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Michigan Property & Casualty
Insurance Exam Questions With
Correct Answers
Risk |- |CORRECT |ANSWER✔✔-The |possibility |that |a |loss |will | occur Speculative |Risk |- |CORRECT |ANSWER✔✔-Chance |of |loss |or | gain Pure |Risk |- |CORRECT |ANSWER✔✔-only |the |possibility |of |loss Peril |- |CORRECT |ANSWER✔✔-cause |of |loss Exposure |- |CORRECT |ANSWER✔✔-The |potential |for | accidents |and |other |losses Direct |Loss |- |CORRECT |ANSWER✔✔-Loss |that |is |a |direct | result |of |a |peril, |such |as |fire. Indirect |Loss |- |CORRECT |ANSWER✔✔-Loss |that |is |a |result |or | consequence |of |a |direct |loss
Moral |Hazard |- |CORRECT |ANSWER✔✔-Arise |from |a |person's | character |(dishonesty) Morale |Hazard |- |CORRECT |ANSWER✔✔-A |condition |of | carelessness |or |indifference |that |increases |the |frequency |or |severity |of |loss. Physical |Hazard |- |CORRECT |ANSWER✔✔-a |physical | condition |that |increases |the |frequency |or |severity |of |loss Sharing |risk |- |CORRECT |ANSWER✔✔-Two |or |more | individuals |share |risk transfer |risk |- |CORRECT |ANSWER✔✔-The |purpose |of | insurance Avoidance |- |CORRECT |ANSWER✔✔-eliminating |certain |risk | by |not |engaging |in |certain |activity Retention |- |CORRECT |ANSWER✔✔-Self-insurance, |person | will |pay |for |loss
Mutual |Insurer |- |CORRECT |ANSWER✔✔-owned |by | policyholders Fraternal |Benefit |Society |- |CORRECT |ANSWER✔✔-An | insurance |company |formed |to |provide |insurance |for | members |of |an |affiliated |lodge, |religious, |or |fraternal | organization |with |a |representative |form |of |government. Reciprocal |Insurers |- |CORRECT |ANSWER✔✔-are | unincorporated |groups |of |individual |members |that |provide | insurance |for |other |members |through |indemnity |contracts. | Each |member |acts |as |both |insurer |and |insured |and |are | managed |by |Attorney |in |Fact. Lloyd's |Association |- |CORRECT |ANSWER✔✔-insurance | provided |by |individual |underwriters, |usually |insure |unusual | risks Risk |Retention |Group |(RRG) |- |CORRECT |ANSWER✔✔-a | mutual |insurance |company |formed |to |insure |people |in |the | same |business, |occupation, |or |profession Self |insurers |- |CORRECT |ANSWER✔✔-These |insurers |do |not | transfer |their |share |of |a |loss |to |an |insurance |company, |but |
instead |establish |their |own |pool |of |reserves |to |cover |losses | that |may |arise. Domestic |Insurer |- |CORRECT |ANSWER✔✔-An |insurance | company |that |conducts |business |in |the |state |of | incorporation. Foreign |Insurer |- |CORRECT |ANSWER✔✔-An |insurer |licensed | to |operate |in |a |state |but |incorporated |in |another |state. Alien |Insurer |- |CORRECT |ANSWER✔✔-An |insurance | company |that |is |incorporated |outside |the |United |States Certificate |of |Authority |- |CORRECT |ANSWER✔✔-state | license |for |an |insurance |company Financial |Strength |Rating |- |CORRECT |ANSWER✔✔-a |report | card |of |the |company independent |agent |- |CORRECT |ANSWER✔✔-Insurance | agents |who |represent |and |sell |products |for |several |different |insurance |companies |and |are |paid |by |commission.
Apparent |Authority |- |CORRECT |ANSWER✔✔-The |authority | an |agent |is |believed |by |third |parties |to |have |because |of |the | behavior |of |the |principal. Elements |of |a |Legal |Contract |- |CORRECT |ANSWER✔✔- Consideration, |Legal, |Offer, |Acceptance, |Competent | parties Contracts |of |Adhesion |- |CORRECT |ANSWER✔✔-written |by | one |party |and |the |other |party |cannot |negotiate if |ambiguous, |the |court |will |decide |in |favor |or |the |insured Aleatory |Contract |- |CORRECT |ANSWER✔✔-The |exchange |of | value |is |unequal. Contract |of |Utmost |Good |Faith |- |CORRECT |ANSWER✔✔-Both |parties |bargain |in |good |faith |in |forming |the |contract, |and | rely |upon |the |statements |and |promises |of |each |other. Unilateral |Contract |- |CORRECT |ANSWER✔✔-One-sided | contract Personal |Contract |- |CORRECT |ANSWER✔✔-An |agreement | between |an |insurance |company |and |an |individual, |non | transferable
Contracts |of |Indemnity |- |CORRECT |ANSWER✔✔-Restore |the |insured |back |to |the |financial |state |they |were |in |before |the | loss, |no |more |no |less Representation |- |CORRECT |ANSWER✔✔-a |statement | believed |to |be |true |to |the |best |of |one's |knowledge warranty |- |CORRECT |ANSWER✔✔-A |promise concealement |- |CORRECT |ANSWER✔✔-Failure |to |disclose | known |facts fraud |- |CORRECT |ANSWER✔✔-the |intentional |act |to |deceive |& |cheat |another Waiver |- |CORRECT |ANSWER✔✔-the |voluntary | relinquishment |of |a |known |legal |right Estoppel |- |CORRECT |ANSWER✔✔-Once |a |waiver |is |created | it |cannot |be |changed Supplementary |Payments |- |CORRECT |ANSWER✔✔-Paid |in | addition |to |the |policy's |limit |of |liability
effective |date, |these |changes |will |automatically |apply, | without |needing |to |be |endorsed |to |the |policy. Subrogation |- |CORRECT |ANSWER✔✔-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. Binders |- |CORRECT |ANSWER✔✔-a |temporary |contract |of | insurance |providing |coverage |prior |to |the |issuing |of |a | complete |insurance |policy Loss |Ratio |- |CORRECT |ANSWER✔✔-incurred |losses/earned | premiums Combined |Ratio |- |CORRECT |ANSWER✔✔-loss |ratio |+ | expense |ratio 3 |ways |to |assign |rates |- |CORRECT |ANSWER✔✔-Judgement, | Manual, |Experience Fair |Credit |Reporting |Act |(FCRA) |- |CORRECT |ANSWER✔✔- Federal |law |giving |consumers |the |right |to |view |and | correct/dispute |their |credit |information
Gramm-Leach-Bliley |Act |- |CORRECT |ANSWER✔✔-requires | financial |institutions |to |ensure |the |security |and | confidentiality |of |customer |data Actual |Cash |Value |(ACV) |- |CORRECT |ANSWER✔✔- replacement |cost |- |depreciation Replacement |Cost |- |CORRECT |ANSWER✔✔-cost |of | replacement |item |with |no |depreciation Pair |or |set |condition |- |CORRECT |ANSWER✔✔-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 Arbitration |- |CORRECT |ANSWER✔✔-settling |a |dispute |by | agreeing |to |accept |the |decision |of |an |impartial |outsider Bailee |- |CORRECT |ANSWER✔✔-a |person |or |business | temporarily |in |possession |of |property |entrusted |to |them |by | others Basic |Perils |- |CORRECT |ANSWER✔✔-Fire, |lightning, |and | internal |explosion
Collapse Tearing |Asunder Special |Perils |- |CORRECT |ANSWER✔✔-All |risks |of |physical | loss |unless |specifically |excluded Dwelling |Insurance |- |CORRECT |ANSWER✔✔--not | homeowners |insurance -does |not |have |to |be |owners-occupied -covers |risk |that |may |not |be |covered |by |homeowners DP-1: |Basic DP-2: |Broad DP-3: |Special Eligible |Dwellings |- |CORRECT |ANSWER✔✔-- |1-4 |unit | dwellings |w/ |boarders
- |vacation/rental
- |endorsement |for: |mobile |home |& |under |construction HO-2 |(broad |form) |- |CORRECT |ANSWER✔✔-Owner | occupant, |Broad |Form
HO-3 |(special |form) |- |CORRECT |ANSWER✔✔-Owner | occupant, |special |form HO-4 |- |CORRECT |ANSWER✔✔-Tenants |or |Renters HO-5 |Comprehensive |Form |- |CORRECT |ANSWER✔✔-Owner | occupants |comprehensive |form HO-6 |- |CORRECT |ANSWER✔✔-condominium |owners HO-8 |- |CORRECT |ANSWER✔✔-Modified |Form |for |Special | Risks 15 |days |- |CORRECT |ANSWER✔✔-File |a |notice |of |producer | appointment |within |__ |days 30 |days |- |CORRECT |ANSWER✔✔-Time |for |producer |to | respond |to |notification Age | 18 |- |CORRECT |ANSWER✔✔-Applicants |minimum |age Symbol | 9 |- |CORRECT |ANSWER✔✔-non-owned |autos, |any | auto |owned |by |an |employee |or |partner |while |used |in |the | insured's |business |or |personal |affairs
Symbol | 8 |- |CORRECT |ANSWER✔✔-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. General |damages |- |CORRECT |ANSWER✔✔-Payable |in | addition |to |special |damages, |payments |for |non-economic | losses |(or |not |directly |measurable) Ex: |pain |& |suffering, |loss |of |companionship Special |Damages |- |CORRECT |ANSWER✔✔-Awarded |for |out | of |pocket |losses |(medical |costs, |loss |of |income, |property | damage) Punitive |Damages |- |CORRECT |ANSWER✔✔-Monetary | damages |that |may |be |awarded |to |a |plaintiff |to |punish |the | defendant |and |deter |similar |conduct |in |the |future. Symbol | 48 |- |CORRECT |ANSWER✔✔-Trailers |in |insured's | possession Obligee |- |CORRECT |ANSWER✔✔-Who |the |surety |bond | protects, |who |the |promise |is |owed |to
Symbol | 7 |- |CORRECT |ANSWER✔✔-Specifically |described | autos |only, |most |restrictive Symbol | 1 |- |CORRECT |ANSWER✔✔-Any |Auto, |least | restrictive Symbol | 2 |- |CORRECT |ANSWER✔✔-Owned |autos |only Symbol | 4 |- |CORRECT |ANSWER✔✔-Owned |autos |other |than | private |passenger |autos |only Utility |Services |- |Direct |Damage |Endorsement |- |CORRECT | ANSWER✔✔-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 |- |CORRECT | ANSWER✔✔-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
