Property And Casualty Insurance License Policy Provisions and Concepts 2

Question 1

What is 'insurable interest' and when must it exist for property insurance?

Accepted Answer

A financial stake in the property; must exist at the time the policy is issued and at the time of loss

Answer

Insurable interest means the insured would suffer a financial loss if the property is damaged; it must exist at both the time the policy is purchased and when a loss occurs.

Question 2

What is the 'other insurance' clause designed to do?

Accepted Answer

Prevent the insured from collecting more than the actual loss when multiple policies cover the same risk

Answer

The other insurance clause coordinates benefits when more than one policy covers a loss, ensuring the insured is indemnified but does not profit from duplicate coverage.

Question 3

What does 'pro-rata cancellation' mean?

Accepted Answer

The unearned premium is returned based on the exact portion of the policy period remaining

Answer

Pro-rata cancellation returns the exact unearned portion of the premium with no penalty, calculated on a daily basis for the remaining policy term.

Question 4

What is a 'short-rate cancellation'?

Accepted Answer

Cancellation by the insured where the return premium is less than the pro-rata amount due to an earned penalty

Answer

Short-rate cancellation occurs when the insured cancels the policy mid-term; the insurer retains more than the earned pro-rata premium as compensation for expenses.

Question 5

What is 'waiver' in the context of insurance?

Accepted Answer

The voluntary relinquishment of a known right by either party

Answer

A waiver is the intentional surrender of a known legal right; in insurance, an insurer may waive a policy condition, preventing it from later using that condition to deny a claim.

Property And Casualty Insurance License Practice Test

Property And Casualty Insurance License Practice Test

Property And Casualty Insurance License Policy Provisions and Concepts 2