Maine Property and Casualty Insurance Chapter Questions
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Course
Maine Property and Casualty Insurance
Institution
Maine Property And Casualty Insurance
What is insurance? - answer-The transfer of risk from an individual or business entity to an insurance company
What is risk? - answer-The uncertainty or chance of a loss occurring; there are two types, pure risk and speculative risk
What is peril? - answer-The causes of loss insured against i...
MAINE PROPERTY AND CASUALTY INSURANCE CHAPTER
QUESTIONS
What is insurance? - answer-The transfer of risk from an individual or business entity to an
insurance company
What is risk? - answer-The uncertainty or chance of a loss occurring; there are two types, pure
risk and speculative risk
What is peril? - answer-The causes of loss insured against in an insurance policy
What are the three types of hazards? - answer-Physical, Moral and Morale
What does indemnity mean? - answer-A provision to an insurance policy that states in the
event of a loss, insured can only collect to the extent of the financial loss and cannot gain
financially
Define Subrogation - answer-The insurers legal right to seek damages from third parties after it
has reimbursed insured for the loss. It prevents the insured from collecting twice from both the
insurer and the third party
What is the difference between an accident and an occurrence? - answer-An accident is a
sudden, unplanned and unexpected event, not controlled, resulting in injury or loss. An
occurrence includes losses caused by continuous or repeated exposure to conditions resulting
in injury or damage that was not intended or expected.
How are indirect and direct loss related? - answer-Indirect losses are related to direct losses
because they are consequential and usually the result of a direct loss
What is the difference between vacancy and unoccupancy? - answer-An insured structure with
no inhabitants that is not storing personal effects and has remained as such for 60 consecutive
days or more is considered vacant. an insured structure that has nobody living or working in it
but is being used to store personal effects is considered unoccupied.
What type of insurance provides coverage for multiple classes or property at one location? -
answer-Blanket insurance
Explain the actual cash value method of valuation. - answer-The actual cash value method of
valuation reinforces the principle of indemnity because it recognizes the reduction of value of
property as it ages and becomes subject to wear and tear and obsolescence. (CRC) - (D) + (ACV)
When absolute liability is involved, does the injured party need to prove negligence? - answer-
no
, If a product is unsafe, what kind of liability applies to the manufacturer? - answer-Strict Liability
What is proximate cause? - answer-An act or event considered a natural and reasonably
foreseeable cause of the damage or event that occurs and damages property or injures a
plaintiff; direct liability caused by negligence.
What are the four elements of an insurance contract? - answer-Agreement, Consideration,
Competent Parties, and Legal Purpose
What does representation mean and how does it differ from warranty? - answer-
Representations are statements from the insured that are believed to be true. Warranty is
statement from the insured that is absolutely true
What is a binder? - answer-A temporary policy that is issued until a true policy can be issued. It
expires when the true policy becomes active.
What information is included in a policy's declarations? - answer-Insured's name, address,
amount of coverage, premiums, description of insured locations, supplemental representations
by insured.
What are additional or supplementary payments? - answer-Additional coverage in the case of
loss without additional premium
What is included in the conditions section of a policy? - answer-General rules/procedures the
insurer and insured agree to follow under the terms or the policy
What does the exclusions section of a policy specify? - answer-Details the perils that are not
insured against and what persons are not insured.
When is an appraisal needed? How is it requested? - answer-If there is a disagreement between
the insured and the insurer on the value of any property loss. Insurer and insured submit
written requests and if appraisers don't agree they hire an umpire
What is proof of loss? - answer-A sworn statement that must usually be furnished from the
insured to an insurer before any loss under a policy can be paid
What is the difference between policy cancellation and non-renewal? - answer-Policy
cancellation is the termination of an in-force insurance policy by either party before expiration
date. Non-renewal is termination by not offering continuation of the existing policy or a
replacement policy.
What is the purpose of the Fair Credit Reporting Act? - answer-It established procedures that
consumer-reporting agencies must follow in order to ensure that records are confidential,
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