Property and Casualty Insurance Basics Practice Test

These questions are part of the practice quiz. Start practicing

• What does the ‘out-of-pocket maximum’ in health insurance refer to?
• What type of damages compensate for mental and physical distress?
• What is the rating method where the underwriter uses intuition and experience instead of a manual?
• What does liability insurance primarily protect against?
• What does gap insurance typically cover?
• Which of the following refers to the risks associated with natural disasters in property insurance?
• What is an example of a direct loss?
• What does ‘subrogation’ mean in insurance terms?
• What type of insurance provides a single amount that may apply to various types of property?
• What is a self-insured retention (SIR)?
• What does 'replacement cost' refer to in an insurance context?
• What calculation is often used for determining premiums on large group life or health insurance plans?
• What does the term "deductible" refer to in an insurance policy?
• How is 'actual cash value' determined in property insurance?
• Which damages are awarded when the injury was caused by gross negligence?
• What type of rating involves insurers using plans developed by the Insurance Services Office (ISO)?
• Which of the following is a common exclusion in homeowners insurance?
• In a personal auto policy, which policy is considered primary regardless of who is driving the vehicle?
• What type of coverage does the term 'all-risk' imply in property insurance?
• What measures the percentage of claims paid in comparison to total premiums collected during a specific time period?
• What does the term "underwriting" refer to in insurance?
• What term describes individuals who are usually the first to recognize a hazard?
• What does the term 'underwriting' refer to in the insurance industry?
• What type of damages are generally quantifiable and an exact figure?
• Which rating uses an underwriter's personal judgment rather than a prescribed rate manual?
• What is a ‘force majeure’ clause in an insurance policy?
• What is the primary purpose of blanket property insurance?
• What does personal injury liability cover?
• What damages are typically awarded for direct loss or injury to a person?
• Which statement accurately defines 'named insured' in an insurance context?
• What is a characteristic of a single limit of insurance?
• What is ‘waiver of subrogation’?
• What is the function of a ‘coinsurance clause’?
• What does the abbreviation ‘HMO’ stand for in health insurance?
• Which term is used to describe the direct chain of events that must be proven to establish causation?
• What is typically suggested for the timeframes involved in policy cancellation notices?
• What differentiates 'mortgage insurance' from 'property insurance'?
• What is the nature of liability when certain activities are seen as inherently dangerous?
• What aspect does a physical hazard address in property and casualty insurance?
• Why might someone need coverage for natural disasters?
• When is there coverage for an indirect loss?
• Why might clients prefer Replacement Cost coverage over ACV?
• Which type of insurance covers liability for injuries to others?
• What does coverage often include in a homeowners insurance policy?
• What legal time limits specify the period during which a lawsuit may be filed?
• What do courts use to assess whether a party acted with reasonable care?
• What does the definitions section of an insurance policy describe?
• What is a characteristic of the structure of an insurance policy?
• Who benefits from first-party insurance coverage?
• What preference do most clients have regarding coverage types?
• What is ‘marine insurance’ primarily used for?
• Which of the following statements regarding premiums is true?
• What type of coverage does a Fine Arts Floater provide?
• What is the primary difference between a Business Owner's Policy (BOP) and a Commercial General Liability (CGL) policy?
• What is the term for the duty to protect others from harm in legal scenarios?
• How does a ‘schedules’ policy differ from a ‘blanket’ policy?
• What term refers to a specific cause of loss in an insurance policy?
• Which of the following pairs damages that aim to punish the defendant and deter future misconduct?
• The 'best interests' of the insurer allows them to do what during a claim?
• What is the term used for the cost per unit of insurance coverage?
• What is referred to as the maximum amount the insurer will pay during the liability period for total occurrences?
• If two parties agree to arbitration, how is a tie resolved in choosing an arbitrator?
• What principle explains that insurers are responsible for the actions of their agents?
• What does a ‘no-fault’ insurance policy entail?
• What is the primary purpose of fidelity bond insurance?
• What is the principle that indicates if you are partly at fault, you cannot recover from the other party at all?
• Which of the following is a feature of a comprehensive auto insurance policy?
• What is the formula for calculating 'actual cash value'?
• What type of defenses are typically accepted in negligence lawsuits?
• Which type of insurance is typically required when purchasing a home?
• What is the purpose of a clause designed to reinforce the Principle of Indemnity?
• What is the term used for when an insured cancels and a penalty fee is applied?
• What is the term used when an insurer does not renew a contract but has provided coverage for the entire term?
• What term describes another person listed on a policy who usually receives coverage at no additional cost?
• What type of insurance provides financial protection in the event of a car accident?
• How many limits does a split limit policy typically address?
• Why is it crucial to understand the exclusions in an insurance policy?
• What does ‘liability insurance’ primarily cover?
• Which rating approach combines both manual and individual loss records to determine a premium?
• What is the term for an economic interest in a property that must exist at the time of loss?
• What are endorsements in insurance policies primarily used for?
• Who is responsible for taking care of your car while it is under their temporary control?
• In liability insurance, what do defense costs include?
• In insurance terms, what is a third-party provision?
• Which type of damages includes medical expenses and lost wages?
• What does a policyholder typically need to provide when filing a claim?
• In terms of liability coverage, what is not typically covered under standard exclusions?
• In property insurance, what does loss of rental income cover?
• What does a ‘stop-loss’ provision in a health insurance policy accomplish?
• What is the primary purpose of property insurance?
• In negligence cases, which situation might prevent a plaintiff from recovering damages?
• Which of the following is one key function of the first named insured on a policy?
• How can an insurance company adjust its premium rates according to risk?
• Which process classifies the applicant based upon the underwriting requirements of the insurer?
• Which of the following is considered an exclusion in an insurance policy?
• What is a requirement for dwelling policies that contain Replacement Cost coverage?
• What is the assessment method that considers the historical claims data of the insured to modify the premium?
• What does a Commercial General Liability (CGL) policy primarily focus on?
• What does the term premium refer to in insurance?
• What is the difference between ‘occurrence’ and ‘claims-made’ liability policies?
• What is the result of having a lower deductible in terms of premiums?
• What is required of the insured regarding rights of recovery against negligent third parties?
• What does the term "tort threshold" refer to?
• What type of loss follows as a consequence of a direct loss?
• What does health insurance portability allow individuals to do?
• Which of the following refers to a limit the insurer will pay for each occurrence?
• What does a homeowners policy typically include?
• What term refers to the chance of loss in insurance?
• What is the main benefit of having a ‘blanket’ policy?
• What does having a higher deductible imply about the insured's financial responsibility during a claim?
• What may the insurer apply if they are processing a cancellation request, according to their administrative expenses?
• What type of insurance is designed to protect businesses?
• Which provision states that the insurer must defend all lawsuits against the insured?
• Which type of policies pay out on an Actual Cash Value (ACV) basis?
• What do conditions in an insurance policy typically include?
• What term refers to rates set by the insurer at a level sufficient to pay claims and company expenses?
• What must an insurer include when canceling a policy according to regulations?
• What is the process called when an insurance company assesses a claim?
• Which of the following best describes liability coverage?
• Who can request a cancellation of an insurance policy?
• How is 'fair market value' defined in the context of insurance?
• What is an exclusion clause in an insurance policy?
• What is the main implication of a vacancy in a property insurance policy?
• Which term refers to the geographic limits of insurance coverage, typically including the USA, Puerto Rico, and Canada?
• What does contractual liability insurance cover?
• In auto policies with split limits, what does the split limit define?
• What is the role of an insurance agent?
• In an insurance context, what does the term "premium" refer to?
• What is a temporary insurance certificate?
• Which type of policies are commonly written without deductibles?
• What is a deductible in an insurance policy?
• What term is used for incidental damages suffered by the injured party?
• When does a Replacement Cost policy apply for property insurance?
• What organization is responsible for developing and filing rates and policy forms for insurance companies?
• What coverage does 'bodily injury liability' provide?
• What type of premium refund method is required when an insurer cancels a policy?
• What principle establishes that one party may be responsible for the negligent acts of another?
• What factor determines whether a specific peril is covered under an insurance policy?
• Which types of insurance policies typically provide Replacement Cost coverage?
• What does liability insurance typically cover?
• In property insurance, what is the basic principle of indemnity?
• In lawsuits, what can be an exception allowing for damages even if negligence is established?
• What is typically included in the calculation of insurance rates?
• What could be the consequence if an insurer cancels a policy without proper notice?
• What type of insurance covers income loss due to unexpected events?
• What process is described when parties cannot agree on the recovery of damages and arbitration is pursued?
• What must the insured do in accordance with the subrogation clause after a loss?
• In underwriting, what is the outcome when the premiums reflect the overall costs to cover claims and operational expenses?
• What happens when restoration occurs in an insurance policy?
• What is the primary function of the National Association of Insurance Commissioners (NAIC)?
• What must a plaintiff prove to recover damages in a negligence lawsuit?
• What term describes a situation where both the occupant and contents have been removed from the premises?
• What type of risks does fidelity bond insurance protect against?
• Under which method do actuaries determine rates based on the "law of large numbers"?
• Where are the limits of liability typically stated in an insurance policy?
• What does ‘out-of-pocket maximum’ indicate in a health policy?
• Which of the following policies is least likely to provide Replacement Cost coverage?
• Which of the following describes the components of rate filing?
• In the context of insurance, what does 'abandonment of property' mean?
• Which principle has replaced the doctrine of contributory negligence?
• Which of the following best defines a term insurance policy?
• When the insured decides to cancel the policy, what is the penalty usually referred to?
• Which type of policy covers all perils unless specifically excluded?
• What does a rider do in an insurance policy?
• How does Replacement Cost coverage benefit policyholders?
• What is the main purpose of reinsurance?
• Which type of construction generally results in lower insurance premiums?
• What is the burden of proof in a negligence lawsuit?
• What is the term for adjusting the premium based on the insured's own loss experience?
• In a negligence lawsuit, who is the injured party referred to as?
• What is the difference between peril and hazard?
• What is the key characteristic of a mutual insurance company?
• Which of the following describes actions taken by a plaintiff that may contribute to their injury?
• What is the purpose of the exclusions section in an insurance policy?
• In which insurance policy can coverage extend worldwide under certain conditions?
• What aspect of cancellation does state regulation often shape?
• What does specific property insurance provide?
• What term describes the negligence where a party knew a product was faulty yet continued to sell it?
• In property insurance, what does ‘actual cash value’ mean?
• What is the purpose of a ‘policy limit’ in an insurance contract?
• Which of the following construction types is typically considered fire resistive?
• The insuring agreement in an insurance policy outlines what?
• What rating adjusts "manual" rates based on past loss experience or other unique risk factors?
• What coverage term is typically restored or starts over again on an annual date?
• Who is primarily referred to in the context of sending notices according to the Declarations Page?
• Which rating method determines the final premium at the end of the policy period based on prior loss experience?
• What is typically considered a direct result of a defendant's negligent act?
• What is a moral hazard in the context of insurance?
• What is the purpose of a waiting period in health insurance?
• What is an endorsement in an insurance policy?
• In what circumstance can a party recover damages in a contributory negligence framework?
• What allows an insurer to change the terms of a contract provided it benefits the insured?
• What kind of property is referred to when the insurer has the right to settle claims in a manner beneficial to them?
• How is an insurance premium calculated?
• Morale hazard is best described as what kind of behavior?
• What does negligence refer to in legal terms?
• Which of the following is an example of additional or supplementary coverage?
• What type of property does a personal articles floater typically cover?
• Which type of hazard includes physical dangers like a dead tree threatening to damage property?
• What percentage is typically required for coinsurance on dwelling fire and homeowners policies?
• What is the benefit of having umbrella insurance?
• Which option states that an insurer has the right to settle claims in their best interests?
• Which of the following is not a type of hazard associated with insurance?
• What does Functional Replacement Cost Coverage entail?
• What is the purpose of an Agreed Valuation Clause in an insurance policy?
• Who are the primary beneficiaries of the filings made by the insurance rating bureau?
• What does the term "Policy Period" mean in relation to insurance coverage?
• What is a 'named peril' policy?
• How are indirect losses typically categorized in insurance policies?
• What type of protection does 'loss of use' coverage provide?
• What information is typically found on the declarations page of an insurance policy?
• What is the formula for calculating Actual Cash Value (ACV)?
• How does a higher deductible typically affect the insurance premium?
• What does ‘adverse selection’ mean in the context of insurance?
• What does ISO stand for in the context of insurance?
• Which of the following best describes Replacement Cost?
• What defines specialized risk insurance?
• What is a key feature of ‘gap insurance’?
• Which provision would you expect to find relating to claims in an insurance policy?
• What is often a requirement for maintaining continuous insurance coverage?
• Which damages are designed to make the injured party whole and include things such as lost wages and medical expenses?
• In terms of insurance coverage, what does Replacement Cost Basis mean?
• What type of loss is defined as a loss occurring suddenly due to a covered peril?
• What is the primary function of an insurance adjuster?
• What does a waiting period refer to in insurance?
• What is the main function of the insurer's reserves?
• What type of coverage obligates the insurer to defend lawsuits filed against the insured?
• What does the term "depreciation" refer to in property insurance?
• What must a plaintiff demonstrate in a negligence lawsuit?