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Questions and Answers
Which of the following is NOT covered under Business Liability Coverage?
Which of the following is NOT covered under Business Liability Coverage?
Medical expenses related to an accident on the insured's premises can be payable to the insured.
Medical expenses related to an accident on the insured's premises can be payable to the insured.
False
What type of liability does the Business Liability Coverage NOT include?
What type of liability does the Business Liability Coverage NOT include?
Contractual liability
The Businessowners Policy (BOP) provides supplementary payments for claims, which include __________ cost coverage.
The Businessowners Policy (BOP) provides supplementary payments for claims, which include __________ cost coverage.
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Match the following types of injuries with their descriptions:
Match the following types of injuries with their descriptions:
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What does property insurance primarily cover?
What does property insurance primarily cover?
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Casualty insurance is also known as liability insurance.
Casualty insurance is also known as liability insurance.
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Define 'peril' in the context of insurance.
Define 'peril' in the context of insurance.
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High exposure means high ______.
High exposure means high ______.
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Match the type of insurance with its description:
Match the type of insurance with its description:
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Which of the following best describes an insurable risk?
Which of the following best describes an insurable risk?
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The Law of Large Numbers is a principle indicating that greater numbers result in increased risk.
The Law of Large Numbers is a principle indicating that greater numbers result in increased risk.
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Which type of insurance company pays stock dividends to stockholders?
Which type of insurance company pays stock dividends to stockholders?
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County mutuals can operate nationwide.
County mutuals can operate nationwide.
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What type of insurance protects producers against unintentional mistakes?
What type of insurance protects producers against unintentional mistakes?
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A _______ insurer consists of groups of members that insure each other.
A _______ insurer consists of groups of members that insure each other.
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Match the following government insurance programs with their types:
Match the following government insurance programs with their types:
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What is required for an admitted insurance company to operate?
What is required for an admitted insurance company to operate?
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Exclusive agents can represent multiple insurers.
Exclusive agents can represent multiple insurers.
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What is the term for a contract where ambiguities are interpreted in the benefit of the policyowner?
What is the term for a contract where ambiguities are interpreted in the benefit of the policyowner?
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The insurer's acceptance of an insurance application occurs through the issuance of a _______.
The insurer's acceptance of an insurance application occurs through the issuance of a _______.
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What does Coverage A in a Homeowners Policy cover?
What does Coverage A in a Homeowners Policy cover?
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Coverage C includes animals owned by the insured.
Coverage C includes animals owned by the insured.
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What is included in Coverage D of a Homeowners Policy?
What is included in Coverage D of a Homeowners Policy?
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Coverage B applies to __________ structures.
Coverage B applies to __________ structures.
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Match the coverage type with its description:
Match the coverage type with its description:
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Which of the following is NOT covered under Coverage C?
Which of the following is NOT covered under Coverage C?
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Coverage A includes construction materials on or next to a dwelling.
Coverage A includes construction materials on or next to a dwelling.
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List one benefit provided under Coverage D.
List one benefit provided under Coverage D.
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Structures rented to non-tenants are __________ under Coverage B.
Structures rented to non-tenants are __________ under Coverage B.
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Which type of coverage provides protection for a detached garage?
Which type of coverage provides protection for a detached garage?
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What does Coverage E (Personal Liability) in a Homeowners Policy include?
What does Coverage E (Personal Liability) in a Homeowners Policy include?
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Coverage F (Medical Payments to Others) covers the insured and regular residents of the insured.
Coverage F (Medical Payments to Others) covers the insured and regular residents of the insured.
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How long does Coverage F pay for medical expenses after an accident?
How long does Coverage F pay for medical expenses after an accident?
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Liability Exclusions include _____ exclusions applicable only to personal liability.
Liability Exclusions include _____ exclusions applicable only to personal liability.
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Which of the following is NOT a condition outlined in the Homeowners Policy?
Which of the following is NOT a condition outlined in the Homeowners Policy?
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Only two endorsements are included in the conditions of a Homeowners Policy.
Only two endorsements are included in the conditions of a Homeowners Policy.
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What is the purpose of Coverage F in the Homeowners Policy?
What is the purpose of Coverage F in the Homeowners Policy?
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The Homeowners Liability Coverage provides payment only when the insured is legally _____ for damages.
The Homeowners Liability Coverage provides payment only when the insured is legally _____ for damages.
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How many exclusions are applicable to both personal liability and medical payments coverage?
How many exclusions are applicable to both personal liability and medical payments coverage?
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Study Notes
Property & Casualty Insurance Core Concepts Overview
- Insurance is a way for individuals or groups to transfer financial risk of loss to an insurance company.
- Property insurance covers financial loss from damage or destruction of personal or commercial property.
- Casualty insurance (liability insurance) covers financial loss due to damage to a person or commercial property, resulting from the insured's words, actions, or failure to take corrective action. Damage can be tangible (e.g., a damaged automobile) or intangible (e.g., a person or business's reputation).
Risk and Loss
- Risk is the chance of loss.
- Loss is an unplanned reduction in economic value.
- Exposure is the state of being subject to possible loss. High exposure means high risk.
- Peril is the cause of a loss (e.g., fire, explosion, windstorm, flood, theft, collision).
- Hazard is a condition that increases the chance of a peril (e.g., moral, morale, physical).
- Risk management is the process for managing life's risks.
- Risk transfer involves transferring the risk to an insurance company.
- Insurable risk is a loss that is definable, measurable, outside the applicant's control, not catastrophic.
Insurance Providers
- Mutual companies are owned by policyowners and issue participating policies that pay policy dividends.
- Stock companies do not issue participating policies and pay stock dividends to stockholders.
- County mutuals are mutual companies that work in a limited geographical area.
- Reciprocal insurers are groups of members insuring each other through contracts of indemnity.
- Fraternal insurers sell insurance to members of a fraternal benefit society.
- Federal and state governmnet programs offer insurance (e.g., NFIP, Crop Insurance, Social Security, Medicare, Workers Compensation, Unemployment, Medicaid, FAIR Plans).
- Admitted vs. non-admitted companies: Admitted companies need a Certificate of Authority from the state (Domestic, Foreign, Alien).
Insurance Producers
- Agents and principals: Agents act on behalf of principals (insurers).
- Exclusive agents represent one insurer.
- Independent producers represent multiple insurers.
- Producer authority: Express authority is defined by the contract with the insurer. Implied authority is understood to be part of the job, and Apparent authority result from the producer's actions, that are not approved by the insurer.
- Responsibilities of producers to applicants and insureds: Full disclosure of all relevant information, honest representation, and suitable recommendations.
- Errors and Omissions (E&O) insurance protects producers from unintentional mistakes.
Insurance Contracts
- Offer and Acceptance: The applicant's offer is the signed application with initial premium. Issuing the policy is the insurer's acceptance.
- Consideration: Premium payment by the applicant, and a good faith promise to honor the contract by the insurer.
- Contract of Adhesion: Ambiguities in the contract are interpreted in favor of the policy owner.
- Indemnity vs. Valued Contracts: Indemnity contracts reimburse losses (mostly property insurance). Valued contracts pay the policy face amount (insurable items hard to value).
- Representations vs. Warranties: Applicant's truthful statements on the application are representations. Insurer’s promises are warranties.
- Fraud: Deliberate act to deceive; misrepresentation; void the contract.
State General Insurance Laws
- Comprehensive knowledge of state laws is essential for exam success. Key details are critical
- Common General State Insurance Law Topics:
- Department of Insurance
- Duties of the Commissioner, Director, or Superintendent
- Hearings
- Penalties
- Producer and Insurance Company Regulation
- Licensing and renewals
- Resident vs. non-resident producers
- Agent appointment
Property Insurance Basics
- Types of Property: Real Property (land and structures), Personal Property (tangible items not Real Property)
- Types of Construction: Frame, Masonry, Masonry Veneer, Superior.
- Types of Property Loss: Direct and Indirect (consequential).
- Insurable Interest: Must exist at all times during policy period. Policyholder must have financial interest in insured property
- Loss Valuation: Replacement Cost (valuing houses, commercial property), Functional Replacement Cost (valuing older buildings), Actual Cash Value (valuing household contents), Market Value, Stated Amount; Agreed Value .
Causes of Loss
- Hazards: Conditions increasing loss likelihood or severity. Includes moral hazard, morale hazard, and physical hazard.
- Perils: Causes of loss. Includes named perils and open perils.
- Named Perils: Insurer covers specified perils only. Policyholder must prove named peril cause.
- Open Perils: Includes all perils except those specifically excluded. Insurer must prove excluded peril cause.
- Concurrent Causes of loss: A loss involving at least one covered peril is covered,even when other perils are not.
- Difference in Conditions (D-I-C) A separate for perils.
Liability Insurance Basics
- Liability insurance protects against civil wrongs (torts).
- Negligence:Failure to use reasonable care to avoid causing injury
- Negligence Conditions: Duty of Care, Breach of Duty of Care, Causation, and Damages.
- Defenses to Negligence: Assumption of risk; contributory negligence, comparative negligence, and strict (absolute) liability vs. vicarious liability.
The Underwriting Process
- Underwriting: Determining if an applicant is acceptable and if so, the premium amount.
- Agency Underwriting: Temporary coverage provided by binder while the application goes through the underwriting process. Risk analysis uses application, agency reports, loss history, loss control reports, MVR, and inspection reports.
- Underwriter's Decision: Accept, reject, or accept with modifications (rated policy).
- Monitor and measure the results: Comparing loss ratio with premiums, expense ratio, and combined ratio.
- Rates vs Premiums: Rate is cost of insurance and premium are periodic payment to maintain coverage.
Policy Structure
- Declarations: Unique policy information, often at beginning, including insured name, address, premium, deductible(s), policy period.
- Definitions: Key terms and conditions.
- Insuring agreements: The insurer's basic promises.
- Conditions: Requirements for coverage (e.g., providing proper notice of loss).
- Endorsements: Modifications to the policy.
- Exclusions: Limitations on coverage.
- Purposes of Exclusions: Eliminating/reducing overlap of coverage, remove unnecessary coverage, reduce incentives for losses from insured.
Property and Casualty Insurance Policy Conditions
- Parties entitled to coverage: Insureds and secured creditors (mortgage holders, loss payees).
- Liberalization Clause: Policy enhancements will be applied to next renewal.
- Conditions affecting property insurance coverage: Policy limits, Deductibles, and Coinsurance.
- Conditions after a loss: Notification duties (time limits), preventing further harm to property and cooperating with the insurer.
Property Insurance Regulation
- Insurance is primarily state regulated, but there are important federal regulations.
- Federal Regulations: FAIR Credit Reporting Act (FCRA), Gramm-Leach-Bliley (GLB), Federal Trade Commission Act (FTC), Health Insurance Portability and Accountability Act (HIPAA), Terrorism Risk Insurance Act (TRIA).
- State Property and Casualty Insurance Law topics: mandatory P&C Policy Provisions, Policy Cancellation and Nonrenewal Standards, Property and Casualty Insurance Minimum Requirements, State Property and Casualty Guaranty Association, Federal Terrorism Insurance Program.
Homeowners Policy
- Homeowners policies are package policies combining property and liability insurance.
- Different Coverage Forms (HO 2, HO 3, HO 4, HO 5, HO 6, HO 8) apply to various situations. They address coverage for dwelling, other structures, personal property, loss of use, personal liability, and medical payments.
- Additional Coverage: Loss valuation, Additional Living expenses, Fair Rental value, Prohibited use/ civil authorities.
- Additional Coverages and Exclusions: Common exclusions include (but not limited to) ordinance or law, earth movement or earthquake, nuclear hazard, flood, and more.
Businessowners Policy
- BOPs are packages that combine property and general liability coverage, designed specifically for small to medium-sized businesses.
- BOP Eligibility Conditions: Consider size and type. Included are exclusions.
- Property Provisions: Coverage for buildings, business personal property and both.
- Liability Provisions: Three categories covering business liability, supplementary payments related to claims and suits, and medical expenses related to accidents on-site or in operations.
Inland and Ocean Marine Insurance
- Insures situations where exposures don't only occur in one place. Covers items that move frequently.
- Insurers cover individuals, families and businesses.
- Commercial coverage (e.g., accounts receivable, bailees’ customers, commercial articles, contractors’ equipment, data processing equipment, etc.).
- Ocean marine covers hull and cargo insurance, with specific coverage for unique issues in marine/ocean transit.
Farm Insurance
- Farm Property Coverage forms covering farm dwellings, structures, and household personal property.
- Farm Property-Farm Personal Property: Covers scheduled vs. unscheduled personal property.
- Farm Property-Barns, Outbuildings, and Other Farm Structures: Covers specific types of structures
- Farm property and other farm provision coverages: Include additional coverages, such as mobile agricultural machinery.
Farm Liability
- Describes four situations (farming operation, roadside stands, general store, vegetable canning operations) and the covered conditions associated with those situations as listed on the slides and coverages included.
- Three basic coverages: Bodily Injury and Property Damage Liability, Personal Injury and Advertising Injury, and Medical Payments.
Flood Insurance
- Covers property in a 100-year flood zone area.
- Federal program that covers areas designated for risk.
- Provides coverage for buildings and contents specifically designed for residences and businesses.
- Contains exclusions for certain losses due to overlfow, seepage, and other conditions.
Equipment Breakdown Coverage
- Covers business equipment and machinery not covered under standard property coverage.
- Coverage includes pressure, electric equipment and communication and computer equipment. Includes several unique coverage options that are specific and excluded perils.
- Covers expenses associated with damage through several options, including common exclusions.
Surplus Lines Insurance
- Covers specific needs that are excluded in standard policies.
- Includes Earthquake, Mobile Home, Watercraft, Farmowners, Crop Hail, and Windstorm types of coverage (exceptions exist).
State Casualty Insurance Laws
- Emphasizes the importance of thoroughly understanding state casualty insurance laws.
- Common topics include state requirements for homeowners’ insurance liability coverages, auto policy coverages, Medical payments, Uninsured and underinsured motorists, and Policy cancellation and nonrenewal—also includes notices and disclosures, FAIR Plans and Risk Retention Groups, plan fundamentals and eligibility conditions.
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Description
Test your knowledge on various aspects of Business Liability Insurance, including coverage details and different types of insurance policies. This quiz covers the fundamentals of business liability, property insurance, and related definitions. Perfect for students and professionals in the insurance field.
