Insurance Policy and Regulations Flashcards
7 cards from real CALA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Insurance Policy and Regulations flashcards as text
Under financial responsibility laws, what is an SR-22 filing?
Answer: A certificate filed by an insurer with the state certifying that a high-risk driver carries the required minimum liability coverage
An SR-22 is a certificate of financial responsibility that an insurer files on behalf of a driver who is required by the state to prove minimum liability coverage.
Which of the following best describes the 'principle of indemnity' as it applies to auto insurance?
Answer: The insurer will restore the insured to the same financial position they were in before the loss, without allowing profit
The principle of indemnity ensures the insured is compensated for the actual loss suffered but cannot gain financially from an insurance claim.
A claimant under a liability policy demands payment in excess of the policy limits. What duty does the insurer have regarding settlement negotiations within limits?
Answer: The insurer must make good-faith efforts to settle within policy limits to protect the insured from excess judgment exposure
Insurers have a duty to act in good faith and attempt to settle claims within policy limits; failure to do so can expose the insurer to liability for any excess judgment.
Which of the following changes in circumstance most commonly requires an insured to notify the insurer to maintain proper auto coverage?
Answer: Adding a teenage driver to the household
Adding a resident driver — especially a teenager — materially changes the risk profile and must be reported to the insurer to ensure accurate rating and continued coverage.
What is the purpose of the 'insuring agreement' in an auto insurance policy?
Answer: To broadly define what the insurer promises to do in exchange for the premium
The insuring agreement is the core promise section of the policy where the insurer agrees to pay covered losses or defend the insured in exchange for the premium.
Under the standard PAP, which exclusion would bar liability coverage for bodily injury caused by the insured while drag racing on a public road?
Answer: The racing exclusion
The PAP contains a specific racing exclusion that eliminates liability coverage for bodily injury or property damage resulting from the insured's participation in racing or speed contests.
When an auto insurer non-renews a policy at the end of the policy period, what is typically required by state regulation?
Answer: Written advance notice to the insured (commonly 30–60 days) stating the reason for non-renewal
State regulations generally require insurers to provide written advance notice of non-renewal (typically 30–60 days) so the insured has time to obtain replacement coverage.