Texas Property & Casualty Insurance
1. Which one of the following terms indicates that an insurance contractcontains the
enforceable promises of only one party?: Unilateral
2. The principle that restores someone to the condition he enjoyed before aloss is ?:
indemnity
3. Bryce owns a $50,000 lake cabin that he has insured for $40,000. He sustains a $5,000
covered loss. According to the principle of indemnity, howmuch will his insurer pay?: $5000
4. The page in an insurance contract contains information about therisk, the
effective date of coverage, deductible, premium amounts, coinsur-ance percentage, and
location of the insured property.: Declarations
5. The attempt to restore an insured to his pre-loss condition is known as
.: indemnification
6. The insured is looking for the amount of coverage in a property and casualty policy. This
information would be found in the .:
declarations
7. Jennifer and David signed a homeowners insurance application for cov- erage on their
home. They did not divulge that last year their garage burned down after their 16-year-old son
left a cigarette burning. The agent sent in theapplication and a policy was issued. When
another fire occurred 2 months after the policy was issued, the company voided the policy
because the agentwould not have sent in the application if he had known of the prior loss. Which
contract principle does this situation describe?: Utmost good faith
8. The parts of a contract are competent parties, legal purpose, offer, accep-tance, and .:
Consideration (CLOAC)
9. An Insurance company is the .: Principle
10. 3 types of authority are expressed (what you can do per the contract),implied and .:
apparent
11. A contract that must be accepted exactly as written, no changes is a
.: Contract of adhesion
12. Unequal exchanges between two parties is called .: an aleatory
con-tract
13. A Statement considered to be guaranteed true is a .: warranty
14. The voluntary relinquishment of a known right is a .: waiver
15. What prevents the re-insertion of a right originally waived?: estoppel
16. Split limits, aggregate limits and single limits are what types of policies?-
: Liability
,17. In a re-insurance transaction there is a ceding carrier that is the primary insurer and that
is the re-insurer that assumes part of the risk.: Assum-ing carrier
18. The transfer to the insurance company of the insured's right of recoveryagainst others is
called .: Subrogation
19. A person or organization that has temporary possession of someone else's personal
property. (like a dry cleaner with people's clothes) is calleda .: bailee
20. An open covers any loss that is not specifically excluded by thepolicy.: peril
policy
21. A policy lists the specific perils or causes of loss insured against underthe contract.:
Named peril
22. Walt and Joanna are co-owners of a bagel shop. Both Walt and Joanna arelisted in the
declarations of the policy that insures the business, with Joanna'sname appearing first. The
declarations also lists First State Bank, which has an outstanding loan on the business. Who is
the first named insured on this policy?: Joanna
23. Losses that are paid on the basis of the cost to replace the property, without an allowance
for depreciation, are paid on .: a replacement
costbasis
24. A condition or situation that presents a possibility of loss is a (an):: exposure
25. The purpose of insurance is to:: transfer risk
26. Which hazard can be described as a careless attitude or general indifferenceon the part of
the insured toward the occurrence of loss?: morale
27. Which risk is insurable?: pure
28. With regard to insurance, risk can be defined as:: uncertainty regarding loss
29. Treating risk by purchasing insurance is an example of what type of riskmanagement?:
transfer
30. Robert and Carolyn live in a busy city and decide that not owning a car is the solution to
not experience having a car stolen. What method describes thisphilosophy?: avoidance
31. Dishonesty on the part of an insured is an example of what?: a moral hazard
32. What is an example of reduction as a method of handling risk?: Installing aburglar alarm
33. Driving too fast and not wearing a seat belt are examples of?: morale hazard
34. The risk that involves the chance of both loss and gain is?: speculative risk
35. Self-insurance is an example of what kind of risk treatment?: Retention
36. If John's father transfers ownership of a house to John, can John buyinsurance?: Yes
because he has an insurable interest.
, 37. Fire would be an example of a what?: peril
38. What is the actual cause of a loss?: peril
39. What kind of risk is the stock market?: speculative risk
40. A is a condition that increases the chance of loss.: hazard
41. Faulty wiring causes a fire that destroys a building. The faulty wiring isconsidered to be
a(n):: hazard
42. A chance, possibility, or uncertainty of loss is known as?: risk
43. Examples of perils are ?: fire, wind and lightning
44. Indemnity insurance will ?: restores insured to pre-loss condition
45. The types of hazards are ?: moral, morale, and physical
46. is when people with a greater than average exposure to loss topurchase
insurance.: Adverse selection
47. Methods of handling risk are avoidance, reduction, retention, transfer and
.: Sharing (ARRTS)
48. Elements of insurable risk are calculable, affordable, non-catastrophic, homogenous,
accidental and .: Measurable (CANHAM)
49. Myron, who is 16, signs a contract to lease a car. This would probably not be considered a
valid contract under the law because .: He is not competentat 16.
50. Ben bought an automobile four years ago for $15,000. Today it is worth
$6,000. According to the principle of indemnity, how much should Ben receiveif the car is
totally demolished?: $6,000
51. Harry Arne and his cousin each own 50% of a $160,000 duplex. Suppose Harry
purchases $160,000 of insurance on the home. If it burns to the ground,how much would Harry
collect?: $80,000
52. Under a unilateral contract, which parties are legally bound to performunder the
contract?: Insurer only
53. Which part of an insurance policy describes the responsibilities and oblig- ations of both the
insurance company and the insured under the policy?: Con-ditions
54. The insuring agreement section of a policy describes the you
areinsured against.: perils
55. The elements of a valid contract are legal purpose, consideration, compe-tent parties, and
.: Offer and acceptance
56. Both parties rely on statements made to each other when writing a con-tract. This is
1. Which one of the following terms indicates that an insurance contractcontains the
enforceable promises of only one party?: Unilateral
2. The principle that restores someone to the condition he enjoyed before aloss is ?:
indemnity
3. Bryce owns a $50,000 lake cabin that he has insured for $40,000. He sustains a $5,000
covered loss. According to the principle of indemnity, howmuch will his insurer pay?: $5000
4. The page in an insurance contract contains information about therisk, the
effective date of coverage, deductible, premium amounts, coinsur-ance percentage, and
location of the insured property.: Declarations
5. The attempt to restore an insured to his pre-loss condition is known as
.: indemnification
6. The insured is looking for the amount of coverage in a property and casualty policy. This
information would be found in the .:
declarations
7. Jennifer and David signed a homeowners insurance application for cov- erage on their
home. They did not divulge that last year their garage burned down after their 16-year-old son
left a cigarette burning. The agent sent in theapplication and a policy was issued. When
another fire occurred 2 months after the policy was issued, the company voided the policy
because the agentwould not have sent in the application if he had known of the prior loss. Which
contract principle does this situation describe?: Utmost good faith
8. The parts of a contract are competent parties, legal purpose, offer, accep-tance, and .:
Consideration (CLOAC)
9. An Insurance company is the .: Principle
10. 3 types of authority are expressed (what you can do per the contract),implied and .:
apparent
11. A contract that must be accepted exactly as written, no changes is a
.: Contract of adhesion
12. Unequal exchanges between two parties is called .: an aleatory
con-tract
13. A Statement considered to be guaranteed true is a .: warranty
14. The voluntary relinquishment of a known right is a .: waiver
15. What prevents the re-insertion of a right originally waived?: estoppel
16. Split limits, aggregate limits and single limits are what types of policies?-
: Liability
,17. In a re-insurance transaction there is a ceding carrier that is the primary insurer and that
is the re-insurer that assumes part of the risk.: Assum-ing carrier
18. The transfer to the insurance company of the insured's right of recoveryagainst others is
called .: Subrogation
19. A person or organization that has temporary possession of someone else's personal
property. (like a dry cleaner with people's clothes) is calleda .: bailee
20. An open covers any loss that is not specifically excluded by thepolicy.: peril
policy
21. A policy lists the specific perils or causes of loss insured against underthe contract.:
Named peril
22. Walt and Joanna are co-owners of a bagel shop. Both Walt and Joanna arelisted in the
declarations of the policy that insures the business, with Joanna'sname appearing first. The
declarations also lists First State Bank, which has an outstanding loan on the business. Who is
the first named insured on this policy?: Joanna
23. Losses that are paid on the basis of the cost to replace the property, without an allowance
for depreciation, are paid on .: a replacement
costbasis
24. A condition or situation that presents a possibility of loss is a (an):: exposure
25. The purpose of insurance is to:: transfer risk
26. Which hazard can be described as a careless attitude or general indifferenceon the part of
the insured toward the occurrence of loss?: morale
27. Which risk is insurable?: pure
28. With regard to insurance, risk can be defined as:: uncertainty regarding loss
29. Treating risk by purchasing insurance is an example of what type of riskmanagement?:
transfer
30. Robert and Carolyn live in a busy city and decide that not owning a car is the solution to
not experience having a car stolen. What method describes thisphilosophy?: avoidance
31. Dishonesty on the part of an insured is an example of what?: a moral hazard
32. What is an example of reduction as a method of handling risk?: Installing aburglar alarm
33. Driving too fast and not wearing a seat belt are examples of?: morale hazard
34. The risk that involves the chance of both loss and gain is?: speculative risk
35. Self-insurance is an example of what kind of risk treatment?: Retention
36. If John's father transfers ownership of a house to John, can John buyinsurance?: Yes
because he has an insurable interest.
, 37. Fire would be an example of a what?: peril
38. What is the actual cause of a loss?: peril
39. What kind of risk is the stock market?: speculative risk
40. A is a condition that increases the chance of loss.: hazard
41. Faulty wiring causes a fire that destroys a building. The faulty wiring isconsidered to be
a(n):: hazard
42. A chance, possibility, or uncertainty of loss is known as?: risk
43. Examples of perils are ?: fire, wind and lightning
44. Indemnity insurance will ?: restores insured to pre-loss condition
45. The types of hazards are ?: moral, morale, and physical
46. is when people with a greater than average exposure to loss topurchase
insurance.: Adverse selection
47. Methods of handling risk are avoidance, reduction, retention, transfer and
.: Sharing (ARRTS)
48. Elements of insurable risk are calculable, affordable, non-catastrophic, homogenous,
accidental and .: Measurable (CANHAM)
49. Myron, who is 16, signs a contract to lease a car. This would probably not be considered a
valid contract under the law because .: He is not competentat 16.
50. Ben bought an automobile four years ago for $15,000. Today it is worth
$6,000. According to the principle of indemnity, how much should Ben receiveif the car is
totally demolished?: $6,000
51. Harry Arne and his cousin each own 50% of a $160,000 duplex. Suppose Harry
purchases $160,000 of insurance on the home. If it burns to the ground,how much would Harry
collect?: $80,000
52. Under a unilateral contract, which parties are legally bound to performunder the
contract?: Insurer only
53. Which part of an insurance policy describes the responsibilities and oblig- ations of both the
insurance company and the insured under the policy?: Con-ditions
54. The insuring agreement section of a policy describes the you
areinsured against.: perils
55. The elements of a valid contract are legal purpose, consideration, compe-tent parties, and
.: Offer and acceptance
56. Both parties rely on statements made to each other when writing a con-tract. This is
