P&C Trivia 3 — Questions and Answers
Question 1: Which rating factor is generally NOT used to calculate personal auto insurance premiums?
- Driver's age
- Driver's marital status
- Driver's religion (Correct answer)
- Vehicle's make and model
Correct answer: Driver's religion
Religion is not a permissible rating factor; insurers use actuarially justified factors such as age, marital status, and vehicle type.
Question 2: Under a commercial general liability (CGL) policy, what does 'occurrence' trigger mean?
- Coverage applies when the policy is in force at the time of the injurious event (Correct answer)
- Coverage applies only when a claim is filed during the policy period
- Coverage is triggered by the date a lawsuit is filed
- Coverage is triggered when the insurer receives notice of loss
Correct answer: Coverage applies when the policy is in force at the time of the injurious event
An occurrence-based policy covers losses that happen during the policy period, regardless of when the claim is filed.
Question 3: What is the primary purpose of workers' compensation insurance?
- To cover employer liability lawsuits from customers
- To provide medical and wage benefits to employees injured on the job (Correct answer)
- To protect the employer's property from employee theft
- To cover unemployment benefits for laid-off workers
Correct answer: To provide medical and wage benefits to employees injured on the job
Workers' compensation provides no-fault benefits including medical care and lost wage replacement for work-related injuries or illnesses.
Question 4: Which term describes the maximum amount an insurer will pay for a covered loss under a policy?
- Deductible
- Coinsurance clause
- Policy limit (Correct answer)
- Retention
Correct answer: Policy limit
The policy limit (also called the limit of liability) is the maximum dollar amount the insurer will pay for a covered claim.
Question 5: A property insurance policy that pays the cost to repair or replace damaged property without deducting depreciation is known as:
- Actual cash value coverage
- Agreed value coverage
- Replacement cost coverage (Correct answer)
- Functional replacement cost coverage
Correct answer: Replacement cost coverage
Replacement cost coverage pays the full cost to repair or replace property with like kind and quality without depreciation deductions.
Question 6: Which document is issued to an insured as evidence of coverage and lists the key details of the insurance contract?
- Declarations page (Correct answer)
- Insuring agreement
- Conditions section
- Endorsement
Correct answer: Declarations page
The declarations page (dec page) summarizes the policyholder's name, covered property, policy period, premiums, and limits.
Question 7: Under an umbrella liability policy, 'drop-down coverage' refers to:
- Lowering the premium when no claims are filed
- The umbrella paying when underlying limits are exhausted or a self-insured retention applies (Correct answer)
- Reducing policy limits at renewal
- Coverage that drops claims below a minimum threshold
Correct answer: The umbrella paying when underlying limits are exhausted or a self-insured retention applies
Drop-down coverage means the umbrella policy 'drops down' to cover losses when underlying insurance is insufficient or absent.
P&C Trivia 3
Which rating factor is generally NOT used to calculate personal auto insurance premiums?