Podcast
Questions and Answers
Which of the following best illustrates the principle of indemnity in an insurance contract?
Which of the following best illustrates the principle of indemnity in an insurance contract?
- An insured is restored to their approximate financial condition prior to a loss, without profiting from the insurance coverage. (correct)
- A policyholder receives a payout exceeding their actual loss to discourage future claims.
- An insurance company avoids paying a claim by finding a minor technicality in the policy language.
- An insurer profits from the misfortune of a policyholder.
Which scenario violates the principle of insurable interest?
Which scenario violates the principle of insurable interest?
- A person insuring their neighbor's house without their knowledge or consent. (correct)
- A homeowner insuring their primary residence against fire damage.
- A lender requiring a borrower to insure a property used as collateral for a loan.
- A business owner insuring a company vehicle used for deliveries.
How does the law of large numbers benefit insurance companies?
How does the law of large numbers benefit insurance companies?
- It reduces the need for detailed risk assessments.
- It enables more accurate prediction of overall losses, facilitating fair premium setting. (correct)
- It guarantees profits regardless of claims volume.
- It allows them to precisely predict individual losses, eliminating uncertainty.
Which of the following is NOT a required element for forming a valid insurance contract?
Which of the following is NOT a required element for forming a valid insurance contract?
A homeowner's policy has a $500 deductible. If the insured sustains $2,000 in damages, how much will the insurance company pay?
A homeowner's policy has a $500 deductible. If the insured sustains $2,000 in damages, how much will the insurance company pay?
A building has a replacement cost of $200,000 and is insured for $100,000. The policy has an 80% coinsurance clause. A $40,000 loss occurs. How much will the policy pay?
A building has a replacement cost of $200,000 and is insured for $100,000. The policy has an 80% coinsurance clause. A $40,000 loss occurs. How much will the policy pay?
Which of the following Homeowners (HO) policy forms provides the most comprehensive coverage?
Which of the following Homeowners (HO) policy forms provides the most comprehensive coverage?
Under Coverage C (Personal Property) of a standard HO-3 policy, which of the following losses would most likely be excluded?
Under Coverage C (Personal Property) of a standard HO-3 policy, which of the following losses would most likely be excluded?
A guest is injured while visiting your home. Under which coverage of your homeowners policy would their medical expenses typically be covered, regardless of your liability?
A guest is injured while visiting your home. Under which coverage of your homeowners policy would their medical expenses typically be covered, regardless of your liability?
In a Personal Auto Policy (PAP), what type of coverage protects you when an at-fault driver has insufficient insurance to cover your bodily injuries?
In a Personal Auto Policy (PAP), what type of coverage protects you when an at-fault driver has insufficient insurance to cover your bodily injuries?
An individual is involved in an accident where the at-fault driver's liability coverage is insufficient to cover the full extent of their injuries. What type of coverage would protect the injured individual in this scenario?
An individual is involved in an accident where the at-fault driver's liability coverage is insufficient to cover the full extent of their injuries. What type of coverage would protect the injured individual in this scenario?
Which of the following scenarios would be covered under comprehensive coverage but NOT collision coverage?
Which of the following scenarios would be covered under comprehensive coverage but NOT collision coverage?
Why is flood insurance typically excluded from standard homeowners insurance policies and administered through the National Flood Insurance Program (NFIP)?
Why is flood insurance typically excluded from standard homeowners insurance policies and administered through the National Flood Insurance Program (NFIP)?
A business owner requires additional liability coverage beyond the limits of their existing commercial general liability policy. Which type of policy should they consider purchasing?
A business owner requires additional liability coverage beyond the limits of their existing commercial general liability policy. Which type of policy should they consider purchasing?
Which type of insurance policy would provide coverage for a collection of valuable jewelry, artwork, and antiques, offering broader protection than a standard homeowners policy?
Which type of insurance policy would provide coverage for a collection of valuable jewelry, artwork, and antiques, offering broader protection than a standard homeowners policy?
What are the minimum auto liability insurance limits required in Alabama, expressed as Bodily Injury per person / Bodily Injury per accident / Property Damage?
What are the minimum auto liability insurance limits required in Alabama, expressed as Bodily Injury per person / Bodily Injury per accident / Property Damage?
An insurance agent convinces a client to cancel their existing policy and purchase a new one from them, based on misleading information about the benefits of the new policy. This is an example of what unfair trade practice?
An insurance agent convinces a client to cancel their existing policy and purchase a new one from them, based on misleading information about the benefits of the new policy. This is an example of what unfair trade practice?
An insurance agent offers a client a portion of their commission as an incentive to purchase a policy. This is an example of what unfair trade practice?
An insurance agent offers a client a portion of their commission as an incentive to purchase a policy. This is an example of what unfair trade practice?
Why might an earthquake insurance policy have a high deductible, and how does this impact the policyholder?
Why might an earthquake insurance policy have a high deductible, and how does this impact the policyholder?
Which of the following scenarios best illustrates a situation where an umbrella insurance policy would provide coverage?
Which of the following scenarios best illustrates a situation where an umbrella insurance policy would provide coverage?
Flashcards
Underinsured Motorist Coverage
Underinsured Motorist Coverage
Covers damages when the at-fault driver's insurance is insufficient.
Collision Coverage
Collision Coverage
Insurance that covers damages from vehicle crashes.
Comprehensive Coverage
Comprehensive Coverage
Covers damages not resulting from collisions, like theft or fire.
Flood Insurance
Flood Insurance
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Umbrella Insurance
Umbrella Insurance
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Earthquake Insurance
Earthquake Insurance
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Personal Articles Floater (PAF)
Personal Articles Floater (PAF)
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Auto Liability Requirements in Alabama
Auto Liability Requirements in Alabama
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Misrepresentation in Insurance
Misrepresentation in Insurance
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Unfair Trade Practices
Unfair Trade Practices
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Risk and Insurance
Risk and Insurance
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Pure vs. Speculative Risk
Pure vs. Speculative Risk
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Law of Large Numbers
Law of Large Numbers
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Insurable Interest
Insurable Interest
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Elements of an Insurance Contract
Elements of an Insurance Contract
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Actual Cash Value (ACV)
Actual Cash Value (ACV)
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Replacement Cost Value (RCV)
Replacement Cost Value (RCV)
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Coinsurance Clause
Coinsurance Clause
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HO Policy Forms
HO Policy Forms
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Coverage F: Medical Payments
Coverage F: Medical Payments
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Study Notes
Section 1: General Insurance Concepts
- Risk and insurance: Risk defined, types (pure vs. speculative), risk management
- Insurance principles: Law of large numbers, insurable interest, indemnity, subrogation
- Types of insurers: Stock companies, mutual companies, fraternal insurers, Lloyd's associations
- Insurance contracts: Elements (offer, acceptance, consideration, legal purpose, competent parties)
Section 2: Property Insurance Basics
- Types of property policies: Homeowners, dwelling, commercial property
- Policy components: Declarations, insuring agreement, exclusions, conditions
- Covered perils: Named-peril vs. open-peril policies, basic/broad/special coverage
- Valuation methods: Actual cash value (ACV) vs. replacement cost (RCV)
- Deductibles and coinsurance: How they impact claim payments
Section 3: Homeowners Insurance
- HO Policy forms: HO-1 through HO-8 (coverages by each form)
Section 4: Auto Insurance (PAP)
- Part A: Liability coverage (bodily injury and property damage limits)
- Part B: Medical payments (pays for injuries to insured and passengers)
- Part C: Uninsured/underinsured coverage (when it applies)
- Part D: Coverage for damage to your auto (collision vs. comprehensive)
- How underinsured motorist works
- Differences between collision and comprehensive coverage
Section 5: Miscellaneous Coverages & Endorsements
- Flood insurance: Coverage of the National Flood Insurance Program (NFIP)
- Umbrella insurance: Extra liability protection
- Earthquake insurance: Deductibles and policy triggers.
- Personal Articles Floater (PAF): Extra coverage for valuable items
- Why flood insurance excluded from standard homeowners policy
- Extra liability policy for multiple rental properties needed: Umbrella insurance
Section 6: Alabama-Specific Laws & Regulations
- State minimum auto liability requirements
- Insurance producer licensing and continuing education
- Claims settlement regulations
- Unfair trade practices: Twisting, rebating, misrepresentation
- Minimum auto liability limits in Alabama (25/50/25)
- Misrepresentation as an unfair trade practice in Alabama
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Description
Explore fundamental insurance concepts, including risk management and different insurer types. Understand property insurance basics like policy components, covered perils, and valuation methods. Review homeowners and auto insurance.
