AU 61 FLASH CARDS
A property location's probable maximum loss (PML) is - answer The underwriter's
estimate of the largest loss likely to occur.
Underwriters must sometimes underwrite package policies for applicants that have
differing loss exposure levels by line of business. Which one of the following can be
used to ensure that enough premiums are paid to cover the higher hazard risks? -
answer Minimum premium levels for low hazard risks
Insureds sometimes purchase package policies to meet their insurance needs. The
underwriting approach can be affected by the type of package policies offered. Which
one of the following types of package policies is used to reduce adverse selection and
often results in a premium discount for the insured? - answer Minimum combination
requirement
In insurance terminology, property being shipped by aircraft is considered to be -
answerProperty in transit.
When working with a valuation guidebook or computer software, underwriters use
several factors to determine a property's value. Which one of the following is a factor
evaluated by underwriters to determine property value? - answerConstruction materials
used
Verifying the values of property exposed to a loss is an essential part of commercial
property underwriting. For example, if the property values shown on a commercial
property submission are higher than the property's actual value, then - answerThe
insured will pay for unnecessary coverage.
Underwriters can use a valuation guidebook or computer software supplied by an
appraisal company to make their own property value estimates. Which one of the
following is true regarding the valuation guidebooks or computer software? -
answerThey can also be used for valuing building contents or equipment.
Which one of the following statements is true regarding amount subject and probable
maximum loss (PML) in evaluating property loss exposures? - answerUnderwriters
often use the expression "within four walls" to explain the concept of amount subject.
One reason underwriters analyze the financial condition of a potential property insured
is to determine if the business is financially resilient and can cope with changing
economic cycles. Which one of the following statements is true regarding financial
condition and changing economic cycles for property insureds? - answerEconomic
contraction can increase the probable frequency and severity of losses.
,Which one of the following statements regarding package policy underwriting is true? -
answerThe disadvantage of package underwriting is that underwriters cannot be
selective in the coverage offered to the applicant
A policy that covers two or more lines of business by combining ISO's Commercial
Lines coverage parts is - answerA commercial package policy.
In the context of property loss exposures, flood is considered to be all of the following,
EXCEPT: - answerAn adverse financial consequence
A technology firm recently built a new production facility with unique property loss
exposures. Of the following possibilities, which one is most likely to address the firm's
needs? - answerA nonstandard form using provisions more favorable to the insured
than standard forms
For which one of the following reasons should an underwriter consider the attitude of a
prospective commercial property insured's management toward risk control? - answerIt
helps the underwriter assess the quality of the account.
Agreed Value optional coverage suspends the coinsurance condition if the insured
carries the amount of insurance agreed to by the insurer and the insured. Because of
this, underwriters should - answerTake extra steps to verify the value of the property
being insured.
Sharon Petty has given her sister, Ellen, the right to use a property during Ellen's
lifetime. Upon Ellen's death, this right terminates and cannot be passed to her estate. At
Ellen's death, Sharon, if living, will retain outright ownership of the property. If Sharon
dies before Ellen, the property will pass to Sharon's brother, Patrick.At Ellen's death,
what type of interest does Sharon have in the property being used by Ellen? -
answerFee simple
Which one of the following types of property ownership is available only to a husband
and wife? - answerTenancy by the entirety
Verifying the values of property exposed to a loss is an essential part of commercial
property underwriting. For example, if the property values shown on a commercial
property submission are lower than the property's actual value, then - answerThe
insurer will not receive sufficient premium
The inspections and surveys condition clarifies that the insurer does not make -
answerSafety inspections
Underwriters must know how a contraction of the economy can affect exposures for all
of following reasons, EXCEPT: - answerIf sales decline while production temporarily
continues, inventory will rapidly decline.
, With package policies, underwriters often incorporate risk control services into the
underwriting process. Which one of the following is true regarding risk control services
and package policies? - answerReducing losses from one source may increase the
possibility of loss from another.
Underwriters will often examine a potential insured's management and financial
condition in order to determine the insured's emphasis on risk control. Which one of the
following best describes why insurers are interested in an insured's risk control efforts? -
answerPutting less emphasis on risk control can increase physical, moral, and morale
hazards.
All of the following are components of a property loss exposure, EXCEPT: - answerThe
insurability of the property
An insured who owns a large business is comparing the different types of commercial
insurance policies. The insured would likely choose a Commercial Package Policy
because it will provide - answerThe option to add lines of insurance for all coverages
that are needed.
Personal property values are easier to determine than real property values. However,
when the values of personal property are difficult to resolve, which one of the following
is almost always required? - answerAn outside appraisal
Policy provisions usually specify a valuation method which states how the insurer will
determine the value of the insured's property in the event of a covered loss. Which one
of the following types of valuation methods reimburses the insured fully for any losses
sustained and eliminates uncertainty in loss adjustments? - answerReplacement cost
Which one of the following statements is true regarding measures of potential loss
severity for property loss exposures? - answerThe amount subject for a location, as
estimated by any two underwriters with a common employer, should be consistent.
A wedding photographer uses his camera equipment at several dozen different
locations each year. In insurance terminology, the camera equipment is considered to
be - answerFloating property.
Rosa is working with an architect to design a new building for her law firm. They initially
discussed frame construction; however, Rosa learned from her insurance agent that
frame construction is less desirable to property underwriters than joisted masonry.
Therefore, Rosa has asked her architect how they might upgrade the construction to
joisted masonry, without drastic changes to the plans or excessive expense. Which one
of the following changes is the architect most likely to recommend to Rosa? -
answerUse concrete self-supporting exterior walls over the wood-framed structure.
A property location's probable maximum loss (PML) is - answer The underwriter's
estimate of the largest loss likely to occur.
Underwriters must sometimes underwrite package policies for applicants that have
differing loss exposure levels by line of business. Which one of the following can be
used to ensure that enough premiums are paid to cover the higher hazard risks? -
answer Minimum premium levels for low hazard risks
Insureds sometimes purchase package policies to meet their insurance needs. The
underwriting approach can be affected by the type of package policies offered. Which
one of the following types of package policies is used to reduce adverse selection and
often results in a premium discount for the insured? - answer Minimum combination
requirement
In insurance terminology, property being shipped by aircraft is considered to be -
answerProperty in transit.
When working with a valuation guidebook or computer software, underwriters use
several factors to determine a property's value. Which one of the following is a factor
evaluated by underwriters to determine property value? - answerConstruction materials
used
Verifying the values of property exposed to a loss is an essential part of commercial
property underwriting. For example, if the property values shown on a commercial
property submission are higher than the property's actual value, then - answerThe
insured will pay for unnecessary coverage.
Underwriters can use a valuation guidebook or computer software supplied by an
appraisal company to make their own property value estimates. Which one of the
following is true regarding the valuation guidebooks or computer software? -
answerThey can also be used for valuing building contents or equipment.
Which one of the following statements is true regarding amount subject and probable
maximum loss (PML) in evaluating property loss exposures? - answerUnderwriters
often use the expression "within four walls" to explain the concept of amount subject.
One reason underwriters analyze the financial condition of a potential property insured
is to determine if the business is financially resilient and can cope with changing
economic cycles. Which one of the following statements is true regarding financial
condition and changing economic cycles for property insureds? - answerEconomic
contraction can increase the probable frequency and severity of losses.
,Which one of the following statements regarding package policy underwriting is true? -
answerThe disadvantage of package underwriting is that underwriters cannot be
selective in the coverage offered to the applicant
A policy that covers two or more lines of business by combining ISO's Commercial
Lines coverage parts is - answerA commercial package policy.
In the context of property loss exposures, flood is considered to be all of the following,
EXCEPT: - answerAn adverse financial consequence
A technology firm recently built a new production facility with unique property loss
exposures. Of the following possibilities, which one is most likely to address the firm's
needs? - answerA nonstandard form using provisions more favorable to the insured
than standard forms
For which one of the following reasons should an underwriter consider the attitude of a
prospective commercial property insured's management toward risk control? - answerIt
helps the underwriter assess the quality of the account.
Agreed Value optional coverage suspends the coinsurance condition if the insured
carries the amount of insurance agreed to by the insurer and the insured. Because of
this, underwriters should - answerTake extra steps to verify the value of the property
being insured.
Sharon Petty has given her sister, Ellen, the right to use a property during Ellen's
lifetime. Upon Ellen's death, this right terminates and cannot be passed to her estate. At
Ellen's death, Sharon, if living, will retain outright ownership of the property. If Sharon
dies before Ellen, the property will pass to Sharon's brother, Patrick.At Ellen's death,
what type of interest does Sharon have in the property being used by Ellen? -
answerFee simple
Which one of the following types of property ownership is available only to a husband
and wife? - answerTenancy by the entirety
Verifying the values of property exposed to a loss is an essential part of commercial
property underwriting. For example, if the property values shown on a commercial
property submission are lower than the property's actual value, then - answerThe
insurer will not receive sufficient premium
The inspections and surveys condition clarifies that the insurer does not make -
answerSafety inspections
Underwriters must know how a contraction of the economy can affect exposures for all
of following reasons, EXCEPT: - answerIf sales decline while production temporarily
continues, inventory will rapidly decline.
, With package policies, underwriters often incorporate risk control services into the
underwriting process. Which one of the following is true regarding risk control services
and package policies? - answerReducing losses from one source may increase the
possibility of loss from another.
Underwriters will often examine a potential insured's management and financial
condition in order to determine the insured's emphasis on risk control. Which one of the
following best describes why insurers are interested in an insured's risk control efforts? -
answerPutting less emphasis on risk control can increase physical, moral, and morale
hazards.
All of the following are components of a property loss exposure, EXCEPT: - answerThe
insurability of the property
An insured who owns a large business is comparing the different types of commercial
insurance policies. The insured would likely choose a Commercial Package Policy
because it will provide - answerThe option to add lines of insurance for all coverages
that are needed.
Personal property values are easier to determine than real property values. However,
when the values of personal property are difficult to resolve, which one of the following
is almost always required? - answerAn outside appraisal
Policy provisions usually specify a valuation method which states how the insurer will
determine the value of the insured's property in the event of a covered loss. Which one
of the following types of valuation methods reimburses the insured fully for any losses
sustained and eliminates uncertainty in loss adjustments? - answerReplacement cost
Which one of the following statements is true regarding measures of potential loss
severity for property loss exposures? - answerThe amount subject for a location, as
estimated by any two underwriters with a common employer, should be consistent.
A wedding photographer uses his camera equipment at several dozen different
locations each year. In insurance terminology, the camera equipment is considered to
be - answerFloating property.
Rosa is working with an architect to design a new building for her law firm. They initially
discussed frame construction; however, Rosa learned from her insurance agent that
frame construction is less desirable to property underwriters than joisted masonry.
Therefore, Rosa has asked her architect how they might upgrade the construction to
joisted masonry, without drastic changes to the plans or excessive expense. Which one
of the following changes is the architect most likely to recommend to Rosa? -
answerUse concrete self-supporting exterior walls over the wood-framed structure.
