Insurance Policy and Adjuster Exam: Key Concepts and Answers, Exams of Insurance law

Download Insurance Policy and Adjuster Exam: Key Concepts and Answers and more Exams Insurance law in PDF only on Docsity! Adjuster Pro - Insurance adjuster test with correct answers. What is insurance? - Correct answer protection against financial loss what is a premium - Correct answer a scheduled amount to be paid for an insurance policy. What are premiums used for - Correct answer premiums are collected into a "pool" or "reserve to pay out claimants when needed. how can insurance companies afford to pay for an individuals catastrophic loss? - Correct answer the insurer collects premiums from all policy holders and uses them to pay out the claims of a few. what is Indemnity - Correct answer payment for damages, that is not more or less than the amount caused by the damage. principle of idemnity - Correct answer insurance will pay no more or less than the actual financial loss suffered indemnification may also include - Correct answer repairs to property reimbursement for additional living expenses rental cars and hotels costs directly associated with a loss 4 Parts of Legal Contract - Correct answer 1. Agreement 2. Consideration 3. Competent Parties 4. Legal Purpose legal contract - agreement - Correct answer mutual intent by offeror and offeree six special characteristics of insurance contracts - Correct answer 1. Personal 2. adhesion 3. utmost good faith 4. aleatory 5. unilateral 6. conditional what kind of contract is an insurance policy? - Correct answer Personal contract what is a contract of adhesion - Correct answer the insured must accept the entire contract with all of its terms and conditions Utmost Good Faith - Correct answer An obligation to act in complete honesty and to disclose all relevant facts. Aleatory Contract - Correct answer a contract where the values exchanged may not be equal but depend on an uncertain event Unilateral Contract - Correct answer insurance agrees that they must pay in event of a claim. the insured can stop paying premiums at any point. only the insurer has promised to perform an action. Conditional Contract - Correct answer A type of an agreement in which both parties must perform certain duties and follow rules of conduct to make the contract enforceable. Acronym for the four sections of an Insurance policy - Correct answer DICE D - declarations page I - Insuring Agreement C- Conditions E - Exclusions Decelerations section - Correct answer Always the first section - establishes the following Names of both parties Policy number Location and description of insured item Dates of the policy Amount and limit of coverage Deductible Provide commercial liability RRG Requirements - Correct answer Members must be involved in similar business endeavors Don't need to be licensed in multiple states Classification based on location - Correct answer Domestic Insurer - adhere to law of a state, located in that state Foreign insurer - adhere to laws in the US but can be located elsewhere Alien insurer - obey laws of another country all together Risk - Correct answer Potential for financial loss An insured item Two types of risk - Correct answer Pure and Speculative Speculative risk - Correct answer No certainty of gain or loss Made knowingly, by conscious choice Cannot be insured Pure risk - Correct answer Risk with no chance of gain Can only result in either loss or no loss Can be insured Exposure - Correct answer Extent to which an item, person, or organization is open to damage or loss Evaluating exposure - Correct answer Expressed in dollars or units Determining factor in issuing a policy and setting a premium Hazard - Correct answer A condition increasing the likelihood or severity of a loss Peril - Correct answer The actual cause of loss or damage Insurable risk - Correct answer Adequate premiums Definable risk Unexpected losses Substantial loss Exclusions Law of large numbers Adequate Premiums - Correct answer Potential loss can't be too much for insurer to pay Insurer must b able to cover claims and expenses If premiums must be set too high, the risk is not insurable Difneable risk - Correct answer Insurer can define exact conditions under which the item is covered by the policy Item it's self is defineable Item has precise value Unexpected loss - Correct answer Unforeseeable Unexpected Reasonably unpreventable Random in nature Substantial loss - Correct answer Must cause substantial economic hardship Exclusions - Correct answer Insurer must be able to exclude large scale disasters and catastrophic events Law of large numbers - Correct answer Insurer must be able to cover large numbers of similar risks Spreads risk across more policies Helps insurers predict losses more accurately Similar risks can mean, cars houses, persons lives, similar business etc Adverse Selection - Correct answer when someone buys health insurance because they know they will probably file a claim 4 risk management techniques - Correct answer Avoidance Reduction Transference Retention Risk avoidance - Correct answer Eliminates risk by not taking action that involves risk Risk reduction - Correct answer Taking measures to reduce risk that is involved Also called risk mitigation Risk Transference - Correct answer Management of sever risk by transferring risk to someone else Most common example is Insurance Risk retention - Correct answer Acknowledging the risks and preparing to handle the unexpected losses as they occur Policy Period - Correct answer The time frame, beginning with the inception date to the expiration date, during which insurance coverage applies. Binder - Correct answer Providing temporary coverage until the policy is issued Blanket coverage vs specific coverage - Correct answer Blankets cover more than one property, type of property, or coverage under a single limit Specific limits - limits that apply to on specific type of property Representation - Correct answer Statement of fact Missrepresentation - Correct answer A false, distorted or deceptive statements Warranty - Correct answer Promise or garuntee certain conditions are met Warranties are found on the conditions page If policy holder breaks up warranty the insurer can deny coverage Concealment - Correct answer Concealment is hiding the truth Deliberately withholding information Waiver - Correct answer Voluntarily surrender of a right, claim, or privilege Insurable Interest - Correct answer Only parties with insurable interest can insure a property or person You can only insure something that has some financial interest to you Lender interest - Correct answer A lenders financial stake in an insured item Lender Interest Provisions - Correct answer Allow the lender to be listed as a payee on the policy Endure the lender is notified if the policy is canceled, reduced, or expires Provide compensation for the lender in the event of an act or an omission by insurer party Permit lender to pay premiums to maintain coverage Limits on lender provisions - Correct answer Lender may only collect up to its financial interest in a property Lender may never change or cancel an insurance policy Actual Cash Value - Correct answer Same as fair market value and depreciation value ACV offers lower premiums for less coverage Formula: replacement cost minus depreciation Depreciation formula - Correct answer allocation of original costs over the estimated useful life of a tangible asset 3 Types of Deductibles - Correct answer Fixed Percentage Franchise Fixed deductible - Correct answer Specific set amount percentage deductible - Correct answer Insured party pays a percentage of the total cost, insurance pays rest Franchise Deductible - Correct answer Policy kicks in only after a loss exceeds a predetermined amount If losses are above the deductible then insurance pays 100% broad evidence rule - Correct answer ACV does not simply come down to RC minus depreciation Takes into account any evidence available to determine value Coinsurance - Correct answer Valuation - Correct answer Process of estimating an items worth Replacement cost policy - Correct answer No depreciation. Based on replacement cost at the time of loss Higher premiums Used on home insurance mostly Replacement cost - Correct answer Cost to replace at today's market value Actual Cash Value (ACV) - Correct answer Replacement cost minus accumulated depreciation Annual Depreciation - Correct answer Replacement cost divided by items useful life span Accumulated Depreciation - Correct answer An items annual depreciation Multiplied by its age Valued Policy - Correct answer Assigns a set value to each insured item Co-insurance penalty - Correct answer If property is underinsured, the insurer will only cover a percentage of partial losses If multiple partial losses occur, the low premiums are not enough for the insurer to cover all the damages Calculating co insurance penalty - Correct answer Had / should X the loss Negligence - Correct answer Failure to use a reasonable degree of care in a particular situation- includes both wrongful acts and acts of omission 4 elements of negligence - Correct answer 1. Defendant had a legal duty to act or not act in a prescribed manner 2. The defendant failed to act accordingly 3. The plaintiff suffered actual loss or injury due to the defendants action or inaction 4. The loss or injury to the plaintiff was a direct result of the breach of duty of the defendant Degrees of Liability - Correct answer Full liability- the insured party is 100% at fault for damages to a third party Partial liability - the insured party is only partially at fault, or shares fault, with a third party. The third party had some parts in his own damages No liability - the insured party has 0% or no liability Assumption of risk - Correct answer Claimant knew he had the potential to experience damage Contributory Negligence - Correct answer A legal defense that may be raised when the defendant feels that the conduct of the plaintiff somehow contributed to any injuries or damages that were sustained by the plaintiff. Comparative Negligence - Correct answer A theory in tort law under which the liability for injuries resulting from negligent acts is shared by all parties who were negligent (including the injured party), on the basis of each person's proportionate negligence. Dangerous Instrumentality Doctrine - Correct answer States that anyone involved in the use of inherently dangerous products or machines is held 100% liable for their own damages. Automobile no fault laws - Correct answer Restrict an individual's rights to sue the driver of a motorized vehicle Breach of product warranty - Correct answer If a product is not suitable for its intended purpose and causes injury or damage. Waiver of Sovereign Immunity - Correct answer Allows individuals to sue gov entities in certain cases Agent - Correct answer One who receives the authority to act on behalf of someone else Sales agent - Correct answer Contracted to sell and service insurance policies on behalf of the insurer Adjusters - Correct answer Contracted to settle claims that arise against the insurer Power to bind - Correct answer What the agent says or does can bind the insurer Agents should take the utmost care in what they say and do Even if the agent makes mistakes, the insurer may have to accept them Responsibilities of an agent - Correct answer Adhere to or follow the contract Use reasonable judgement Provide all necessary information and documentation to the insurer Three types of authority - Correct answer express, implied, apparent Express Authority - Correct answer Authority directly granted to an agent via the contract -sell polices -collect premiums -issue binders - offer discounts - cancel insurance Implied Authority - Correct answer A form of indirect authority The authority that the public reasonably believes the agent to have - portraying self as a representative - wearing a name tag with a company logo - handing out company business cards - words and actions that go hand in hand with express authority and are usual in order to perform an agents duties Apparent Authority - Correct answer When the insurer does not correct its agent even when the agent may be acting in error - granted when the insurer does not act - by not correcting the agent, the insurer implies consent Types of sales agents - Correct answer Independent agent Exclusive agent General agent Direct writer Independent agent - Correct answer Self employed Offer insurance form more than one company at a time They can compare and give rate quotes from different companies. Find a policy that suits the customer Exclusive agent - Correct answer Also called a captive agent - commissioned - represents only one insurer and only their policies General agent - Correct answer Works for one insurance company Trains and supervises agents for that company Direct writer - Correct answer Salaried employee Works for one company