Insurance Terms and Concepts, Exams of Advanced Education

Download Insurance Terms and Concepts and more Exams Advanced Education in PDF only on Docsity! State Farm Insurance License Exam With Verified Answers 2024 Abandonment Condition - Correct Answer-A condition often contained in property insurance policies that states that the insured cannot abandon damaged property to the insurer and demand to be reimbursed for its full value. Accident - Correct Answer-A loss that occurs at a specific time and place Actual Cash Value (ACV) - Correct Answer-Today's replacement cost minus depreciation. Depreciation from wear and tear, or obsolescence. admitted insurer; authorized insurer - Correct Answer-Company that meets a state insurance department's standards and is allowed to do business in that state. Adverse Selection - Correct Answer-the tendency of insureds with a greater than average chance of loss to purchase insurance Annual Transit Policy - Correct Answer-Nonfiled commercial inland marine transportation form that insures a property owner's incoming or outgoing shipments of goods during a year Appraisal Clause - Correct Answer-A survey of property to determine the insurable value of the property or the value of the loss sustained. Appraisal Condition - Correct Answer-Policy condition that outlines a procedure for when the insured and insurer disagree on the amount of a loss Assignment - Correct Answer-The legal transfer of one's interest in an insurance policy to another person. Aviation Hull Insurance - Correct Answer-Provides coverage for physical damage to an aircraft. Bailee's Customers Policy - Correct Answer-Nonfiled commercial inland marine form obtained by a bailee to cover loss or damage to customers' property in the bailee's custody without regard to liability. Appurtenant Structures - Correct Answer-Buildings of lesser value that are on the same premises as the main building insured under a property policy; they are usually covered by the policy. Assignment Condition - Correct Answer-Condition in insurance policies that specifies that the policy cannot be transferred to another unless the company consents to the transfer in writing. Bailee - Correct Answer-A person or organization that has temporary possession of someone else's personal property. Basic Perils in Homeowners Policy - Correct Answer-There are 14 perils. Fire, lightening, riot, explosion, vehicles, volcanic eruption, civil commotion, smoke, hail, aircraft, windstorm, vandalism, malicious mischief, theft. Basic Property Policy Structure (DICEE) - Correct Answer-D - Declarations I - Insuring agreement C - Conditions E - Exclusions E - Endorsements Blanket Insurance - Correct Answer-Type of insurance policy that covers more than one item of property at a single location or one or more items of property at multiple locations Builders Risk Coverage Form - Correct Answer-Commercial property coverage forms that covers commercial, residential, or farm buildings that are under construction or during remodeling. Cargo Insurance - Correct Answer-Type of ocean marine insurance that covers goods while they are in transit over water. Binder - Correct Answer-Oral or written statement that provides immediate insurance protection for a specified period; designed to provide temporary coverage until a policy is issued or denied. BOP - Correct Answer-Package policy designed to provide broad property and liability coverage for small businesses; eligibility requirements are stricter than the CPP. Business Income Policy - Correct Answer-Pays for loss of income that the insured sustains due to a direct physical loss from a covered peril that forces the insured to suspend operations until the property can be repaired, rebuilt, or replaced with reasonable speed; available with or without extra expense coverage. Causes of Loss Form - Correct Answer-Separate form used with the commercial property coverage part of the commercial package policy that lists covered perils and exclusions. Several different versions provide increasingly broader coverage from basic to broad to special. Coverage I - personal and advertising injury Coverage J - medical payments to others Floater - Correct Answer-An insurance policy, or an addition to another insurance policy, covering personal property deemed to be easily moveable. It covers property lost, damaged, or destroyed (e.g. jewelry, electronics, and furs.) Fraud - Correct Answer-A deliberate misrepresentation that causes harm; an all out effort by one party to deceive and cheat the other, must have intent. Functional Replacement Cost - Correct Answer-Damaged property is repaired or replaced with less expensive, but functionally equivalent, materials HO-3 Policy Perils - Correct Answer-Dwelling covered for open perils and personal property covered for broad perils in this HO policy. HO-4 Policy - Correct Answer-Renters policy. Personal property covered for broad perils. Indemnity - Correct Answer-Restores an insured to the approximate conditions before the loss, no better or worse. Inherent Vice - Correct Answer-Characteristic in property itself causing it to depreciate, spoil, break, become defective, disintegrate, or destroy itself. Implied Warranties - Correct Answer-In ocean marine insurance, warranties that are not written into the policy, but have become a part of the policy by custom. Indirect Loss - Correct Answer-Loss that is the result or consequence of a direct loss Inland Marine Insurance - Correct Answer-Property insurance coverage designed to insure exposures that cannot be conveniently or reasonably confined to a fixed location or insured under a standard form. Includes coverage for property in transit, overland, moveable property, instruments of transportation and communication (bridges, roads, and television/radio towers), legal liability for bailees coverage, and computerized equipment. Insuring Agreement - Correct Answer-Section in the policy that describes what property is covered and the perils the policy insures against. Jettison - Correct Answer-A voluntary action to rid a ship of cargo to prevent further damage or peril. Liberalization Clause - Correct Answer-Condition found in property insurance contracts that provides that if the insurer broadens coverage under a policy form or endorsement without requiring an additional premium, then all existing similar policies or endorsements will be construed to contain the broadened coverage MCS-90 - Correct Answer-Endorsement attached to the truckers coverage form to provide public liability coverage. Intervening Cause - Correct Answer-An independent action that breaks the chain of causation and sets in motion a new chain of events; when this occurs, it became the new proximate cause. Legal Liability - Correct Answer-Commercial property coverage form that covers the insured for liability arising out of negligent damage to the property of others while it is in the insured's care, custody, or control. Market Value - Correct Answer-The amount property could be sold for at the time of of loss. May be used to determine the amount of reimbursement for a loss. Messenger - Correct Answer-In a crime policy, defined as an insured , partner, or employee who has care and custody of insured property outside the premises. Morale Hazard - Correct Answer-Hazard created by an individual's tendency to contribute to a loss through his own irresponsible actions or carelessness. Motor Truck Cargo Policy - Correct Answer-Commercial inland marine policy that protects a carrier against its liability for damage to domestic shipments in its custody. Named (specified) Peril Policy - Correct Answer-Insurance policy that insures only against perils specifically listed in the policy. National Flood Insurance Program (NFIP) - Correct Answer-Program run by the federal government that makes flood insurance available to eligible communities at subsidized rate; includes coverage for both building and personal property with separate deductible for each. Motor Carrier Coverage Form - Correct Answer-commercial auto coverage form that is an alternate to the truckers coverage form; it can be used to cover anyone who transports property by auto in a commercial enterprise Mysterious Disappearance - Correct Answer-Loss of property due to unknown cause; theft must be ruled out. Named Insured - Correct Answer-Person, business, or other entity named in the declarations to whom the policy is issued. Nonconcurrency - Correct Answer-Situation that exists when the same property is covered by more than one policy, but the policies are not identical as to the extent of coverage provided. Ocean Marine - Correct Answer-Insurance designed to provide broad coverage for cargo and ships in transit over sea; includes cargo insurance, hull insurance, freight insurance, and protection and indemnity insurance. Pair and Set Provision - Correct Answer-Found in some property and inland marine policies stating the company will pay for loss of part of a set by either repairing or replacing the damaged article or paying the difference between the ACV of the intact set and the ACV of the articles remaining after the loss. Parts of a legal contract (CLOC/CLAC) - Correct Answer-Competent parties Lawful objective Offer and acceptance Consideration Personal effects form - Correct Answer-Inland marine form that covers an insured's personal belongings, such as baggage, while traveling. Open Peril; all risk; special coverage - Correct Answer-Insurance policy that protects the insured from losses caused by any peril that is not specifically excluded by the policy Parts of a Homeowners Policy - Correct Answer-Coverage A - dwelling Coverage B - other structures Coverage C - personal property/contents Coverage D - loss of use/additional living expenses Coverage E - personal liability Coverage F - medical payments to others Personal Articles Form - Correct Answer-Inland marine form that provides scheduled coverage for nine optional classes of personal property: jewelry, furs, cameras, musical instruments, silverware, golf equipment, fine arts, stamp collections, and coin collections. Primary Insurance - Correct Answer-When two or more coverage or policies apply to the same loss, the one that pays first, up to its limit of liability or the amount of the loss, whichever is less. Pro Rata Basis - Correct Answer-Insurance company cancels the policy; unearned premium is returned to the insured. No penalty is applied to this method of cancellation. Protection and Indemnity - Correct Answer-Form of ocean marine liability insurance that covers a variety of types of liability, such as a damage to cargo through negligence and damage to other property or another boat resulting from collision. Advertising Injury - Correct Answer-Coverage in the CGL that covers losses caused by oral or written material that slanders or libels, violates privacy rights or infringes on copyrights, titles or slogans. Assigned Risk Plan; Automobile Insurance Plan - Correct Answer-A state-sponsored plan that provides automobile insurance to those who are uninsurable under standard auto insurance policies. Bid Bond - Correct Answer-Type of surety bond that if a contractor's price is accepted, the contractor will enter into a contract and provide the required performance bond. Additional Coverage; Coverage Extensions; Extended Coverages; Other Coverages - Correct Answer-Supplement insurance coverage that apply only in certain circumstances, have reduced or separate limits of liability, or require the insured to meet certain requirements before they are applicable Aggregate Limit - Correct Answer-Type of policy limit found in liability policies that limits coverage to a specified total amount for all losses occurring within the policy period Assumption Risk - Correct Answer-Defense against liability based on the common law principle that a person who knowingly exposes themselves to danger or injury takes on the risk of loss and cannot hold another person responsible for the loss. Bodily Injury (BI) - Correct Answer-Defined in most policies to include injury sickness disease and death resulting from any of these at any time. Burglary - Correct Answer-The taking of property by a person unlawfully entering or leaving the premises as evidenced by visible signs of forced entry or exit Claims-made Form - Correct Answer-CGL coverage form that pays off bodily injury (BI) or property damage (PD) losses for which a claim was first made against the insured during the policy period Comparative Negligence - Correct Answer-Law that allows an injured party to collect from another party for a loss, even when the injured party contributed to her own loss. Damages are reduced to the extent of the injured party's negligence. Blanket Position Bond - Correct Answer-Fidelity bond that covers losses arising from the dishonesty of one or more employees acting separately or in collusion; provides a single limit of liability applicable to each employee involved in a loss. Certificate of Insurance - Correct Answer-Written form that verifies a policy has been written. Provides a summary of the coverage provided under the policy. Collision - Correct Answer-Type of physical damage coverage that covers loss that occurs when the insured auto strikes another object or vehicle; may also include upset or overturn of the insured auto. Compensatory Damages - Correct Answer-Damages that reimburse an injured party for losses that were actually sustained.