Property And Casualty Insurance License Policy Provisions and Concepts 3

Question 1

What does 'utmost good faith' (uberrimae fidei) require in insurance?

Accepted Answer

Both parties must disclose all material facts relevant to the insurance contract

Answer

Utmost good faith requires both parties — especially the applicant — to fully disclose all material information that could affect the insurer's decision to provide coverage or set the premium.

Question 2

What is 'misrepresentation' in insurance applications?

Accepted Answer

Making a false statement of a material fact on an insurance application

Answer

Misrepresentation is the act of providing false information on an insurance application; if material, it can allow the insurer to void the policy.

Question 3

What is the 'appraisal clause' in a property policy used for?

Accepted Answer

Resolving disputes over the amount of loss when coverage is not in question

Answer

The appraisal clause provides a mechanism to resolve disagreements about the dollar amount of a covered loss by appointing independent appraisers.

Question 4

What is a 'mortgagee clause' (also called a mortgage clause) in a property policy?

Accepted Answer

A provision protecting the lender's interest in insured property even if the borrower violates policy conditions

Answer

The mortgagee clause gives the lender an independent right to receive claim proceeds and protects the lender if the borrower's coverage is voided by a policy violation.

Question 5

What is meant by 'assignment' of an insurance policy?

Accepted Answer

The transfer of the insured's rights and interests under the policy to another party

Answer

Assignment transfers the policyholder's rights to another party; property and casualty policies generally require the insurer's written consent for assignment because coverage is personal to the insured.

Property And Casualty Insurance License Practice Test

Property And Casualty Insurance License Practice Test

Property And Casualty Insurance License Policy Provisions and Concepts 3