MONTANA PROPERTY & CASUALTY EXAM 2024/2025
What is insurance? - Precise Answer Transfer of risk to protect from financial loss.
Types of Risk - Precise Answer Pure and Speculative
Pure Risk - Precise Answer Insurable risk. There is only loss.
Speculative Risk - Precise Answer Not insu...
What is insurance? - Precise Answer ✔✔Transfer of risk to protect from
financial loss.
Types of Risk - Precise Answer ✔✔Pure and Speculative
Pure Risk - Precise Answer ✔✔Insurable risk. There is only loss.
Speculative Risk - Precise Answer ✔✔Not insurable. Could loss or gain
financially. EX: gambling/stock market. Could win or lose money.
Hazard - Precise Answer ✔✔Conditions that increase the probability for
loss.
Types of Hazards - Precise Answer ✔✔Physical: Structural defects
Moral: Lying about the type of dog you have
Morale: Speeding in unsafe conditions. or Im not gonna pay to fix the
brakes on my car, ill wait for them to break and have insurance pay for
it.
Peril - Precise Answer ✔✔Cause of the Loss
,Property: EX: Hail damage to my car
Casualty: EX: Dog bite from my neighbors dog.
Only collect to extent of financial loss, no gain.
5 ways to handle risk - Precise Answer ✔✔Avoidance: Not driving to
work to avoid car accident.
Retention: Not buying insurance and being self insured.
Sharing: Group of people pool their money to share loss.
Reduction: Being safer. Perform routine maintenance.
Transfer: Insurance
Types of Insurers - Ownership - Precise Answer ✔✔Stock owned
company: Issues nonparticipating policies, owned by stockholders
(allstate), pay dividends to stockholders.
Mutual: Issue participating policies, owned by policy owners, pay to
policy owners. (state farm)
Types of Insurers - Authority - Precise Answer
✔✔Admitted/authorized: Certified, approved to transact insurance in a
state
Nonadmitted/unauthorized: Not certified, prohibited from transacting
,Types of Insurers - Domicile - Precise Answer ✔✔Domestic:
Incorporated in this state
Foreign: Incorporated in another state
Alien: Incorporated outside of the US
Laws of Agency - Precise Answer ✔✔- Agents represent the insurer
- Knowledge of the agents = Knowledge of the insurer
- The insurer is responsible for agents action
- Payment to the agent = payment to the insurer
Agent Authority - Precise Answer ✔✔Express: Written in the contract
Implied: Not written into the contract, but is assumed
Apparent: Based on the principals actions or words (customers
perception is reality)
Elements of a Legal Contract - Precise Answer ✔✔- Agreement
- Consideration
- Competent parties
- Legal purpose
Application Statements - Precise Answer ✔✔Warranties: Absolutely
true statements. Breach of warranties can void a policy. (saying you dont
have a trampoline in your backyard, when you do.)
Representations: Statements that are true to the best of knowledge - not
guaranteed to be true (saying you havent had a ticket in 5 years to your
knowledge, but you had one 4 years, 6 months ago)
Fraud - Precise Answer ✔✔Intentional misrepresentation of a material
fact made with intent to deceive.
Material Fact - Precise Answer ✔✔Fact that would lead to a different
underwriting decision had the insurer known about it
Quiz 1 - A situation in which a person can only lose or have no chance
of gain represents? - Precise Answer ✔✔Pure Risk
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