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COMMERCIAL LINES 101 CE
QUESTIONS AND ANSWER S
Question : Insurer
CORRECT ANSWER : The insurance company
Question : Named Insured/Insured
CORRECT ANSWER : The policyholder
Question : Financial Definition of Insurance
CORRECT ANSWER : A financial agreement involving
the redistribution of financial losses
Question : Legal Definition of Insurance
CORRECT ANSWER : A contractual agreement in
which one party (the insurer) agrees to compensate or indemnify another party (the insured) for fortuitous losses
Question : Loss Pooling
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CORRECT ANSWER: the sharing of total losses
sustained by a few members of the insured group
Question : Payment of Accidental or Fortuitous Losses
CORRECT ANSWER : Allows the insurer to more
accurately predict future losses
Question : Transfer of Risk
CORRECT ANSWER : Involves the transfer of risk
from the insured to the insurer which is normally a larger entity more financially able to absorb the loss
Question : Indemnification
CORRECT ANSWER : The act of an insurer
compensating the insured for a covered loss with the goal to put the insured back in the same financial position he or she was in prior to the loss
Question : Loss
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CORRECT ANSWER : The basis of a claim for
damages under the terms of the policy
Question : Planned Losses
CORRECT ANSWER : Include expenses such as
depreciation on a piece of factory equipment or on a commercial vehicle
Question : Is insurance designed to cover planned losses
or accidental losses?
CORRECT ANSWER : Accidental losses
Question : Direct Loss
CORRECT ANSWER : An insurable loss that is the
immediate result of a covered cause of loss (fire to an office building)
Question : Indirect Loss
CORRECT ANSWER : An insurable loss that is a
consequential result of a direct loss (expenses entailed in
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renting other commercial property because of a fire to your office building)
Question : Peril
CORRECT ANSWER : The cause of the loss
Question : Named Perils Policy
CORRECT ANSWER : The policy specifically lists the
covered perils
Question : All Risks Policy
CORRECT ANSWER : Provides broader protection and
covers any accidental loss, subject to a host of policy exclusions
Question : Exclusion
CORRECT ANSWER : A policy provision that
identifies losses that are not covered