Property and Casualty Insurance Agent Licensing Practice Exam

Coverage is provided for bodily injury liability. In addition, coverage is written to cover the negligence of the insured. Business and professional liability and personal injury are excluded.

A binder is a legal contract that shows the insurance company agrees to provide coverage until the actual policy has gone through underwriting and is approved for issuance. Coverage under a binder usually lasts between 30-90 days. The declarations page includes essential information about the policy such as the insured, coverage, and coverage effective dates. Good faith refers to the concept of an insurance company acting honestly and reasonably when processing claims. Coinsurance refers to cost-sharing where an insured must pay a portion of a covered expense.

Proximate cause. Legal liability has to do with negligent damages to another party. Time element loss is a type of business income loss. Personal loss is a general term that is not applicable.

Hazard. A catastrophe causes sudden damage. A peril is a cause of loss. Risk is the uncertainty arising from the possible occurrence of given events that would result in a loss with no opportunity for gain.

Compensatory (or Actual) damages reimburse a party for a loss sustained in order to make the party whole. Punitive damages are damages exceeding simple compensation and serve to punish the defendant. General damages are damages which exceed simple compensation and awarded to punish the defendant. Broad damages are not a particular type of legal damage.

Comprehensive, also known as 'other than collision,' is the part of the policy that responds to damage from birds or animals. The collision portion of the policy responds to collisions that are not bird or animal-related. Medical payments pay for a medical expense, not physical damage to the auto. Likewise, liability pays for damage to another party, not the insured vehicle.

A DP-3 policy covers the structure for replacement cost. It's an all-risk policy that covers loss of rents and other structures. A DP-2 also pays for losses to the structure at replacement cost, and a DP-1 pays for losses to the structure for actual cash value.

A cyber liability insurance policy generally covers most costs connected with a data breach or other cybercrime. It covers legal defense costs, the costs to investigate a cyberattack, and crisis management costs to manage the negative effects such as notifying affected individuals, making provisions to monitor their credit, and setting up a call center, etc. Individual policies may differ slightly, but none of them cover the loss of income due to a system shutdown a cyberattack, or data breach.

The medical or no-fault section of the pedestrian's personal auto policy will respond. Because Jenny's BOP and commercial auto policy were not endorsed to extend coverage to non-owned auto exposures, neither will respond. The bank had no contributing factors that led to the accident, and is therefore not negligent. If it were winter in Fargo, ND, for example, and the bank parking lot was covered in ice and contributed to the accident, the bank may be found negligent.

Commercial inland marine policies respond to the theft of scheduled equipment. Commercial property responds to property losses at the business location only. Commercial General Liability does not respond to property losses. Commercial Auto responds to commercial auto, not equipment.

After a loss, insureds are required to notify the insurance company, cooperate with the adjuster, protect their property and keep accurate reports of property and receipts. Insureds must notify the police if the cause of loss is theft, but it's not necessary to notify them otherwise.

A pair or set of items are worth less when one part is damaged or missing. A pair-and-set clause is designed to pay an insured for the value of the entire set when one part is damaged or missing and a replacement item cannot be found. If the insurance company replaces the whole set, they must generally surrender the undamaged item to the insurer. An indemnification clause refers to the insurance company promising to pay for losses as stated in the policy. A severability clause refers to the concept of an insurance company insuring each covered individual as if the company issued a separate policy to each of them. A limit of liability clause states a specific maximum limit the insurance company is required to pay for a covered loss.

Proof of loss. Loss cost is a term used in determining a loss ratio. Policy record and supplementary do not apply.

The declarations page lists the name and address of the named insured. Typically, states will declare the requirements that must be met for the coverage to be valid. The Exclusions section lists what is not covered under the policy. The Insuring Agreement is where the insurer agrees to certain conditions, like pay for claims.