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PROPERTY AND CASUALTY PRACTICE
SOLUTION 2026 SOLVED ITEMS CONFIRMED
A+
◉ Blanket insurance. Answer: This type of insurance covers more than one item of property at a single location or one more items of property at multiple locations. ◉ Speculative. Answer: possibility of both gain and loss. Not insurable. ◉ Pure. Answer: only the possibility of loss. Insurable. ◉ What are the 5 methods of managing or handling risk?. Answer: avoid, control, retain, and transfer risk. ◉ Hazard. Answer: A condition or situation which increases the chance for loss ◉ Physical Hazards. Answer: a hazard that arises from the condition, occupancy, or use of the property itself. ex: skateboard left on the steps
◉ Moral Hazards. Answer: when an individual through carelessness or by irresponsible actions can increase the possibly for a loss. ex: person who drives carelessly just because they know they are insured. ◉ Morale Hazards. Answer: when a person might create a loss situation on purpose just to collect from the insurance company. ex: Prearranged, faked theft of someone's old vehicle so they can get an insurance payout to buy a new vehicle. ◉ Replacement Cost. Answer: The amount of money it would take to replace a damaged or destroyed item with one of like kind and quality AT THE TIME OF LOSS. No deduction for depreciation. ◉ Actual Cash Value (ACV). Answer: Replacement Cost, minus depreciation. ◉ Pair and Set Clause. Answer: Loss to one item of a pair or set does not constitute loss to the entire pair or set.
◉ Insolvency. Answer: A financial state that occurs if liabilities are greater than assets. ◉ Law of Agency. Answer: Knowledge of the Agents is Knowledge of the Principal (Insurance Company) ◉ Principal. Answer: Insurance Company ◉ What is the ISO?. Answer: Insurance Services Office which is an organization established for the benefit of its member insurance companies. This organization gathers statistics, provides loss costs, drafts policy forms and coverage provisions and conducts inspections for rate making purposes. ◉ Coinsurance Clause. Answer: Requires the insured to carry a minimum specified amount (generally 80%) of the replacement cost value of the insured property in order for partial losses to be paid in full. ◉ Estoppel. Answer: A legal bar to changing or denying a fact because of one's own previous actions or words to the contrary. ex: If an insurance company representative intentionally or unintentionally gives the impression that a specific fact exists when
it does not and a client relies on that impression and is damaged a result. ◉ Binder. Answer: A temporary contract of insurance, oral or written, offered by an insurer pending issuance of the policy. Usually written for a period of 30-60 days and remains in force for that period or until a permanent policy is either issued or denied by the insurer. ◉ Warranty. Answer: A provision in a policy that pledges that a condition does exist or will exist at some time in the future. ◉ Deposit Premium. Answer: Tentative charge made at the beginning of certain policies and reinsurance agreements to be adjusted when the actual earned charge has been later determined. ◉ Audit. Answer: Verification of books or accounts to determine their accuracy. ◉ Occurrence. Answer: An accident, including continuous or repeated exposure to the same harmful conditions, which result in bodily injury or property damage. ◉ Special Damages. Answer: type of compensatory damages that reimburse the injured part for direct and specific expenses involved
◉ Casualty Insurance. Answer: Refers to coverage designed to address the liability of individuals and organizations resulting from negligent acts in their personal, business, or professional roles. ◉ Overinsurance. Answer: Exists if a property or an insurable interest in property is insured by one or more insurance contracts against the same hazard in excess of the fair value of the property or of such interest. ◉ Specific Insurance. Answer: Coverage on ONE type of property (real or personal) in ONE location. ◉ Blanket Insurance. Answer: A single policy written on an insured's interest for 2 or more different types of property (dwelling/building and contents) at the same location, or at different locations. ◉ Uninsured Motor Vehicle. Answer: A motor vehicle or trailer to which:
- No liability coverage at the time of accident
- has liability coverage but not enough to meet the state's financial responsibility requirement
- Operated by a hit and run driver
- Has invalid liability insurance at the time of the accident because the insurer is insolvent or denies coverage ◉ Part C: Uninsured Motorist Coverage. Answer: this coverage compensates the insured for bodily injury ONLY as a result of an accident with an uninsured motorist. ◉ Medical Payments. Answer: Insurance company agrees to pay for reasonable expenses incurred for necessary medical and funeral services because of bodily injury.
- Covers first party.
- "Stays in the car"
- 3 years is time limit for incurring medical expenses ◉ Supplementary Payments. Answer: Payments made in addition to the Limits of Liability.
- Up to $200/day for loss of earnings
- Up to $250 for the cost of bail bonds required because of an accident. ◉ Excess. Answer: Any insurance that is provided for a vehicle you do not own, shall be excess over any other collectible insurance.
- Covers Third Party Only
- Pays for both $pecial and General Damages ◉ Loss of Use. Answer: The inconvenience caused to an individual for the inability to use property. ◉ Underinsured Motorist Coverage (UIM). Answer: Covers the insured when involved in an accident with a driver who has auto liability insurance, but the limit of this insurance is insufficient to pay for the insured's damage. ◉ Collision. Answer: The upset of a covered auto or its impact with another motor vehicle. ◉ Comprehensive. Answer: Addresses property damage losses to the insured vehicle involving losses other than collisions. Examples:
- Contact with birds or animals
- Theft or larceny
- Fire
- Hair, water, or flood
- Vandalism or malicious mischief (VMM)
- Breakage of glass ◉ Nonowned Auto. Answer: Any private passenger vehicle not owned by the insured being operated by the insured. Examples:
- Rental Car
- Temporary Substitute ◉ APIP. Answer: Additional Personal Injury Protection (optional) ◉ OBEL. Answer: Optional Basic Economic Loss Additional $25,000 to be assigned to any combination of Medical Expenses, Loss Wages, Rehab. ◉ Red Lining. Answer: No insurer may refuse to issue or renew an auto policy because of age, sex, race, occupation or principal place of garaging of the named insured. ◉ Stacking. Answer: The practice of adding (stacking) the limits of all applicable policies to address a given loss.
◉ Fair Credit Reporting Act. Answer: Mandates confidential, fair and accurate reporting of information on consumers by reporting organizations as well as organizations (such as insurers) which use the services of reporting organizations. Consumers must be informed if a credit report is needed in order to underwrite a particular line of insurance. ◉ Express Authority. Answer: Authority specifically given to an agent, either orally or in writing, by the principal
- Written authority is typically provided under the agency agreement which allows the agent to countersign, issue and deliver policies. ◉ Implied Authority. Answer: authority given by the insurance company to the agent that is not formally expressed or communicated.
- This allows the agent to perform all of the usual and necessary tasks to sell and service insurance contracts and to full exercise the agents express authority.
◉ Apparent Authority. Answer: Authority that states that an agent may have whatever authority a reasonable person would assume the agent has. ◉ General Rule of Agency. Answer: Any knowledge of the agent is presumed to be knowledge of the insurer (principal). ◉ Producer (Agent). Answer: general term used to describe someone who sells insurance.
- represents the insurance company ◉ Broker. Answer: An individual, partnership, or corporation who, for a commission, acts or aids in any manner in the sale of insurance as the representative of the insured. In an insurance transaction, this person represents the insured. ◉ Consultant. Answer: Someone who, for a fee, offers advice on the benefits, advantages, and disadvantages of various insurance policies.
- They don't actually sell insurance, only advice.
◉ Aleatory Contract. Answer: it is a contract that is contingent on an uncertain event (a loss) that provides for unequal transfer of value between the parties. For example, people can pay insurance premiums for years without having a loss or on the other hand someone could experience a loss and be reimbursed a great deal more than they had paid in premiums. ◉ Unilateral Contract. Answer: Only one of the parties in the contract is legally bound to do anything.
- Insurance policies are one sided because only the insurance company is legally bound to perform its part of the agreement. ◉ Absolute Liability. Answer: Imposed on defendants engaged in hazardous activities, such as harboring wild animals, using explosives, etc. The injured party does not have to prove negligence. ◉ Strict Liability. Answer: Commonly applied in product liability cases. A person or business that manufactures or sells a product makes an implied warranty that the product is safe.The business is then liable for defective products, regardless of fault or negligence.
◉ Contract. Answer: a legal agreement between two competent parties that promises a certain performance in exchange for a certain consideration. ex: Insurance policy covers insured's losses in exchange for a premium. ◉ Characteristics of a valid contract include:. Answer: - competent parties
- legal purpose
- offer and agreement
- consideration ◉ Offer. Answer: a promise that requires an act or another promise in exchange. ◉ Agreement. Answer: occurs when the other party agrees to the offer or does what was proposed in the offer. ◉ Consideration. Answer: a thing of value exchanged for the performance promised in the contract.
which the insured will be indemnified. This section also describes the type of property covered and the perils against which it is insured. ◉ Conditions. Answer: This section states the ground rules for the policy. They describe the responsibilities and the obligations of both the insurance company and the insured. ◉ Exclusions. Answer: This section describes the losses for which the insured is not covered. If and excluded loss occurs, the insured will not be reimbursed. ◉ Definitions. Answer: This section clarifies the meanings of certain terms used in the policy. ◉ Endorsement. Answer: These are documents that modify or change the original policy in any way and are attached to the original policy. These changes could be anything from broadening coverage, restricting coverage to changing the name of the insured. ◉ Insurance from the federal government may include:. Answer: - War risk insurance
- Nuclear energy liability insurance
- Flood insurance
- Federal crop insurance ◉ Insurance from state government may include:. Answer: - Unemployment insurance
- Workers compensation benefits ◉ Residual Market Insurance. Answer: insurance provided by the government which is not typically available from private insurers. Such war risk, flood, workers comp, etc. ◉ Monoline companies. Answer: insurance companies that only write one type of insurance policy. ◉ Multiline companies. Answer: insurance companies that write more than one type of insurance policy. ◉ Life insurance. Answer: insurance designed to handle the risk of premature death or the risk that an individual may outlive his or her financial resources.
