I85PREP
⌘ K
NE Property & Casualty study materials
NE Property & Casualty study resources

NE Property & Casualty practice questions

One question at a time. Build your NE Property & Casualty understanding.

First 50 of 200 questions. Each one lists the choices, the correct answer, and an explanation. The checker at the top of this page saves progress in this browser when it is available.

Continue in the practice tool above to load more questions, 50 at a time.

Question 1Insurance Regulation

Which entity has primary authority to regulate the business of insurance in Nebraska?

  1. The federal Department of Commerce
  2. The National Association of Insurance Commissioners
  3. The Nebraska Department of Insurance Correct answer.
  4. The county clerk in the producer's county of residence

Explanation

Insurance regulation in Nebraska is administered by the Nebraska Department of Insurance, headed by the Director of Insurance. The NAIC is a voluntary association of state regulators that drafts model laws and coordinates data, but it has no regulatory authority of its own. Under the McCarran-Ferguson Act, the states, not the federal government, regulate the business of insurance.

Question 2Insurance Regulation

An insurer that is organized and incorporated under the laws of Nebraska is classified as which type of insurer?

  1. Domestic Correct answer.
  2. Foreign
  3. Alien
  4. Surplus lines

Explanation

An insurer is a domestic insurer in the state where it is chartered, so a Nebraska-chartered company is domestic when doing business in Nebraska. Foreign insurers are chartered by another state, and alien insurers are chartered by a government outside the United States.

Question 3Insurance Regulation

An insurer incorporated under the laws of a country other than the United States is classified as what type of insurer?

  1. Admitted
  2. Domestic
  3. Foreign
  4. Alien Correct answer.

Explanation

An alien insurer is one formed under the laws of a jurisdiction outside the United States. A foreign insurer is formed under the laws of another state of the United States, and a domestic insurer is formed under the laws of the state in question.

Question 4Insurance Regulation

Before an individual may sell property and casualty insurance for an insurer in Nebraska, the individual generally must do which of the following?

  1. Hold a producer license issued by the Department of Insurance Correct answer.
  2. Join the National Association of Insurance Commissioners as an associate member
  3. Register with the federal Securities and Exchange Commission as a broker
  4. Post a surety bond with the clerk of the county court in each county

Explanation

Selling insurance requires a producer license from the Nebraska Department of Insurance, and the producer must also be appointed by the insurer it represents. County bonds, NAIC membership, and SEC registration are not substitutes for a state producer license.

Question 5Insurance Regulation

A producer offers to apply part of her own commission toward a client's premium in order to win the account. This practice is best identified as which of the following?

  1. Twisting, which is a prohibited replacement practice
  2. Rebating, which is an illegal inducement Correct answer.
  3. Coercion, which requires an explicit threat of harm
  4. Commingling, which involves the misuse of fiduciary funds

Explanation

Rebating is the offering of any inducement not specified in the policy, such as a share of commission, to persuade a buyer to purchase insurance. It is an unfair trade practice under Nebraska law and can subject the producer to license action.

Question 6Insurance Regulation

A producer tells a policyholder that her current insurer is about to become insolvent in order to persuade her to surrender the existing policy and buy a replacement. This conduct is best described as which of the following?

  1. Defamation
  2. Boycott
  3. Twisting Correct answer.
  4. Rebating

Explanation

Twisting is a misrepresentation or misleading comparison used to induce a policyholder to lapse, surrender, or replace coverage. The false statement about insolvency is the tool used to bring about the replacement.

Question 7Insurance Regulation

In what manner is the Director of the Nebraska Department of Insurance selected?

  1. Chosen by the NAIC executive committee
  2. Elected by the Legislature in joint session
  3. Appointed by the Governor Correct answer.
  4. Elected by the voters in a statewide general election

Explanation

The Director of Insurance is a gubernatorial appointee who heads the Nebraska Department of Insurance. The position is not a statewide elected office, and the NAIC plays no role in selecting state officials.

Question 8Insurance Regulation

What is the primary purpose of the Nebraska Property and Casualty Insurance Guaranty Association?

  1. To license nonresident producers
  2. To set maximum rates for personal lines coverage
  3. To guarantee that every insurer writing in Nebraska remains solvent
  4. To pay covered claims of insolvent P&C insurers Correct answer.

Explanation

The guaranty association pays covered claims against member property and casualty insurers that have become insolvent, subject to statutory limits and exclusions. It does not prevent insolvency, and it has no rate-setting or licensing functions.

Question 9Insurance Regulation

A producer collects $4,200 in premiums from clients and deposits the money into her personal checking account, intending to remit it when convenient. How should this conduct be characterized?

  1. It is allowed if the producer credits the client with interest earned
  2. It breaches the producer's fiduciary duty to hold premiums in trust Correct answer.
  3. It is permitted for small amounts under a de minimis statutory exception
  4. It is acceptable as long as the full amount is remitted within the year

Explanation

Premiums collected from insureds belong to the insurer or the insured and must be held in a fiduciary capacity, separate from the producer's own funds. Commingling them with personal money is a breach of that duty and supports license action even if the funds are later remitted.

Question 10Insurance Regulation

An insurer wants a licensed producer to sell its policies in Nebraska. What mechanism authorizes that producer to act on the insurer's behalf?

  1. A countersignature recorded with the county clerk where the risk sits
  2. A certificate of authority issued by the Department to the producer
  3. A surplus lines eligibility affidavit filed by the producer
  4. An appointment filed by the insurer with the Department Correct answer.

Explanation

Appointment is the insurer's grant of authority to a licensed producer, and the appointment is filed with the Department of Insurance. Each insurer that the producer represents must appoint the producer.

Question 11Insurance Regulation

Under Nebraska's rating laws, property and casualty insurance rates must meet which standard?

  1. They must not be excessive, inadequate, or unfairly discriminatory Correct answer.
  2. They must be identical among all admitted insurers writing that line
  3. They must be approved personally by the Governor before each use
  4. They must be guaranteed to produce an underwriting profit for the insurer

Explanation

The statutory rate standard requires that rates be neither excessive nor inadequate and that they not be unfairly discriminatory among similar risks. Rate competition among insurers is expected, so identical pricing is not required.

Question 12Insurance Regulation

Coverage for a Nebraska risk is unavailable from any admitted insurer. A surplus lines producer may place the business with a nonadmitted insurer only if the producer does which of the following?

  1. Obtains an individual waiver signed by the Director of Insurance
  2. Obtains declination letters from every admitted insurer in the United States
  3. Places the risk with an insurer not authorized in its own domiciliary state
  4. Conducts and documents a diligent search of admitted markets Correct answer.

Explanation

Surplus lines placement requires proof that admitted insurers will not write the risk, shown through a diligent search that the producer documents. The nonadmitted insurer must generally be authorized in its domiciliary state and appear on the NAIC's eligible insurer list.

Question 13Insurance Regulation

Nebraska's continuing education requirement for licensed producers includes designated hours of instruction in which subject?

  1. Federal income taxation
  2. Commercial real estate appraisal
  3. Ethics Correct answer.
  4. Actuarial mathematics

Explanation

Nebraska requires producers to complete continuing education each renewal period, including a specified number of hours devoted to ethics. Taxation, actuarial science, and appraisal are separate professions and are not part of the producer continuing education mandate.

Question 14Insurance Regulation

A producer who is licensed and residing in Iowa applies for a Nebraska producer license. How will Nebraska generally handle the application?

  1. Issue a license based on the home state license in good standing Correct answer.
  2. Deny the application solely because the applicant resides out of state
  3. Issue a temporary license limited to a single 90-day period
  4. Require the applicant to complete Nebraska's prelicensing course again

Explanation

Nonresident licensing is reciprocal: a nonresident who holds an active home-state license in good standing generally qualifies for a Nebraska license without repeating prelicensing education. Nebraska does not require residency as a condition of licensure.

Question 15Insurance Regulation

An insurer receives a first-party claim and, without any legitimate reason, fails to acknowledge or act on it for several months. This conduct is addressed by which set of rules?

  1. The producer appointment and termination rules
  2. The unfair claims settlement practices provisions Correct answer.
  3. The surplus lines eligibility and diligent search rules
  4. The guaranty association assessment and coverage rules

Explanation

Failing to acknowledge and act reasonably promptly on claims communications is an unfair claims settlement practice. These provisions require prompt investigation, communication with the claimant, and good-faith settlement efforts.

Question 16Insurance Regulation

A licensed producer relocates to a new office and changes her business address. What is her obligation?

  1. Report the address change to the Department within the required time Correct answer.
  2. File a new producer application and pay the original licensing fee again
  3. Wait until her next biennial renewal and report the change on that form
  4. Notify only the insurers that have appointed her to represent them

Explanation

Licensees must keep the Department's licensing records current, which includes reporting a change of name or address within the period set by regulation. Informing only appointing insurers does not satisfy the reporting duty.

Question 17Insurance Regulation

An agency organized as a corporation applies for a Nebraska producer license. Which requirement applies to the application?

  1. The corporation's shares must be majority-owned by Nebraska residents
  2. Only the corporate officers and directors need to hold licenses
  3. A licensed individual producer must be designated to act for the entity Correct answer.
  4. Business entities are ineligible for licensure; only individuals may be licensed

Explanation

Business entities may hold producer licenses, but the license is tied to a designated licensed individual who is responsible for the entity's compliance with insurance law. Ownership by state residents is not a licensing condition.

Question 18Insurance Regulation

Nebraska's premium tax is imposed directly on which party?

  1. Policyholders, through a surcharge added to each policy
  2. Insurers, measured by premiums written on Nebraska risks Correct answer.
  3. Each producer's gross commission income from Nebraska sales
  4. The guaranty association's investment earnings and assessments

Explanation

The premium tax is an insurer-level tax measured by premiums written for Nebraska risks, and it functions in place of a general income tax on that business. Producers pay tax on their own income, and policyholders are not billed a premium tax surcharge.

Question 19Insurance Regulation

A producer wants to split her commission on a commercial account with an unlicensed office assistant who helped solicit the sale. How does Nebraska law treat this arrangement?

  1. It is prohibited, because commissions may be shared only with licensed persons Correct answer.
  2. It is allowed, if the total commission does not exceed the filed rate
  3. It is allowed, if the split is disclosed to the insured in writing
  4. It is allowed, because the assistant is an agency employee

Explanation

Commissions for the sale of insurance may be paid only to licensed producers, subject to narrow statutory exceptions, so sharing with an unlicensed employee who solicited the sale is prohibited. Disclosure to the insured or compliance with filed rates does not cure the licensing problem.

Question 20Insurance Regulation

An insured intentionally inflates a property damage claim by adding items that were never damaged. How is this conduct classified?

  1. Insurance fraud subject to criminal and civil penalties Correct answer.
  2. A minor policy violation that is handled only by cancellation
  3. Permitted, because the policy settles claims at actual cash value
  4. Lawful, as long as the inflated amount falls within the deductible

Explanation

Knowingly presenting a false or inflated claim to obtain payment is insurance fraud under Nebraska law and exposes the claimant to criminal prosecution and civil liability. Neither the deductible nor the policy's loss valuation method excuses intentional inflation.

Question 21Insurance Regulation

An insurer gives a producer company signs and rate books and routinely accepts business the producer submits, even though the agency agreement limits the producer to auto lines. The producer writes a commercial property policy, and the insurer tries to deny coverage. How is the insurer most likely treated under agency principles?

  1. Bound, because the insurer's conduct created apparent authority Correct answer.
  2. Not bound, because the insured had a duty to read the agency agreement
  3. Bound only if the producer personally pays the claim out of pocket
  4. Not bound, because the agency contract limited express authority to auto

Explanation

Apparent authority arises when the insurer's own manifestations lead a third party to reasonably believe the agent has authority, and the insurer is bound by acts within that appearance. Insureds are not charged with knowledge of undisclosed limits in the agency contract.

Question 22Insurance Regulation

An investor seeks to acquire 15% of the voting securities of a Nebraska-domiciled insurer whose shares are widely held. What must the investor do under the insurance holding company law?

  1. File an acquisition of control statement and obtain approval Correct answer.
  2. Wait until the insurer files its next annual statement with the Department
  3. Take no action, because the stake is well below a 50% threshold
  4. Notify only the Securities and Exchange Commission under federal law

Explanation

Acquiring control of a domestic insurer requires a prior acquisition of control filing and the Director's approval, and control is presumed at 10% or more of the voting securities. Federal securities filings do not substitute for the state approval process.

Question 23Insurance Regulation

A Nebraska-domiciled insurer's surplus falls below the statutory minimum and its liabilities exceed its assets. What is the Director's most appropriate course of action?

  1. Immediately revoke the licenses of all producers in the state
  2. Petition a court for rehabilitation or liquidation of the insurer Correct answer.
  3. Order the guaranty association to assume all of the insurer's policies
  4. Assess the insurer's policyholders for funds to restore surplus

Explanation

When an insurer is impaired or insolvent, the Director may seek court approval to take control through rehabilitation or liquidation proceedings. Guaranty association involvement follows the insolvency proceeding rather than replacing it.

Question 24Insurance Regulation

A risk retention group formed under the federal Liability Risk Retention Act wants to write liability coverage for Nebraska businesses. Which statement is correct?

  1. It is completely exempt from state insurance regulation
  2. It must obtain a Nebraska certificate of authority for each line
  3. It registers with Nebraska but is regulated primarily by its chartering state Correct answer.
  4. It may write both property and liability coverage in the state

Explanation

A risk retention group is chartered in one state and may operate elsewhere by registering, with its domiciliary state serving as the principal regulator. Its authority is limited to liability coverage, and it remains subject to many state laws.

Question 25Insurance Regulation

A producer distributes flyers falsely stating that a competing insurer is nearly bankrupt and unable to pay claims, intending to injure that insurer's business. Which unfair trade practice does this describe?

  1. Coercion
  2. Boycott
  3. Rebating
  4. Defamation Correct answer.

Explanation

Publishing false statements that are calculated to injure an insurer's reputation or financial standing is defamation under the unfair trade practices law. Boycott involves an agreement to refuse to deal, coercion involves threats or pressure, and rebating is an unlawful inducement.

Question 26Insurance Regulation

Before an insurer may transact any insurance business in Nebraska, it must obtain which of the following from the Department of Insurance?

  1. A guaranty association membership certificate
  2. A certificate of authority Correct answer.
  3. A certificate of incorporation from the Secretary of State
  4. A producer license issued to each of its officers

Explanation

An insurer must be authorized by the Director before it transacts insurance in Nebraska, and the document evidencing that authorization is the certificate of authority. Corporate formation documents and individual producer licenses do not substitute for it, and guaranty association membership follows from being an authorized member insurer rather than authorizing one.

Question 27Insurance Regulation

An insurer that is organized under the laws of Nebraska and maintains its principal office in the state is classified as which type of insurer?

  1. A foreign insurer
  2. An alien insurer
  3. A domestic insurer Correct answer.
  4. A surplus lines insurer

Explanation

Classification turns on the jurisdiction in which the insurer is chartered: an insurer formed under Nebraska law is a domestic insurer in Nebraska. Insurers formed under the laws of another state are foreign, and those formed under the laws of another country are alien.

Question 28Insurance Regulation

A producer persuades a policyholder to surrender an existing policy by falsely stating that the current insurer is failing, so that the policyholder buys a new policy. This practice is known as:

  1. Defamation
  2. Twisting Correct answer.
  3. Rebating
  4. Coercion

Explanation

Twisting is inducing a policyholder to lapse, surrender, or replace coverage through misrepresentation or an incomplete comparison of policies, and it is an unfair trade practice. Coercion involves force or threats, rebating involves offering value not stated in the policy, and defamation involves false statements about a competitor's business or financial condition made to injure it.

Question 29Insurance Regulation

Nebraska resident producer licenses are issued for a fixed term. How often must the license be renewed?

  1. Every four years
  2. Every two years Correct answer.
  3. Annually, on or before December 31
  4. Every three years

Explanation

Nebraska issues producer licenses on a two-year cycle, and a producer must renew before expiration and complete the required continuing education to keep the license in force. Continuing past the expiration date without renewal ends the authority to solicit or negotiate insurance.

Question 30Insurance Regulation

An insurer offers reduced property rates to members of an association that was formed for the sole purpose of obtaining that insurance. This arrangement is best described as:

  1. Permitted premium rebating
  2. An approved residual market pool
  3. A lawful group marketing plan
  4. An unlawful fictitious group Correct answer.

Explanation

Group treatment is permitted only where members share a genuine common interest and the group was not organized primarily to buy insurance at preferred rates. A group created solely to obtain coverage is a fictitious group, and writing business on that basis is an unfair trade practice.

Question 31Insurance Regulation

A person charges a fee to review a business's property and liability exposures and to recommend coverage, but never sells or negotiates insurance contracts. Under Nebraska law this person must:

  1. Be licensed as an insurance consultant Correct answer.
  2. Hold no license, because no insurance is sold
  3. Hold a limited lines producer license
  4. Be appointed by each insurer it recommends

Explanation

A person who advises others about insurance for a fee must hold a consultant license, and a consultant is compensated by fee rather than commission. Selling or negotiating contracts is what triggers the producer license instead.

Question 32Insurance Regulation

A bank tells a mortgage applicant that the loan will close only if the required homeowners policy is purchased through the bank's affiliated agency. This conduct is:

  1. Permissible, because the bank is not an insurer
  2. Unlawful rebating
  3. Unlawful coercion Correct answer.
  4. Permissible, because the bank may set reasonable conditions

Explanation

A lender may require that adequate insurance be maintained, but it may not use its economic power to force the borrower to place the business with a particular producer or agency. Doing so is unlawful coercion, an unfair trade practice regardless of whether the bank itself is an insurer.

Question 33Insurance Regulation

When the Nebraska Department of Insurance examines a domestic insurer's books and records, who pays for the examination?

  1. The guaranty association
  2. The Director's office, from general state funds
  3. The producers who placed the business
  4. The insurer being examined Correct answer.

Explanation

The expense of an examination is borne by the insurer examined, and the Department may require the insurer to advance or reimburse the cost. This keeps the cost of market and financial oversight off the state's general fund and off individual producers.

Question 34Insurance Regulation

The Director finds that a producer has engaged in a pattern of misrepresenting policy terms to consumers. Which action may the Director take?

  1. File felony charges in district court
  2. Refer the matter to the Legislature for a hearing
  3. Issue a cease and desist order Correct answer.
  4. Order the producer to pay the insured's lost wages

Explanation

The Director enforces the insurance code through administrative remedies, including cease and desist orders, license suspension or revocation, and civil penalties. Criminal prosecution is initiated by prosecutors, and the Director does not award damages to individual insureds.

Question 35Insurance Regulation

A claims representative reports a suspected fraudulent claim to the Nebraska Department of Insurance in good faith. The representative is:

  1. Required to obtain the insured's written consent
  2. Liable for defamation if the claim is honest
  3. In violation, because claim details are confidential
  4. Immune from civil liability for the report Correct answer.

Explanation

Nebraska grants immunity from civil liability to persons who report suspected insurance fraud to the Department in good faith, which encourages reporting without fear of retaliation suits. The immunity depends on good faith rather than on whether fraud is ultimately proven.

Question 36Insurance Regulation

A surplus lines producer places a Nebraska risk with an eligible nonadmitted insurer. Who must collect and remit the applicable surplus lines premium tax to the state?

  1. The Nebraska Property and Casualty Insurance Guaranty Association
  2. The surplus lines producer Correct answer.
  3. The insured, by direct payment with its annual return
  4. The nonadmitted insurer, on its annual statement

Explanation

Surplus lines premium tax is collected by the surplus lines licensee placing the coverage and remitted to the state, which substitutes for the premium tax an admitted insurer would pay. The insured and the nonadmitted insurer are not the parties responsible for the remittance.

Question 37Insurance Regulation

A Nebraska producer is disciplined by another state's insurance regulator. Within what period must the producer report that action to the Nebraska Department of Insurance?

  1. 5 business days
  2. 60 days
  3. 30 days Correct answer.
  4. 10 days

Explanation

A producer must notify the Department of an administrative action taken by another jurisdiction within 30 days of the final disposition of the matter. Failing to report can itself support disciplinary action, including suspension or revocation of the Nebraska license.

Question 38Insurance Regulation

A domestic insurer is financially impaired but has not yet been found insolvent, and the Director obtains a court order allowing the insurer to keep operating under Department supervision while its affairs are reorganized. This proceeding is:

  1. A rehabilitation proceeding Correct answer.
  2. A conservatorship of assets
  3. An involuntary dissolution
  4. A liquidation proceeding

Explanation

Rehabilitation is used when there is a reasonable prospect of restoring the insurer to sound condition, and it lets the insurer continue operations under supervision. Liquidation is reserved for winding up the business when continued operation would be hazardous to policyholders or the public.

Question 39Insurance Regulation

An insurer refuses to issue any homeowners policies in a particular ZIP code, regardless of the age, condition, or claims history of the individual property. This underwriting practice is:

  1. Permitted, because territorial rating is always allowed
  2. Permitted if the insurer files its rating plan with the Department
  3. An unlawful unfair trade practice Correct answer.
  4. Permitted, because underwriting is solely the insurer's business judgment

Explanation

Refusing to consider an individual risk solely because of its geographic location, without regard to the risk's own characteristics, is unfair discrimination among applicants of like class. Territorial factors may be used in rating only when supported by actuarial data and applied through approved classifications.

Question 40Insurance Regulation

A licensed producer negotiates with an insurer on behalf of an insured to settle a large fire loss and charges the insured a percentage of the settlement. What must the producer hold?

  1. A surplus lines producer license
  2. A public adjuster license Correct answer.
  3. No additional license, because the producer already holds a property license
  4. A claims adjuster license issued by the insurer

Explanation

A person who, for compensation, acts on behalf of the insured in negotiating a claim settlement is acting as a public adjuster and must hold a public adjuster license. A producer license authorizes soliciting and selling insurance, not representing insureds in claim negotiations for a percentage of the recovery.

Question 41General Insurance Concepts

In property insurance, insurable interest generally must exist at which point in time?

  1. Whenever the premium is paid
  2. At the time of the loss Correct answer.
  3. Only when the application is signed
  4. At the policy's expiration date

Explanation

Insurable interest is the financial stake a person has in the property such that its loss causes a genuine economic loss. For property coverage, that stake must be present when the loss occurs so the payment does not create a windfall.

Question 42General Insurance Concepts

The principle of indemnity in insurance is designed to:

  1. restore the insured to roughly the pre-loss financial position Correct answer.
  2. guarantee that damaged property is replaced with new property
  3. require the insurer to pay the full policy limit for every loss
  4. Allow the insured to profit from a covered loss

Explanation

Indemnity means the insured is made whole for the value of the loss, no better and no worse. It prevents recovery that exceeds the actual financial harm suffered.

Question 43General Insurance Concepts

Which of the following is an example of a pure risk?

  1. Betting on a horse race
  2. Purchasing stock in a new company
  3. Introducing an untested product line
  4. Fire damage to a store's inventory Correct answer.

Explanation

A pure risk involves only the possibility of loss or no loss, with no chance of gain. Fire is a classic pure risk because the outcome is either unchanged or worse.

Question 44General Insurance Concepts

A shop owner stores oily rags next to a furnace, increasing the chance of a fire. In insurance terms, this condition is:

  1. a speculative risk
  2. a moral hazard
  3. a physical hazard Correct answer.
  4. adverse selection

Explanation

A physical hazard is a tangible condition that increases the probability or severity of a loss. Oily rags near a heat source are a concrete, observable condition of the premises.

Question 45General Insurance Concepts

An insurer's ability to predict losses more reliably as the number of similar exposure units grows is known as:

  1. the doctrine of subrogation
  2. the law of large numbers Correct answer.
  3. the principle of indemnity
  4. the rule of adverse selection

Explanation

The law of large numbers holds that observed results converge on expected results as the sample size increases. This lets insurers set rates with confidence when they insure many similar, independent exposures.

Question 46General Insurance Concepts

A manufacturer discontinues a product line because of potential liability claims. This risk management technique is:

  1. loss reduction
  2. retention
  3. avoidance Correct answer.
  4. transfer

Explanation

Avoidance eliminates the exposure entirely by not undertaking the activity that creates it. Ending the product line removes the liability exposure rather than managing it after the fact.

Question 47General Insurance Concepts

An insurance policy is described as a contract of adhesion because:

  1. the insured may rewrite unclear provisions after a loss
  2. the insurer drafts the terms and the insured accepts or rejects them Correct answer.
  3. both parties negotiate every term of the agreement before it is issued
  4. it becomes binding only after a covered loss happens

Explanation

In a contract of adhesion, one party writes the terms and the other takes it or leaves it. Because the insurer controls the wording, ambiguities are ordinarily construed in favor of the insured.

Question 48General Insurance Concepts

Which policy section identifies the named insured, the policy period, and the amount of insurance?

  1. Conditions
  2. Declarations Correct answer.
  3. Exclusions
  4. Insuring agreement

Explanation

The declarations page personalizes the policy with facts specific to the insured, such as names, dates, limits, and described property. The other sections contain general obligations, promises, and limitations.

Question 49General Insurance Concepts

After paying a collision claim, an insurer pursues the at-fault driver to recover the amount paid. This right is called:

  1. salvage
  2. coinsurance
  3. contribution
  4. subrogation Correct answer.

Explanation

Subrogation lets the insurer stand in the insured's shoes and pursue the legally liable party after paying the claim. It supports the indemnity principle and helps hold down premiums.

Question 50General Insurance Concepts

A building with a replacement cost of $500,000 is insured for $250,000 under a policy with an 80% coinsurance clause. A covered $100,000 loss occurs. Ignoring any deductible, the insurer pays:

  1. $62,500 Correct answer.
  2. $100,000
  3. $80,000
  4. $50,000

Explanation

The coinsurance requirement is 80% of $500,000, or $400,000. Because $250,000 was carried, the insured is covered for 250,000 / 400,000, or 62.5%, of the loss, producing a payment of $62,500.