Insurance Concepts Practice Test Review

Speculative Risk Example: Gambling
Peril Definition: An event that may cause a loss.
Insurance Covered Loss Cause: Proximate Cause
Indemnify Definition: Providing compensation for losses or expenses a result of the insured peril.

Primary Function of Insurance: A method of sharing the losses of a few amongst many.
General Insurance Examples: Fire, crime, business interruption, liability, and automobile insurance.
Mutual Insurer Type: Owned by its policyholders.
Underwriting Meaning: Scrutinizing risk and determining eligibility for insurance.

Insured Prediction Tool: Law of large numbers, combined loss ratios from previous years, and underwriting gain/loss.
Insurance Company Employee Sales Method: Direct writing company, exclusive agency company and independent agency company.

Broker Authority: Within the scope of the contract with the insurer and the terms of the insurance policies they issue.
Information Influencing Insurer Decisions: Material fact.
Additional Insurance Contract Requirements: Utmost good faith, insurable interest, and indemnity.
Insured Party in a Contract: First party
Indemnity Principle: Restoring the insured to their pre-loss financial position.

Insurance Contract Document: Insurance Policy.
Temporary Insurance Type: Cover note.
Insurance Contract Evidence: Evidence of a contract and its terms and provisions.
Policy Section for Insured Amounts: Coverage Summary.
Statutory Conditions in Temporary Insurance: Apply despite the policy not being issued.

Premium Refund Method (Policy Cancellation): Short rate or pro rata cancellation.
Assignment without Insurer Consent: Assignments under the Bankruptcy Act.

Statute of Limitations Definition: A law defining the time frame parties have to pursue legal action.
Loss Adjuster Duties: Review the policy and verify if other parties have insurable interest.
Adjuster Professional Conduct: Integrity, fairness, and due diligence.
Premium Owner: The insured.
Fire Type in Intended Place: Friendly fire.

Homeowners Policy Additional Coverage: Liability insurance.
Comprehensive Homeowner Policy Coverage Type: All-perils policy that covers all losses except specifically excluded ones.
Specified Peril Policy Reason for List of Causes: To restrict coverage for certain perils or property types.
Named Peril Policy: Covers only specific, listed causes

Policy Coverage for Specific Theft: Named-peril policy.
Theft Coverage Types: Theft from the principal dwelling, secondary locations or tenant-rented spaces, and building materials from construction sites
Material Loss Obligation: Notify Police.

Insurance Coverage Needed for High-Value Items: Affidavit, detailed description, bill of sale, or appraisal
Specific Historical Item Insurance: Broker specializing in historical items.
Required for Policy Coverage for Items: Purchase a personal articles endorsement.
Sewer Back-up Coverage Conditions: Ground or surface water is present or the outside the home and maintenance of the sewer system must not have been a factor.
Legal Action Time Limit: Statute of limitations

Coverage for Loss in Absence of Underlying Policy: Drop-down coverage.
Additional Coverage Feature in Policies: Extended coverage endorsement or additional insuring agreements

Professional Negligence Coverage Type: Professional liability insurance.
Determining Incidental vs. Commercial Exposure: Based on business activities, operating years, and income.
Proper Business Type for Policy: A single location of a multi-national franchise restaurant operation.
Produce Endorsement Included Items: Seeds, fertilizers, and packaging.
Business Interruption Insurance Types: Earnings Approach and Extra Expense Insurance.

Dishonesty Coverage Type: Fidelity insurance.
Surety Bond Parties: Principal, surety, and obligee.
Liability for Actions: When demonstrating a duty of care, fulfilling contract terms, or when negligence has caused injury.