Chapter 1: P/C Insurance Basics ACTUAL
QUESTIONS AND CORRECT ANSWERS
Insurance - Correct answers✔✔a method for spreading the risk of a financial loss among a large
number of people. By spreading risk, we reduce the financial impact of an individual loss.
SPREAD LOSS TO MAKE LOSSES MORE MANAGEABLE.
Insurer - Correct answers✔✔Insurance company that writes the policy language and includes the
rights of the company within the guidelines of the insurance laws.
Property Insurance - Correct answers✔✔Dwelling, Homeowners, Commercial Property, Inland
Marine, Ocean Marine, Crime.
2 Parties involved: insured & insurer.
Casualty Insurance (Liability) - Correct answers✔✔Protects you against legal liability for BI
(bodily injury) and/or PD (property damage) that YOU cause to other people.
Will pay for accidental damage you cause to another person or their property.
3 Parties involved: Insured, Insurer, Injured Party
Personal Lines Insurance - Correct answers✔✔P/C insurance for an individual as opposed to a
business.
Ex) Homeowners, renters, auto, and personal umbrella.
Commercial Lines Insurance - Correct answers✔✔P/C insurance to cover a business.
Ex) Commercial General Liability, Worker's Comp, Commercial Property Insurance
Premium - Correct answers✔✔The money you pay in exchange for insurance coverage
, Consideration - Correct answers✔✔money you pay in exchange for insurance coverage along
with the statements you make in the application.
Deductible - Correct answers✔✔The portion of covered loss that is not paid by the insurance
company.
Insured is responsible for payment of deductible
Higher the deductible, lower the premium
By having a deductible, insured will not usually report any claims under deductible amount.
Binder - Correct answers✔✔An oral or written agreement that provides temporary evidence of
insurance until a policy can be issued.
Binder does not guarantee a policy will be issued
Provides temp coverage while app is being written
Underwriting - Correct answers✔✔process of classification, rating, and selection of risks.
Process of determining whether to accept a risk or not.
If risk is acceptable, underwriters will determine the amount of coverage to issue and the
premium to charge
First Name Insured - Correct answers✔✔Person or entity that is listed first on the declarations
page.
Holds highest rank among all insureds and has broader rights and obligations under the contract
than other insureds.
Can cancel policy, initiate changes, etc
Risk - Correct answers✔✔The possibility or uncertainty of loss
QUESTIONS AND CORRECT ANSWERS
Insurance - Correct answers✔✔a method for spreading the risk of a financial loss among a large
number of people. By spreading risk, we reduce the financial impact of an individual loss.
SPREAD LOSS TO MAKE LOSSES MORE MANAGEABLE.
Insurer - Correct answers✔✔Insurance company that writes the policy language and includes the
rights of the company within the guidelines of the insurance laws.
Property Insurance - Correct answers✔✔Dwelling, Homeowners, Commercial Property, Inland
Marine, Ocean Marine, Crime.
2 Parties involved: insured & insurer.
Casualty Insurance (Liability) - Correct answers✔✔Protects you against legal liability for BI
(bodily injury) and/or PD (property damage) that YOU cause to other people.
Will pay for accidental damage you cause to another person or their property.
3 Parties involved: Insured, Insurer, Injured Party
Personal Lines Insurance - Correct answers✔✔P/C insurance for an individual as opposed to a
business.
Ex) Homeowners, renters, auto, and personal umbrella.
Commercial Lines Insurance - Correct answers✔✔P/C insurance to cover a business.
Ex) Commercial General Liability, Worker's Comp, Commercial Property Insurance
Premium - Correct answers✔✔The money you pay in exchange for insurance coverage
, Consideration - Correct answers✔✔money you pay in exchange for insurance coverage along
with the statements you make in the application.
Deductible - Correct answers✔✔The portion of covered loss that is not paid by the insurance
company.
Insured is responsible for payment of deductible
Higher the deductible, lower the premium
By having a deductible, insured will not usually report any claims under deductible amount.
Binder - Correct answers✔✔An oral or written agreement that provides temporary evidence of
insurance until a policy can be issued.
Binder does not guarantee a policy will be issued
Provides temp coverage while app is being written
Underwriting - Correct answers✔✔process of classification, rating, and selection of risks.
Process of determining whether to accept a risk or not.
If risk is acceptable, underwriters will determine the amount of coverage to issue and the
premium to charge
First Name Insured - Correct answers✔✔Person or entity that is listed first on the declarations
page.
Holds highest rank among all insureds and has broader rights and obligations under the contract
than other insureds.
Can cancel policy, initiate changes, etc
Risk - Correct answers✔✔The possibility or uncertainty of loss
