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NJ Property, Casualty, and Auto
Licensing Exam Questions and Answers
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Insuring Agreement ✔✔company's obligation to pay, includes the perils and coverage for specific or named peril policies
Exclusions ✔✔what the policy will not pay for
Definitions ✔✔names of the persons insured in addition to the named insured are listed here, along with any other (blank) of terms in the policy
Additional Coverage ✔✔coverages under a policy that are provided by the insurer at no extra cost
Casualty Policies ✔✔defense costs over and above liability limits, post-judgement interest, bail bonds and appeal bonds
Property Policies ✔✔debris removal, falls within the insured dwelling limit and cannot exceed the limit
Binder ✔✔temporary proof of coverage before policy is issued (oral is good for 10 days, written for 60 days)
Bodily Injury and Property Damage Coverage Amounts ✔✔Minimum: 15k per person/30k per accident/5k for property; Max is $500k
Auto - Personal Assigned Risk Policy ✔✔PAIP; standard risk 0 points, non-standard risk 1- 8 points, assigned risk 9 points. (blank) classification runs for 3 years
Auto - Commercial Assigned Risk Policy ✔✔CAIP; assigned risk policy for commercial vehicles, including private vehicles owned by the business
Personal Injury Protection ✔✔PIP or No-Fault, NJ Representations Act; mandatory, encourage the insured to recover under his/her own policy, tries to reduce premiums and hasten settlements through avoidance of lengthy litigation that would normally be the case. The benefits of the standard policy are statutory and therefor minimal
Fire ✔✔A named peril policy. (blank) policies must be filed with the DOBI commissioner before use and must provide a fairly uniform look, and provide ample space for coverage, limits, rates, policy inception, and expiration dates
Friendly Fire ✔✔fire is within it's intended confines (not covered)
Hostile Fire ✔✔fire is outside it's intended confines
Special Peril Coverage - DP3 ✔✔ALL-RISK on dwelling unless specifically excluded and BROAD on contents or personal property
Coverage A ✔✔dwelling + attached structures - no co-insurance requirement unlike homeowners policy
Coverage B ✔✔detached structures - limited to 10% of coverage A amount
Coverage C ✔✔personal property - limited to 50% of coverage A amount / 10% of secondary insurance
Coverage D ✔✔fair rental value - limited to 10% of coverage A amount
Coverage E ✔✔additional living expense - limited to 20% of coverage A amount
Boat Owner's Policy ✔✔similar to auto insurance policy, except that PIP or "no-fault" is not available. damage from waves is referred to as "hull-damage" and is covered. no workers' compensation coverage
Yacht Owner's Policy ✔✔for boats that ply international waters, high seas, and engage in commercial fishing. workers' compensation coverage is included
Flood Insurance Policy ✔✔operated by HUD to provide coverage in flood-prone areas for one- family residential homes, commercial buildings, and house contents. basic policy covers loss due to flood, inundation of tidal waters, mudslide, and soil erosion. can request additional coverage at any time, but there is a 30 day waiting perod before the insurance can go into effect
Flood Insurance Policy Exclusions ✔✔landslide, damage from water main breakage, sewer main breakage, and wind-driven rain. not a general flood condition (your house is the only one that is flooded but your neighbor's houses are not - your house is not covered)
Personal Injury ✔✔defamation (slander-oral, libel-written), false arrest or imprisonment, wrongful eviction, invasion of privacy, copyright infringement, industrial espionage - do not confuse with bodily injury
Advertising Liability ✔✔injury arising from advertising activities, libel in an advertisement, and misrepresentation of a competitor
Contractual Liability ✔✔coverage is restricted to those that are automatically covered; Lease, Easement, Agreement to indemnity municipality, Side track also known as spur agreement for a rail road loading facility, and Elevator maintenance or L.E.A.S.E
Medical Payments ✔✔party must incur and report (blank) within 1 year, must arise from business operations on or off premises. max amount is $5,
Special Multi-Peril Policy ✔✔SMP; a policy for a small business that is not a package, the insured selects what is needed and pays for each part separately
Nationwide Inland Marine Policy ✔✔covers property that has no fixed location - property in transit, imports and exports, domestic shipments, means of transportation, communication - bridges, tunnels, transmission lines etc. Buildings, skyscrapers, and cement mixers are NOT covered
Ocean Marine Policy ✔✔covers property at sea, international waters, or high sea
Destruction Policy ✔✔covers moneys and securities on and off the premises; dishonest acts of customers (shop-lifting) and mysterious disappearance
Workers' Compensation Policy ✔✔covers all active employees whose sickness or injury arises out of the course of the employer's business, whether or not on the premises
Assumption of Risk ✔✔by taking the job, the employee assumed the risk, known and unknown
Contributory Negligence ✔✔the relative negligence of the plaintiff and defendant contributed to the injury or sickness
Fellow Servant Negligence ✔✔an employer was not liable because the sickness or injury was the result or a fellow servant or co-employee's acts
Aggregate Limit ✔✔total amount of coverage available for all claims during a policy period, e.g. $1 million per year
Insurance Limit ✔✔limit of an insurance policy is its policy limit e.g. $100,000 per incident
Penalty ✔✔limit of a bond - fidelity or surety bond
Warranty ✔✔A pledge, a promise, a guaranty - what one is warranting must be true in all aspects
- existence of a sprinkler system, security guard, or limitation of boat usage
Representation ✔✔true to the best of one's belief and knowledge. answers to questions on an insurance application and proof of loss are (blank)s.
Material Fact ✔✔something done or existed of such importance whose disclosure would alter the underwriter's decision or loss settlement. e.g. brother is a convicted arsonist and he lives with insured, if insured told the insurance company about him, they would not write the policy
Concealment ✔✔act of not disclosing a material fact; would void a policy
Unoccupied ✔✔no occupants, but furnishings remain. same coverage rules at vacant - if you go away for 60 days on vacation from your business or 30 days away from your home, you need additional coverage
Robbery and Safe ✔✔there is a threat of violence or actual violence involved in the theft; gold coins are covered
Barratry ✔✔criminal acts by a ship's master or crew
Inchmaree ✔✔negligence of a ship's captain or crew members - includes navigational errors
Moral Responsibiity ✔✔a homeowner borrows a neighbor's lawnmower and damages is by striking a rock while using it. the homeowner can request up to $500 from the insurance company to pay the neighbor
Event or Accident ✔✔1. definite time and place 2. neither expected nor intended 3. results in bodily injury or property damage 4. sudden, unforeseen, fortuitous. (blank)s must occur during the policy period but may be reported after the policy expires
Occurrence ✔✔accident + continuous and repeated exposure to injurious conditions. example: fumes over an extended time caused death, working with asbestos. (blank) must occur during the policy but may be reported after the policy expires
Statute of Limitations ✔✔the time period after the incident during which one is allowed to use
Direct Loss ✔✔(blank) happening immediately and direction from a hazard that has been insured against e.g. wind knocks down a lamp; the lamp starts a fire and the damage resulting from the fireman putting out the fire , all give rise to (blank)
Indirect Loss ✔✔(blank) resulting from a peril, but not resulting directly and immediately from the peril e.g. loss of income during restoration period - usually covered by an endorsement
Proof of Loss ✔✔insured must fill this out and submit to the insurance company within 60 days: describe what happened, demand for payment, provide supporting proof
Fair Value Reporting ✔✔insured must report true value of inventory every 30 days, if the inventory is underreported the insured is penalized
Actual Cash Value ✔✔old for old - replacement cost less depreciation e.g. personal property or contents
Abandonment ✔✔relinquishment or surrender to an insurance company of all rights and interests in an insured property
Jettisoning ✔✔under an ocean marine policy - throw some cargo overboard to save the ship from sinking. all cargo owners share in a loss, not just the cargo owner whose cargo was (blank)ed to save the vessel
Subrogation ✔✔the assignment to an insurance company of the insured's rights of recovery against a third party. after paying a first party loss, the carrier stands in the shoes of the insured and can recover from the negligent third party whatever the insured can recover
Deductible ✔✔specific amount insured is required to pay of the loss - can be a percentage of the loss
Flat Deductible ✔✔definite amount e.g. $500 deductible on property damage, personal auto, and collision and comprehensive
Disappearing Deductible ✔✔the higher the covered loss the smaller the deductible; usually associated with commercial policies
Ceding Company ✔✔in reinsurance, the company that wrote the original risk
Assuming company ✔✔in reinsurance, the company assuming the risk
Retrocession ✔✔an arrangement between re-insurers to cede risks, which requires the prior approval of DOBI. the DOBI must also give prior written approval for the reinsurer to do business in NJ
Proximate Cause ✔✔immediate cause that is natural and continuous, unbroken by any intervening cause i.e. wind-driven rain
Negligence ✔✔failure to act as a responsible, prudent person would
Tort ✔✔a civil wrong that is not a wrong arising from non performance of a contract (contract violation)
Bodily Injury ✔✔sickness, injury, death as well as pain and suffering
Firefighter's Injuries ✔✔workers' compensation provided by the municipality will pay for medical expenses of an injured voluntary fireman for injuries arising out of a firefighter's efforts to put out the fire in a house. the homeowner can request the insurance company pay up to $500 to the volunteer fire department
Restoration ✔✔returns the insured back to where he or she was prior to the loss. insured cannot recover more than the actual loss, assuming the actual loss is more than the policy limit
Co-insurance ✔✔provision requiring a specific amount of insurance based on the value of the insured property - at least 80% of replacement cost. assures the property is adequately insured at the time of the loss
Other Insurance ✔✔e.g $80k property insured by A for $40k, B for $30k, and C for $10k/ B's share of the loss would be 3/8ths. no one carrier will pay more than its prorated shares even if the other carriers cannot or will not pay
Messenger ✔✔an employee who performs duties outside the premises
Custodian ✔✔an employee who works inside the premises - cannot be a security guard or janitor
Watchman ✔✔an employee who guards property on premises and has no other duty
Worker's Compensation Claim Defenses ✔✔major deviation, intentionally self-inflicted, disease must be unique or particular to occupation, intoxication, fighting, adequately trained
Insured ✔✔All persons covered by the policy
Named Insured ✔✔The first one named, he/she is responsible for paying premiums and requesting changes to coverage
Inland Marine Personal Floaters ✔✔all risk - valuable property associated with family and home life
Commercial Floaters ✔✔covers motor truck cargo, bailees customers' goods, contractors' equipment, etc
Fidelity Bond ✔✔a form of insurance that covers policyholders for losses that they incur as a result of fraudulent acts by specified individuals. usually insures a business for losses caused by the dishonest acts of it's employees
Surety Bond ✔✔contract among at least 3 parties; the obligee - party who is the recipient of an obligation, the principal - the primary party who will be performing the contractual obligation, the surety - who assures the obligee that the principal can perform the task
Business Owners Policy ✔✔BOP; designed to cover small and medium size business with small liability exposure - typically small and medium size apartment, office and mercantile risks
Homeowners Policy ✔✔1st and 3rd party coverage. the property must be owner-occupied. no more than 2 families under a standard policy
HO-1 ✔✔basic peril coverage - named perils - most basic homeowners policy
HO-2 ✔✔broad peril coverage - named perils but more perils than HO-
HO-3 ✔✔special peril coverage - all risk on dwelling and broad on contents, ACV settlement
HO-4 ✔✔contents only - renters/contents policy
HO-5 ✔✔comprehensive: all risk on dwellings, all risk on contents unless excluded
HO-6 ✔✔condo owners - same as renters plus $1,000 for condo loss assessments and pro-rated share of unsatisfied judgements
HO-8 ✔✔historical - settlement is ACV basis vs. replacement cost for dwellings
Medical Expenses ✔✔doctors, x-rays, rehabilitation, ambulance, diagnostics, transportation back and forth for treatment; hospital expenses - room and board, operating room charges, drugs and
supplies; must be personal and incurred within 3 years of accident. $250 deductible, 80/20 co- payment up to $5,000; $250,000 limit
Essential Services ✔✔services not performed for income (care of family, household, etc) - $12/day or $4,380 in one year
Income Continuation ✔✔Income - $100/wk, $5,200 limit
Survivor Benefits ✔✔$5,200 plus $4,380 if insured used to provide essential services
Funeral Expenses ✔✔Expense: $1,
Policy Cancellation - Short Rate ✔✔refund basis when insured cancels the policy. penalty is incurred and insured gets short end of the deal
Policy Cancellation - Pro-Rata Basis ✔✔refund basis when insurer cancels policy, insured does not suffer a penalty
PAP ✔✔Personal Automobile Policy
Private Passenger Autos ✔✔4 wheels, designed/licensed for use on public highways - no company cars, private pick up trucks and vans under 10,000lbs - no company owned vehicles, trailers
