General Insurance Questions And Answers

Question 1

What is used to divide an insurer's loss ratio?

Accepted Answer

Underwriting losses by total premiums

Answer

An insurer's loss ratio is a key measure of profitability, calculated by dividing the total underwriting losses (claims paid and loss adjustment expenses) by the total earned premiums. This ratio indicates how much of the premium income is used to pay claims, reflecting the insurer's claims experience.

Question 2

Which of the following perils is excluded from a commercial property coverage component that has the basic causes of loss form attached?

Accepted Answer

Volcanic eruption

Answer

The basic causes of loss form in commercial property insurance typically covers a limited set of perils, such as fire, lightning, windstorm, and sprinkler leakage. Volcanic eruption, which involves the discharge of lava, ash, or gases, is generally an excluded peril under this basic form, although volcanic action (ground tremors) might be covered.

Question 3

In terms of law, one party's actions could have the effect of waiving a recognized right. Which of the following has the party generated when this happens?

Accepted Answer

Waiver

Answer

A waiver in insurance law occurs when one party voluntarily gives up a known right or privilege. This action can be express or implied, and once a right is waived, the party cannot later assert that right, effectively relinquishing their claim to it.

Question 4

How long will the time for reporting claims under the policy be prolonged if general liability "claims-made" coverage is renewed by "occurrence" coverage and the insured purchases a supplemental extended reporting period (ERP)?

Accepted Answer

Indefinitely

Answer

When a 'claims-made' general liability policy is renewed by an 'occurrence' policy, and the insured purchases a supplemental extended reporting period (ERP), the ERP extends the time for reporting claims indefinitely. This provides long-term protection for incidents that occurred during the claims-made policy period but were reported after its expiration, ensuring continuous coverage.

Question 5

Which of the following describes the policy territory under the majority of property insurance policies?

Accepted Answer

The United States, its territories and possessions, and Canada

Answer

Most standard property insurance policies, including both commercial and personal lines, define the policy territory as the United States of America, its territories and possessions, and Canada. This specifies the geographical area where the insurance coverage applies for covered losses.

Insurance Practice Test

Insurance Practice Test

General Insurance Questions And Answers