
-subrogation, appraisal, cancellation and nonrenewal are all found
4. Duties of the insurer found in property policy conditions include all of thefollowing
EXCEPT: -Notify the insured in the event of financial difficulty
5. All of the following are considered parts of the policy structure EXCEPT: -
Provisions
-conditions, exclusions, and insuring clause are found
6. Representations are written or oral statements made by the applicant thatare: Considered
true to the best of the applicant's knowledge
7. The part of a policy that clarifies terms in the policy is the: Definitions
8. In forming an insurance contract, when does acceptance usually occur?-
: When an insurer's underwriter approves coverage
9. In insurance, an offer is usually made when: The completed application issubmitted
10. Which of the following is NOT the consideration in a policy?: The applicationgiven to a
prospective insured
11. Before an insurer will pay any loss under a policy, what is usually requiredfrom the
insured?: Proof of loss
12. An insurer neglects to pay a legitimate claim that is covered under the terms of the policy.
Which of the following insurance principles has the insurerviolated?: Consideration
13. When an insured makes truthful statements on the application for insur- ance and pays
the required premium, it is known as which of the following?-
,: Consideration
14. Which of the following is a statement that is guaranteed to be true, and ifuntrue, may
breach an insurance contract?: Warranty
15. The other insurance provision that limits the liability of the insurer to aportion of the loss
no greater than the amount the insurer bears to all the insurance covering the property is
called: Pro rata liability
16. 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'sconsent
17. In terms of parties to a contract, which of the following does NOT describe acompetent
party?: The person must have at least completed secondary education
18. When would a misrepresentation on the insurance application be consid-ered fraud?: If it
is intentional and material
19. An insured intentionally did not disclose a material fact on an applicationfor insurance.
This would be considered: Concealment
20. The ABC Corporation has $100,000 of coverage on its building through insurance
Company A, and $50,000 of identical coverage on the same buildingthrough insurance
Company B. Assuming coinsurance is not an issue, whena $24,000 loss occurs and the pro
rata method is used, how much will each insurer pay?: Company A will pay $16,000 and
Company B will pay $8,000
( Each policy pays its pro rata share of the loss based upon each policy's share ofthe total
amount of coverage.)
21. A person who is not named as an insured on the declarations page of apolicy but is
protected by the policy is known as the: Additional insured
22. Elements for a contract:: 1) Agreement - offer and acceptance
2) Consideration
3) Competent parties
4) Legal purpose
23. Payment for medical expenses, loss of wages, funeral expenses, or the cost to repair or
replace damaged property are known as what type of compensato-ry damages?: Special
24. Which method of loss valuation is contrary to the basic concept of indem- nity?:
Replacement cost
25. An insured owns several buildings, each at a different location and insured on a separate
policy. What type of coverage does the insured have?: Specific
26. The policy provision found in property insurance policies that prevents the insured from
collecting twice for the same loss is called: Subrogation
, 27. 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 which of the
following terms?: Occurrence
28. 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 some of
furniture and clothes in the house. From an insurance standpoint, the insured's house is
considered: Unoccupied
29. An insured's roof cost $4,000 when installed 5 years ago. It has been damaged by hail
and must be replaced.The new roof will cost $6,000 at today'sprices. If the roof has been
depreciating at $200 per year and the insured's policy is written on the actual cash
value(ACV), how much will the policy paytoward the insured's new roof?: $5,000
30. 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 loss to her home, how much
will the bank receive?: Nothing
31. What type of damages may be awarded by the court to create disincentives that discourage
behavior that is deemed highly undesirable by society?: Puni-tive
32. A tornado that destroys property would be an example of which of thefollowing?: A Peril
33. The insured's house is located one mile from the county's new landfill andacross the road
from the entrance of a rock quarry. It would cost $150,000
to rebuild the house if something happened to it, but when the insured triedto sell it, the best
offer he received was $80,000. The insurance company will
insure the house for only $80,000. What method of valuation is used to insurethis property?:
Market Value
34. An insured is applying for a casualty insurance policy. One of the con- ditions 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 beencollected for the exposure she plans to insure.
Which condition is part of theinsured's policy?: Deposit premium audit
35. All of the following statements concerning coinsurance are true EXCEPT-
: The coinsurance formula will also be applied to total losses.
36. A situation in which a person can only lose or have no change represents-
: Pure risk
37. A policy condition that stipulates how the amount of damaged or lost property will be
determined if the insured and the principal do not agree isknown as: Appraisal
38. An insured has a liability policy that sets the amount for all claims that arise from a single
incident at $50,000. Which type of limit of liability does thisinsured's policy have?: Per
