SECTION 33: ADDITIONAL HIGH-YIELD CONCEPTS

Question 1

Appraisal vs. Arbitration

Answer 1

Appraisal = disagreement on AMOUNT of loss (each side picks appraiser → umpire if needed → any 2 of 3 decide).

Arbitration = disagreement on OTHER AREAS of the loss.

Question 2

Insurable interest — when must it exist for property?

Answer 2

At the TIME OF LOSS

Question 3

Vacant vs. Unoccupied

Answer 3

Vacant = no property OR people (may affect perils and claim value).

Unoccupied = no people but property present (does NOT affect perils or claim value).

Question 4

Assignment of policy

Answer 4

Cannot be transferred without WRITTEN consent from insurer

Question 5

Subrogation

Answer 5

Insurer’s right to sue at-fault third party for damages insurer paid to insured

Question 6

Binder

Answer 6

Temporary insurance given by agent (verbal or written); can be canceled by company; does NOT guarantee policy issuance; ends automatically if policy issued

Question 7

Domestic vs. Foreign vs. Alien insurer

Answer 7

Domestic = state where incorporated. Foreign = incorporated in another state/US territory. Alien = incorporated in another country.

Question 8

Surplus lines — key rules

Answer 8

Sold by unauthorized/nonadmitted insurers on state’s approved list; only to certain high-risk insureds; CANNOT be sold solely for a cheaper rate.

Question 9

Experience rating period

Answer 9

Usually 3-year period based on insured’s claim history

Question 10

Commercial auto — supplementary bail bond limit

Answer 10

$2,000 (vs. $250 in CGL/BOP/personal)

Question 11

Builders risk — termination triggers

Answer 11

Property accepted by purchaser, 90 days after construction completed, building occupied/put to use, insured’s interest ceases, or insured abandons construction

Question 12

Mobile home insurance — personal property

Answer 12

40% of dwelling coverage; loss of use = 20%; requires permanent foundation

Question 13

Yacht vs. Boatowner

Answer 13

Boatowner = less than 26 feet. Yacht = 26 feet or more.

Question 14

Difference in Conditions (DIC) policy

Answer 14

Catastrophic property exposures; high deductibles; NO coinsurance requirement

Question 15

Liquor liability — also called

Answer 15

Dram shop liability; excluded from CGL; covers businesses that sell or serve alcohol

Question 16

Employment Practices Liability

Answer 16

NOT covered by CGL; ONLY policy that covers discrimination

Question 17

Section I vs. Section II (HO)

Answer 17

Section I = Property (Coverages A-D).

Section II = Liability (Coverages E-F). Section I is first-party (pays insured). Section II is third-party (pays others).

Question 18

Direct loss vs. Indirect loss

Answer 18

Direct = immediate damage from peril.

Indirect = consequential loss over time (lost business income, rental car costs, additional living expenses).

Question 19

Named peril vs. Open (special) peril

Answer 19

Named = ONLY listed perils covered.

Open/Special = ALL perils covered EXCEPT those specifically excluded.

Question 20

Classes of construction (1-6)

Answer 20

1-Frame, 2-Joisted Masonry, 3-Noncombustible, 4-Masonry Noncombustible, 5-Modified Fire Resistive, 6-Fire Resistive

Question 21

2 most common types of contract bonds

Answer 21

Performance bonds

Bid bonds

Question 22

A payment bond guarantees

Answer 22

that the contractor completing job will be paid

Question 23

A performance bond guarantees

Answer 23

That a contractor will complete complete the contract usually construction

Question 24

A contract bond guarantees

Answer 24

Perfromance of the terms written in a contract

Question 25

If an insured makes statements on an application that turned out to be false but at the time the didn’t know did they misrepresent?

Answer 25

Yes. Thought not fraudulent the misstatement was material.

Question 26

Annual Transit policy

Answer 26

Protects the shipper and receiver of goods for the year

Question 27

Trip transit policy

Answer 27

Insures for a single shipment made once

Question 28

How many sections are there in a workers compensation policy?

Answer 28

6