Free KY P&C Exam Flashcards

Pure risk involves only the chance of loss or no loss, such as fire or theft, and is insurable. Speculative risk also carries a chance of gain, such as gambling or investing, and is not insurable.

A peril is the cause of a loss, such as fire or windstorm. A hazard is a condition that raises the chance or severity of a loss and may be physical (faulty wiring), moral (dishonesty), or morale (carelessness because insurance exists).

The insured must stand to suffer a genuine financial loss if the insured event occurs; without it, the contract is an unenforceable wager. In property and casualty insurance, insurable interest must exist at the time of the loss.

An insurance payout restores the insured to the financial position held just before the loss, no better and no worse, preventing the insured from profiting from a covered event.

A binding contract requires agreement (an offer, typically the application, and acceptance by the insurer), consideration (the premium exchanged for the insurer's promise to pay), competent parties, and a legal purpose.

Insurance contracts are aleatory, meaning unequal value may be exchanged depending on whether a loss occurs, and contracts of adhesion, meaning the insurer drafts the wording so any ambiguity is construed against it.

An insurance contract is unilateral because only the insurer makes a legally enforceable promise, and personal because it covers the insured rather than the property itself, so it cannot be assigned to a new owner without the insurer's written consent.

A stock insurer is owned by shareholders who receive any dividends as a return on investment. A mutual insurer is owned by its policyholders, who may receive policy dividends when results are favorable.

A binder is temporary written or oral evidence of coverage that protects the applicant while the insurer finishes underwriting; the policy is the final, complete written contract that replaces it.

A representation is a statement the applicant believes to be true, and only a material misrepresentation lets the insurer avoid the contract. A warranty is a statement guaranteed to be true that becomes part of the contract, so any breach can void coverage.

Waiver is the voluntary surrender of a known right, such as an insurer accepting late premiums without objection. Estoppel then bars the insurer from asserting that right against an insured who reasonably relied on the insurer's conduct.

Requires the insured to carry coverage equal to a stated percentage of the property's value, commonly 80%, 90%, or 100%. If less is carried, a partial loss is paid as (insurance carried / insurance required) x loss, minus the deductible.

ACV pays replacement cost minus depreciation, while replacement cost coverage pays to rebuild or repair with new materials of like kind and quality without a deduction for depreciation.

A negligence claim requires proof of a legal duty, breach of that duty, causation linking the breach to the injury (proximate cause), and actual damages; missing any one element defeats the claim.

Since Hilen v. Hays (Ky. 1984), now reflected in KRS 411.182, Kentucky reduces an injured party's damages by that party's own percentage of fault but does not bar recovery, even if that fault exceeds 50 percent. Contributory negligence, by contrast, would bar recovery entirely.

A dwelling (DP) policy is property coverage for risks such as rental or non-owner-occupied homes and does not include personal liability or theft coverage unless endorsed. A homeowners policy packages Section I property coverages with Section II liability for an owner-occupant.

The most common homeowners form; it insures the dwelling and other structures on an open-peril basis but insures personal property only for the named broad-form perils.

HO-4 (Contents Broad Form) is for renters and covers personal property and liability but no dwelling. HO-6 (Unit-Owners Form) is for condominium owners and adds limited dwelling coverage for the parts of the unit the owner must insure.

Pays additional living expense, or the fair rental value of a part of the home rented to others, when a covered loss makes the residence premises unfit to live in during repairs.

Coverage E (Personal Liability) pays damages and defense costs when an insured is legally liable for bodily injury or property damage. Coverage F (Medical Payments to Others) pays guests' medical bills regardless of fault and never pays for an insured's own injuries.

Part A (Liability) pays for bodily injury and property damage the insured causes to others; Part D (Coverage for Damage to Your Auto) pays to repair or replace the insured's own vehicle under collision and other-than-collision coverage.

KRS 304.39-110 requires split limits of 25/50/25 - $25,000 per person and $50,000 per accident for bodily injury, plus $25,000 for property damage - or, alternatively, a single limit of $60,000 that applies to all bodily injury and property damage from one accident.

UM pays the injured insured when the at-fault driver has no liability insurance or is a hit-and-run driver. UIM pays when the at-fault driver has liability insurance but the limits are too low to cover the insured's damages.

KRS 304.20-020 requires every auto liability policy to include UM bodily injury coverage at the 25/50 minimum limits unless a named insured rejects it in writing. UIM is handled differently: KRS 304.39-320 only requires insurers to make it available on request.

Homeowners and dwelling policies exclude flood, so coverage comes from the federal NFIP or a private flood policy. NFIP residential limits are $250,000 for the building and $100,000 for contents, and a new policy generally has a 30-day waiting period.

Kentucky's residual property market under KRS Chapter 304, Subtitle 35, in continuous operation since 1968. It makes basic property coverage available to owners who, through their agent, have exhausted the voluntary market.

Provides a high excess liability limit above required underlying homeowners and auto liability coverage, and can cover some claims the underlying policies exclude, subject to a self-insured retention paid by the insured.

A modular policy that combines two or more commercial coverage parts, such as property, general liability, crime, inland marine, and auto, under one set of common policy declarations and common policy conditions.

Six conditions apply to every coverage part in a CPP: cancellation; changes; examination of books and records; inspections and surveys; premiums; and transfer of rights and duties. The first named insured is the party who receives cancellation notice and pays premiums.

A pre-packaged policy that combines property and liability coverage for eligible small and mid-size businesses in one contract, with many coverages built in rather than selected part by part as in a CPP.

Eligibility depends on the business class and size. Risks commonly ineligible for a BOP include auto dealers and repair shops, bars, banks and other financial institutions, and places of amusement, which must use a CPP or monoline policies instead.

The core commercial property form insuring the building, the insured's business personal property, and the property of others at a described location, subject to a selected causes-of-loss form: basic, broad, or special.

Pays lost net income plus continuing normal operating expenses, including payroll, while a covered direct property loss suspends operations during the period of restoration. Extra expense coverage pays added costs to keep operating.

Identifies what may be written as marine insurance: imports, exports, domestic shipments, instrumentalities of transportation and communication such as bridges and tunnels, and personal and commercial property floater risks. Inland marine forms may be filed or nonfiled.

Coverage A pays bodily injury and property damage liability, Coverage B pays personal and advertising injury liability, and Coverage C pays medical payments to injured third parties regardless of fault.

An occurrence form covers injury or damage that happens during the policy period regardless of when the claim is made. A claims-made form covers claims first made during the policy period or an extended reporting period, for injury on or after the retroactive date.

Numeric symbols on the declarations define which autos are covered for each coverage: Symbol 1 is any auto, Symbol 2 is owned autos only, Symbol 7 is specifically described autos, Symbol 8 is hired autos, and Symbol 9 is nonowned autos.

Covers loss of money, securities, and other property from theft committed by an employee, a loss that commercial property forms exclude. This exposure was historically written as a fidelity bond.

A discovery form covers losses discovered during the policy period, or within 60 days after it ends, no matter when they occurred. A loss sustained form covers losses that occur during the policy period and are discovered no later than 1 year after it ends.

Part One pays the statutory workers' compensation benefits for job-related injury or disease regardless of fault. Part Two (Employers Liability) covers the employer for related lawsuits outside the statutory system, such as third-party-over actions.

KRS 342.630 makes workers' compensation mandatory for any employer with one or more employees, other than one engaged solely in agriculture. KRS 342.650 exempts certain workers, including farm workers and domestic servants in a home with fewer than two full-time domestic employees.

Income benefits depend on the disability class: temporary total, temporary partial, permanent partial, or permanent total. Benefits also include medical expenses, rehabilitation, and death benefits to survivors, and are the employee's exclusive remedy against the employer.

A surety bond is a three-party guarantee, involving the principal, obligee, and surety, that the principal will perform an obligation; unlike insurance, no losses are expected and the principal must reimburse the surety for any loss it pays.

A federal backstop under which the government shares insured losses from certified acts of terrorism. Insurers must make terrorism coverage available on covered commercial property and casualty policies, and an act is certified only by the Secretary of the Treasury when losses exceed $5 million.

Covers sudden and accidental breakdown of boilers, pressure vessels, and mechanical or electrical equipment, a cause of loss that commercial property forms exclude. Insurer inspection and loss-prevention services are a major part of the coverage.

KRS 304.9-295 requires a licensed agent to complete 24 CE hours each biennium, including 3 hours of ethics, by the last day of the birth month in the even or odd year that matches the licensee's birth year.

The no-fault benefit under Kentucky's Motor Vehicle Reparations Act (KRS 304.39). It pays economic loss such as medical expense, work loss, and replacement services up to $10,000 per person per accident, regardless of who caused the accident.

A person subject to the no-fault system may recover pain-and-suffering damages in tort only if medical expenses exceed $1,000, or the injury involves a fracture, permanent injury, permanent disfigurement, loss of a body member, or death, per KRS 304.39-060(2)(b).

When a member property and casualty insurer becomes insolvent, KIGA pays covered claims under KRS 304.36-080: the full amount of workers' compensation claims, up to $10,000 per policy for unearned premium, and up to $300,000 per claimant for most other covered claims.

Lists prohibited claim conduct, including misrepresenting policy provisions, failing to acknowledge claim communications reasonably promptly, refusing to pay without a reasonable investigation, and not attempting a good-faith, prompt, fair settlement once liability is reasonably clear.