Unit 3 Quizzes

The duties following a loss condition lists the insured’s responsibilities after a loss. One of these duties requires that the insured completes an official inventory of the damages. This is also known as

a proof of loss

Nancy purchases an auto policy on her new car. There are no other insureds listed on the declarations page. Nancy is considered

The names insured

Which of the following would NOT be included on the declarations page of the policy

1. 1. the name of the insured

2. 2. the description of the policy

3. 3. the amount of coverage provided

4. 4. the exclusions in the policy

the exclusions in the policy

The heart of the insurance policy that states what will be covered is called

the insuring agreement

All of the following statements regarding the rights and responsibilities of an insurer or insured when an insurance contract is canceled or nonrenewed are true EXCEPT

1. 1. when a policy is canceled on the effective date, by either the insurer or insured, it’s called a flat cancellation

2. 2. if the insured had paid premiums in advance for future months, any unused premium (unearned premium) must be returned to the insured upon cancellation of a policy

3. 3. both the insurance company and insured can cancel at any time

4. 4. it is common that a policy is extended at the end of its term or policy period

3 - both cannot cancel at any time, the insurer must give advance notice

Which of the following is NOT an example of an insurable interest?

1. 1: A person’s interest in the home she buys

2. 2: A dog groomer’s interest in the pets that are in his building for service

3. 3: A person’s interest in the home that his parents own

4. 4: A person’s interest in the home improvements he has made to a rental property he owns

3 - insurable interest requires being at financial risk of a loss, which you don’t have if your parents own outright

Which ratio is calculated by dividing the underwriting expenses by the written premium and is a good indicator of the cost of doing business

the expense ratio

What is an oral or written statement made by the agent that gives the insured immediate coverage for a specified time?

A binder

What is the primary source of underwriting information

the application

Which of the following is NOT a ratio that the insurer uses to evaluate performance

A. Combined ratio

B. Expense Ratio

C. Cost Ratio

D. Loss Ratio

C - cost ratio

All of the following are ways to assign rates EXCEPT

A. pro rata rating

B. Experience Rating

C. Manual Rating

D. Judgment Rating

A - Pro rata rating

Which premium rating method is determined by considering the individual risk and using careful judgement and the experience of the underwriter

judgement rating

Imprisonment may be ordered for up to how many years if false statements made jeopardized the safety and soundness of an insurer and were a significant case of the insurer being places in conservation, rehabilitation, or liquidation by the courts

15

An act of terrorism must be certified by the Secretary of Treasury in consultation with the Secretary of Homeland Security, and the

US Attorney General

Under the Fair Credit Reporting Act, the maximum penalty for obtaining consumer information reports under false pretenses is

$5000, imprisonment for 1 year, or both

Which of the following acts requires financial institutions; companies that offer consumers financial products or services like loans, financial, or investment advice ; and insurance companies, to explain their information-sharing practices to their customers and to safeguard sensitive data

GLBA - Gramm-Leach-Bliley Act

What type of insurance policy protects the insured from loss caused by damage to covered property by a covered peril

property insurance policy

Which of the following is not a part of the structure of a property or casualty insurance policy?

A. Conditions

B. Explanations

C. Declarations

D. Endorsements

B - Explanations

What is the term that describes the person listed first on the declarations page of a policy when there is more than one names insured

First-named insured

Greg’s policy states that a loss will not be covered unless it occurs within the United States or Canada. What is the name of this provision in his policy

the policy territory provision

When an insured decides to cancel an insurance policy before the expiration date, the unearned premium is returned on

a short rate basis

Todd and Mary have insurance protection for their home with a policy deductive of $500. One night, a thunderstorm knocks a tree onto their root and cases $2500 in damage. How much money will the insurance company pay to Todd and Mary to fix their roof?

$2,000 (damages - deductible)

Which of the following is NOT a type of merit rating that modifies the manual premium on the basis of the insured’s loss experience?

A. Retrospective rating

B. Schedule Rating

C. Manual Rating

D. Experience Rating

C - Manual rating - this rating is the only one not based on merit, but on defined criteria

Factors that determine premium rates set by insurance companies include loss costs, operating expenses, claims handling costs, and ___

Profits

Marcus has 2 policies that will cover his $20,000 loss. Company A will pay the first $15,000, and company B pays the remainder. In this example, Company A’s policy is considered

primary insurance

Which provision specifies that an insurance policy may not be transferred to anyone else without the written consent of the insurer unless the names insured dies

Assignment provision

Ace Insurance Company and Acme insurance company each insure the same building for the same amount. Both policies contain a pro rata other insurance clause. In the event of a partial loss, how much of the loss will Acme pay?

50% - each insurer will pay half the amount of the loss since each insure the same amount

How many days do you have to give the notice to the applicant after a report is requested under the Fair Credit Reporting Act

Up to 3 days

What are the 3 basic ways in which underwriters assign rates

Experience, judgement, and manual rating

The amounts of coverage and limits of liability are found in which section of a policy

Declarations

What is the term for the process of of evaulating the risk and exposures to potential clients

underwriting

When an insurance company cancels a policy, what is the method used to determine the premium due

Pro Rata - Premium refund equals the premium paid for the unexpired term of the policy

An insurance company takes possession of a damaged auto it has covered. When the company becomes the legal owner of the auto, it is excercising the right of

Salvage - Company takes possession of property and sells off parts

All of the following are the insured’s duties following a loss except

A. Protecting the property from further damage

B. Completing a detailed proof of loss

C. Assisting the investigator during the claim investigation procedure

D. Giving prompt notice of claim to the agent or insurer

C - Insured does not assist the investigator / appraiser

For a loss to be covered under the TRIA, the cause of the loss must

Be certified as an act of terrorism

Which of the following is NOT an example of an insurable interest

A. A woman’s interest in the home she owns

B. A woman’s interest in property that she hopes her uncle will leave to her in his will

C. A dry cleaner’s interest in his customers’ clothing in his custody, care, or control

D. A man’s interest in the improvements he has added to his leased apartment

B - not insurable interest because she does not currently have a financial stake in the company

Tim purchased an auto policy for his new car. There are no other insureds listed on the declarations. Tim is considered the

named insured

Which type of return premium computation is used when the policyholder cancels a policy

Short-rate

which section of the policy restricts certain risks from coverage

Exclusions

What is the purpose of the conditions section of an insurance policy

List the obligations of the insured and the insurance company

The provisions of the Terrorism Risk Insurance Program Reauthorization Act of 2019 apply to which line / type of insurance

Commercial Property

Why do insurance policies usually define who is considered an insured under the policy

To specify who is covered in addition to the named insured

The procedure for resolving a disagreement between an insured and an insurance company about a loss is described in which part of an insurance policy

Conditions

What legal principle allows insurance companies to collect from a negligent third party damages it paid to an insured

subrogation

What happens if a consumer notifies a credit reporting agency that information in the consumer’s credit report is incorrect

The credit reporting agency is required to investigate the complaint and, if it is justified, correct or delete the information

In describing the concept of subrogation, the insurer claims the right to

collect from a negligent third party