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Michigan Property & Casualty Insurance
Exam Questions With 100 % Correct
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Contract of Utmost Good Faith - ✔️ ✔️ Both parties bargain in good faith in forming the contract, and rely upon the statements and promises of each other. contribution by equal shares - ✔️ ✔️ Under this concept, when 2 or more insurers' policies cover at the same level (Primary or Excess), each insurer contributes an equal amount to the loss settlement until the loss is paid, or until each insurer has exhausted its limits of insurance, whichever comes first. Example: If there are 3 insurers participating, each would pay 33 1/3 percent of the loss; if 4 insurers participating, each would pay 25 percent of the loss; or if 5 insurers participating, each would pay 20 percent of the loss. 30 days - ✔️ ✔️ Time for producer to respond to notification 60 - ✔️ ✔️ Insured must send a signed statement of loss to the insurance company within __ Abandonment - ✔️ ✔️ Insured cannot abandon property that can be repaired & expect to be paid as if it was a total loss Actual Cash Value (ACV) - ✔️ ✔️ replacement cost - depreciation Adverse Selection - ✔️ ✔️ risks that have a greater than average chance of loss Age 18 - ✔️ ✔️ Applicants minimum age 15 days - ✔️ ✔️ File a notice of producer appointment within __ days Aleatory Contract - ✔️ ✔️ The exchange of value is unequal. Alien Insurer - ✔️ ✔️ An insurance company that is incorporated outside the United States Apparent Authority - ✔️ ✔️ The authority an agent is believed by third parties to have because of the behavior of the principal.
Arbitration - ✔️ ✔️ settling a dispute by agreeing to accept the decision of an impartial outsider Avoidance - ✔️ ✔️ eliminating certain risk by not engaging in certain activity Bailee - ✔️ ✔️ a person or business temporarily in possession of property entrusted to them by others Basic Perils - ✔️ ✔️ Fire, lightning, and internal explosion Binders - ✔️ ✔️ a temporary contract of insurance providing coverage prior to the issuing of a complete insurance policy 3 ways to assign rates - ✔️ ✔️ Judgement, Manual, Experience Broad Perils (BIG AFFECT) - ✔️ ✔️ Burglary damage Ice, sleet, snow (weight of) Glass breakage Accidental Discharge of water or steam Freezing objects Falling objects Electrical Current Collapse Tearing Asunder Captive Agent - ✔️ ✔️ an insurance agent who represents only one insurance company and who is, in effect, an employee of that company Certificate of Authority - ✔️ ✔️ state license for an insurance company Combined Ratio - ✔️ ✔️ loss ratio + expense ratio Commercial Auto Policy - ✔️ ✔️ Includes liability & physical damage, medical payments can be added by endorsement concealement - ✔️ ✔️ Failure to disclose known facts Contracts of Adhesion - ✔️ ✔️ written by one party and the other party cannot negotiate if ambiguous, the court will decide in favor or the insured
extended coverage (WCSHAVVER and V&MM) - ✔️ ✔️ Wind Civil Commotion Smoke Hail Aircraft Vehicle Volcanic Eruption Explosion Riot Vandalism & Malicious Mischief Fair Credit Reporting Act (FCRA) - ✔️ ✔️ Federal law giving consumers the right to view and correct/dispute their credit information Financial Strength Rating - ✔️ ✔️ a report card of the company Foreign Insurer - ✔️ ✔️ An insurer licensed to operate in a state but incorporated in another state. Fraternal Benefit Society - ✔️ ✔️ An insurance company formed to provide insurance for members of an affiliated lodge, religious, or fraternal organization with a representative form of government. fraud - ✔️ ✔️ the intentional act to deceive & cheat another General Agent - ✔️ ✔️ Individuals that train, hire, manage other agents General damages - ✔️ ✔️ Payable in addition to special damages, payments for non- economic losses (or not directly measurable) Ex: pain & suffering, loss of companionship Gramm-Leach-Bliley Act - ✔️ ✔️ requires financial institutions to ensure the security and confidentiality of customer data HO-2 (broad form) - ✔️ ✔️ Owner occupant, Broad Form HO-3 (special form) - ✔️ ✔️ Owner occupant, special form HO- 4 - ✔️ ✔️ Tenants or Renters HO-5 Comprehensive Form - ✔️ ✔️ Owner occupants comprehensive form
HO- 6 - ✔️ ✔️ condominium owners HO- 8 - ✔️ ✔️ Modified Form for Special Risks independent agent - ✔️ ✔️ Insurance agents who represent and sell products for several different insurance companies and are paid by commission. Indirect Loss - ✔️ ✔️ Loss that is a result or consequence of a direct loss Law of Agency - ✔️ ✔️ contracts made by the agent are considered to be contracts of the principal Law of Large Numbers - ✔️ ✔️ A principle stating that the larger the number of similar exposure units considered, the more closely the losses reported will equal the underlying probability of loss. Liberalization - ✔️ ✔️ If the insurer makes any change that broadens coverage in the policy edition during the policy period or within 60 days before the effective date, these changes will automatically apply, without needing to be endorsed to the policy. Lloyd's Association - ✔️ ✔️ insurance provided by individual underwriters, usually insure unusual risks Loss Ratio - ✔️ ✔️ incurred losses/earned premiums Loss sustained crime form - ✔️ ✔️ Losses that occur after the policy are NOT covered, must be during policy period & discovered up to 1 year after policy expires Michigan Catastrophic Claims Association - ✔️ ✔️ all insurers writing no-fault insurance are members of the: Moral Hazard - ✔️ ✔️ Arise from a person's character (dishonesty) Morale Hazard - ✔️ ✔️ A condition of carelessness or indifference that increases the frequency or severity of loss. Mutual Insurer - ✔️ ✔️ owned by policyholders Obligee - ✔️ ✔️ Who the surety bond protects, who the promise is owed to Pair or set condition - ✔️ ✔️ When part of a set is damaged or destroyed, insured will not be reimbursed for the value of the entire set, only for the part that is damaged or destroyed
Sharing risk - ✔️ ✔️ Two or more individuals share risk Special Damages - ✔️ ✔️ Awarded for out of pocket losses (medical costs, loss of income, property damage) Special Perils - ✔️ ✔️ All risks of physical loss unless specifically excluded Speculative Risk - ✔️ ✔️ Chance of loss or gain Stock Insurer - ✔️ ✔️ Owned by stockholders Subrogation - ✔️ ✔️ The process by which an insurer can, after it has paid a loss under the policy, recover the amount paid from any party (other than the insured) who caused the loss or is otherwise legally liable for the loss. Supplementary Payments - ✔️ ✔️ Paid in addition to the policy's limit of liability Symbol 1 - ✔️ ✔️ Any Auto, least restrictive Symbol 2 - ✔️ ✔️ Owned autos only Symbol 4 - ✔️ ✔️ Owned autos other than private passenger autos only Symbol 48 - ✔️ ✔️ Trailers in insured's possession Symbol 7 - ✔️ ✔️ Specifically described autos only, most restrictive Symbol 8 - ✔️ ✔️ hired autos only-- coverage only for autos leased, hired, rented, or borrowed from the named insured's employees or family members. Typically, used for liability and physical damage coverage. transfer risk - ✔️ ✔️ The purpose of insurance Unilateral Contract - ✔️ ✔️ One-sided contract Utility Services - Direct Damage Endorsement - ✔️ ✔️ Covers damage to covered property caused by interruption of utilities, such as water, communication, or power to the insured premises utility services - time element endorsement - ✔️ ✔️ an endorsement that covers loss of business income or extra expense at the insured premises caused by the interruption of utility services to or from the insured premises
Waiver - ✔️ ✔️ the voluntary relinquishment of a known legal right warranty - ✔️ ✔️ A promise Implied Authority - ✔️ ✔️ Authority that is not expressed or written into the contract, but which the agent is assumed to have in order to transact the business of insurance for the principal. Symbol 9 - ✔️ ✔️ non-owned autos, any auto owned by an employee or partner while used in the insured's business or personal affairs
