State Farm Property & Casualty Exam
Questions And Answers With Verified
Solutions Already Passed!!!
What is insurance? - ANSWER✔✔Transfer of risk to protect from financial loss.
Types of Risk - ANSWER✔✔Pure and Speculative
Pure Risk - ANSWER✔✔Insurable risk. There is only loss.
Speculative Risk - ANSWER✔✔Not insurable. Could loss or gain financially. EX:
gambling/stock market. Could win or lose money.
Hazard - ANSWER✔✔Conditions that increase the probability for loss.
Types of Hazards - ANSWER✔✔Physical: Structural defects
Moral: Lying about the type of dog you have
Morale: Speeding in unsafe conditions. or Im not gonna pay to fix the brakes on
my car, ill wait for them to break and have insurance pay for it.
Peril - ANSWER✔✔Cause of the Loss
Property: EX: Hail damage to my car
Casualty: EX: Dog bite from my neighbors dog.
Indemnity - ANSWER✔✔Equals reimbursement!
,Only collect to extent of financial loss, no gain.
5 ways to handle risk - ANSWER✔✔Avoidance: Not driving to work to avoid car
accident.
Retention: Not buying insurance and being self insured.
Sharing: Group of people pool their money to share loss.
Reduction: Being safer. Perform routine maintenance.
Transfer: Insurance
Types of Insurers - Ownership - ANSWER✔✔Stock owned company: Issues
nonparticipating policies, owned by stockholders (allstate), pay dividends to
stockholders.
Mutual: Issue participating policies, owned by policy owners, pay to policy
owners. (state farm)
Types of Insurers - Authority - ANSWER✔✔Admitted/authorized: Certified,
approved to transact insurance in a state
Nonadmitted/unauthorized: Not certified, prohibited from transacting
Types of Insurers - Domicile - ANSWER✔✔Domestic: Incorporated in this state
Foreign: Incorporated in another state
Alien: Incorporated outside of the US
Laws of Agency - ANSWER✔✔- Agents represent the insurer
- Knowledge of the agents = Knowledge of the insurer
,- The insurer is responsible for agents action
- Payment to the agent = payment to the insurer
Agent Authority - ANSWER✔✔Express: Written in the contract
Implied: Not written into the contract, but is assumed
Apparent: Based on the principals actions or words (customers perception is
reality)
Elements of a Legal Contract - ANSWER✔✔- Agreement
- Consideration
- Competent parties
- Legal purpose
The insurance company - promising to pay a claim
The policy owner - statements on the application, paying premium
Insurance Contract term - Aleatory - ANSWER✔✔Unequal Exchange
Insurance Contract term - Adhesion - ANSWER✔✔Take it or leave it
Insurance Contract term - Unilateral - ANSWER✔✔One sided promise
, Application Statements - ANSWER✔✔Warranties: Absolutely true statements.
Breach of warranties can void a policy. (saying you dont have a trampoline in your
backyard, when you do.)
Representations: Statements that are true to the best of knowledge - not guaranteed
to be true (saying you havent had a ticket in 5 years to your knowledge, but you
had one 4 years, 6 months ago)
Fraud - ANSWER✔✔Intentional misrepresentation of a material fact made with
intent to deceive.
Material Fact - ANSWER✔✔Fact that would lead to a different underwriting
decision had the insurer known about it
Quiz 1 - A situation in which a person can only lose or have no chance of gain
represents? - ANSWER✔✔Pure Risk
Quiz 1 - All of the following are elements of insurable risk except? -
ANSWER✔✔A. Must be due to chance
B. Statistically predictable
-- C. Catastrophic
D. Definite & Measurable
Quiz 1 - Which of the following grants express authority to an agent? -
ANSWER✔✔Agents contract with the insurer
Quiz 1 - Who does the agent represent? - ANSWER✔✔The insurer
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