General Insurance Flashcards
7 cards from real Insurance practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 General Insurance flashcards as text
Which insurance principle requires that a policyholder must have a financial stake in the insured item?
Answer: Insurable interest
Insurable interest means the policyholder must stand to suffer a financial loss if the insured event occurs, preventing speculative policies.
What is the purpose of a 'declarations page' in an insurance policy?
Answer: To summarize key policy details such as coverage limits, premiums, and named insured
The declarations page (dec page) is a summary sheet at the front of a policy that provides the essential facts of coverage at a glance.
In insurance, what is a 'peril'?
Answer: The cause of a potential loss, such as fire, theft, or wind
A peril is a specific risk or cause of loss that an insurance policy may or may not cover.
What does 'actual cash value' (ACV) mean when settling a property insurance claim?
Answer: The replacement cost minus depreciation
ACV is calculated as replacement cost minus depreciation, accounting for the item's age and wear at the time of loss.
Which of the following is an example of an 'open perils' (all-risk) policy?
Answer: A policy that covers all causes of loss except those specifically excluded
An open perils or all-risk policy covers any cause of loss that is not specifically excluded, offering broader protection than named-peril policies.
Why do insurers use 'exclusions' in a policy?
Answer: To limit the insurer's liability for certain high-risk, uninsurable, or separately coverable losses
Exclusions define what the policy will not cover, which allows insurers to manage specific risks, keep premiums manageable, and avoid covering intentional or catastrophic losses.
What is 'coinsurance' in the context of property insurance?
Answer: A clause requiring the insured to carry coverage equal to a minimum percentage of the property's value
Coinsurance clauses require the insured to maintain coverage at a specified percentage (often 80%) of the property's full replacement value or face a penalty at claim time.