Fundamentals of Property & Casualty Insurance: Policy Management Quiz

The Named Insured is the individual listed on the insurance policy and has the authority to make changes or cancel the policy. Insurance agents act on behalf of insurance companies, and the insurance company holds the policy but does not make individual changes without the Named Insured's approval. The primary beneficiary is not typically involved in policy management.

Risk is defined as the uncertainty of an outcome, specifically in terms of potential loss. While profit, success, and failure are outcomes that may be influenced by risk, they do not encompass the concept of risk itself.

The insured would be refunded half of the annual premium paid as only 6 out of 12 months have passed.

In this scenario, the hotel expense incurred due to the house burning down is considered an indirect loss as it is a consequence or result of the main event (the house burning down), but not directly caused by it.

Endorsements are additional provisions added to an insurance policy to amend or enhance coverage. In this case, adding coverage for specific catastrophic losses like flood and earthquake would be done through an endorsement, not through adjusting the deductible, exclusion, or premium of the policy.

Insurable Interest must exist at the time of the loss in order to collect for a loss in a Property contract, as it ensures that the policyholder has a financial stake in the property and will not profit from its loss.

When an insurer cancels an insured's policy in the middle of a policy period, the insured will receive a Pro Rata refund, which means they will receive a refund based on the portion of the premium that has not been used.

A Participating Company is a type of insurance company that is owned by policyholders, also known as mutual insurance company.

Consequential loss is not the same as a secondary loss, collateral damage, or derivative consequence.

In a Commercial Lines policy, the First Named Insured has the authority to make changes or cancel the policy as they are the primary individual or entity listed on the policy documents.

Insurance companies aim to indemnify or make whole the policyholders by compensating for their losses, not to make them rich or profit from their misfortunes. The concept of indemnity in insurance is about restoring the insured to the same financial position they were in prior to the covered event.

In the insurance industry, companies typically pay out based on the lower of either the actual loss incurred by the policyholder or the policy limit set in their coverage. This ensures that the insurer's liability is capped at a certain amount.

A non-participating company is typically referred to as a stock company, where ownership is represented by shares of stock and the shareholders have limited liability.

Endorsements are additions to an insurance policy that change or amend the coverage provided. By purchasing an endorsement, an insured can upgrade the valuation of their belongings or property from Actual Cash Value to Replacement Cost.

A direct loss refers to the physical damage or destruction of property, in this case, your house burning down. It is considered a direct loss because it directly impacts the property itself.

A liability contract involves a third party that agrees to take responsibility for potential damages or losses, whereas service, insurance, and lease contracts involve different types of agreements.

Pure Risk involves only the possibility of loss without the opportunity for gain or breaking even.

Insurance companies that are chartered, formed, or headquartered in a different country or jurisdiction than where they operate are typically referred to as 'Alien Companies'. In this case, an Insurance Company in Alberta, Canada, would be considered an Alien Company due to it not being domestically chartered or formed within Alberta.

The Law of Large Numbers specifically focuses on groups of risks that are similar in nature, making the correct answer 'Homogeneous'. The other options - Heterogeneous, Diverse, and Unequal - would not align with the concept of the Law of Large Numbers as it pertains to examining large groups of similar risks.

When risks have the same or similar characteristics and probabilities, they are also known as homogeneous risks.

Gambling involves uncertain outcomes where individuals place bets or wagers on the possibility of winning or losing money. Speculative risk refers to situations where individuals knowingly take risks in the hopes of gaining a profit, making it an appropriate category for gambling.

In insurance industry terminology, a company is considered foreign if it is chartered, formed, or headquartered in one jurisdiction but operates in another. Therefore, an insurance company based in Puerto Rico would be classified as a Foreign Company.

In the insurance industry, an Agent typically represents the insurance company, while a Broker represents the client. A Policyholder is someone who holds an insurance policy, an Underwriter assesses risk and determines premium rates, and an Adjuster investigates and settles insurance claims.

In this question, we are discussing the concept of authority that is perceived by the public. The correct term to describe this type of authority is 'Apparent' authority, which refers to the authority that is believed to exist by the public. The incorrect answers 'Implied', 'Explicit', and 'Inherent' do not accurately describe the type of authority in question.

Reinsurance is the process where an insurance company transfers a portion of their risk to another insurer. Underwriting is the process of evaluating, accepting, or rejecting insurance risks. Subrogation is when an insurer assumes the legal rights of the insured to recover expenses from a third party. Indemnification is the action of compensating someone for harm or loss suffered.

The correct term for authorized insurers is 'Admitted insurers', as they are licensed and approved by state insurance departments to transact insurance in a particular state.

A two party contract, also known as a property contract, is a legally binding agreement between two parties involving the exchange of property or rights.

When an insured cancels a policy, the refund given is referred to as a short rate refund because it is less than a pro rata refund. A pro rata refund would be the correct amount if the policy was canceled midway through the term, while a short rate refund results in charges by the insurance company for the time the policy was active.

Speculative risk involves the possibility of both gain and loss, typically associated with uncertain outcomes that can be created by a decision or action.