Free Massachusetts Property & Casualty Insurance Exam Flashcards

HO-3 covers the dwelling and other structures on an open-perils basis but insures personal property on a named-perils basis. HO-5 extends open-perils coverage to personal property as well. Both still exclude flood, earth movement, and wear and tear.

HO-4 is the tenants form. It provides no Coverage A dwelling limit, only personal property and liability. HO-6 is the condominium unit-owners form. It adds a small Coverage A limit for the unit's interior walls, fixtures, and improvements not insured by the association master policy.

HO-8 is the modified coverage form for older homes whose replacement cost far exceeds market value. Instead of replacement cost, losses are settled on a functional repair or actual cash value basis using common construction materials, which keeps the home insurable at a realistic limit.

DP-1 is the basic form: a short named-perils list, settled at actual cash value. DP-3 is the special form: open perils on the dwelling and other structures, named perils on personal property, and replacement cost settlement on the building. Dwelling forms cover non-owner-occupied and rental dwellings.

Business income replaces net income the insured would have earned plus continuing normal operating expenses during the period of restoration. Extra expense pays the additional costs of continuing operations that would not have been incurred without the loss, such as renting temporary space or equipment.

A pre-packaged commercial policy that bundles property and general liability coverage for eligible small and mid-sized businesses at a single premium. Eligibility is restricted by class, size, and building height. It is less flexible than a Commercial Package Policy but usually broader and cheaper for qualifying risks.

Homeowners forms cap theft of jewelry, watches, and furs at a low sublimit. A personal articles floater is inland marine coverage that lists each item with its own stated amount of insurance, insures it on an open-perils basis worldwide, and typically applies no deductible and no coinsurance requirement.

Actual cash value is replacement cost minus depreciation, so the insured absorbs the wear on the damaged property. Replacement cost pays to repair or replace with new property of like kind and quality, with no deduction for depreciation, usually only after repair or replacement is actually completed.

Divide the limit actually carried by the limit required (the coinsurance percentage times the property's value), multiply that fraction by the loss, then subtract the deductible. The insurer never pays more than the policy limit. Carrying insurance to value avoids the penalty entirely.

At the time of loss. Property insurance is a contract of indemnity, so the insured must stand to suffer financial loss when the damage occurs. This differs from life insurance, where insurable interest need only exist at policy inception.

Unoccupied means people have moved out but the contents remain. Vacant means both the occupants and substantially all the contents are gone. Property forms suspend certain coverages, notably vandalism, glass breakage, and water damage, once the premises stay vacant beyond the stated period.

A moral hazard is a character flaw that makes loss more likely on purpose, such as an insured with a history of arson or fraudulent claims. A morale hazard is carelessness or indifference because insurance exists, such as leaving a car unlocked with the keys inside.

It makes the mortgagee's right to recover independent of the insured's conduct, so the insured's act or neglect does not void coverage for the lender. The mortgagee also gets its own notice of cancellation and the right to pay the premium and file proof of loss if the insured does not.

Each insurer pays the share of the loss that its limit bears to the total limits of all collectible policies. A policy with a $300,000 limit alongside one with $100,000 pays three quarters of the loss. The insured still collects only the actual loss, never a profit.

After paying a claim the insurer takes over the insured's legal right to recover from the party at fault. An insured who signs a release or waiver of recovery against the responsible party after the loss impairs that right and can have the claim reduced or denied.

Concealment is silence: failing to disclose a material fact the applicant knew and should have revealed. Misrepresentation is speech: making a false statement of material fact. Either one, if material and relied upon, gives the insurer grounds to rescind the contract.

Coverage A insures bodily injury and property damage liability. Coverage B insures personal and advertising injury, such as libel, slander, wrongful eviction, and copyright infringement in advertising. Coverage C pays medical payments to injured non-insureds regardless of the insured's legal liability.

An occurrence policy responds to injury that happens during the policy period, whenever the claim is filed. A claims-made policy responds to claims first made during the policy period, and only for injury occurring on or after the retroactive date shown in the declarations.

Split limits state three separate figures: bodily injury per person, bodily injury per accident, and property damage per accident. A combined single limit is one pool available for bodily injury and property damage in any proportion, which helps when one severe injury exhausts a low per-person split limit.

Collision covers impact with another vehicle or object and upset of the covered auto. Other than collision, often called comprehensive, covers everything else that is not excluded: fire, theft, glass breakage, vandalism, hail, flood, and contact with a bird or animal.

A surety bond is a three-party guarantee that the principal will perform an obligation for the obligee, and the surety expects reimbursement from the principal after a payment. A fidelity bond is first-party crime coverage protecting an employer against dishonest acts of its own employees.

Part One pays statutory workers compensation benefits. Part Two employers liability covers the employer against suits for work-related injury that fall outside the statutory benefit system, such as third-party-over actions, consequential bodily injury claims by a spouse, and dual-capacity claims.

Errors and omissions covers professionals against claims of negligent performance of professional services. Directors and officers covers corporate managers for wrongful acts in running the organization. Employment practices liability covers claims by employees alleging discrimination, harassment, or wrongful termination.

A legal duty owed to the claimant, a breach of that duty, proximate cause linking the breach to the harm, and actual damages. All four must be present. Missing any one defeats the claim, which is why liability policies fund a defense even when negligence is not established.

Compensatory damages restore the claimant and split into special damages, which are measurable costs like medical bills and lost wages, and general damages, which are intangible losses like pain and suffering. Punitive damages punish wilful misconduct and are frequently excluded or uninsurable.

None on its own. It is evidence that a policy existed on the date it was issued and nothing more. It does not amend, extend, or alter the policy, and the holder gains no rights under the contract unless it is actually added as an additional insured by endorsement.

Exposure-rated policies such as workers compensation and general liability charge an estimated deposit premium at inception based on projected payroll or sales. After expiration the insurer audits actual exposures and bills additional premium or returns the excess.

Costs the insurer pays in addition to the limit of liability: defense costs, premiums on appeal and release-of-attachment bonds, up to $250 for bail bonds, post-judgment interest, and reasonable expenses the insured incurs at the insurer's request. They do not reduce the limit.

It bars the insurer from settling a claim without the insured's written agreement, common in professional liability where a settlement damages reputation. Many such policies pair it with a hammer clause capping the insurer's exposure at the refused settlement amount plus defense costs to that date.

The first named insured listed in the declarations acts for all insureds on policy administration: it pays premiums, receives return premiums, receives notices of cancellation and nonrenewal, requests policy changes, and may cancel the policy. Other named insureds do not hold those rights.

It applies when the insured and the insurer disagree over whether the insured is legally entitled to recover or over the amount, most often in uninsured and underinsured motorist claims. Each side selects an arbitrator, the two select a third, and the decision resolves the dispute without a lawsuit.

Up to three years. The first license expires in the licensee's birth month, so it may run as short as two years, and each renewal is then a three-year term. The Division of Insurance charges $225 for an individual producer license plus a $75 lead paint surcharge whenever the license carries Property, Casualty, or Personal Lines authority, for $300 in total.

Sixty CE credits, including 3 credits in ethics, before the first renewal. Each subsequent three-year renewal requires 45 credits, again including 3 ethics credits. Missing the deadline can lead to non-renewal plus monetary penalties for non-compliance.

Fourteen unfair claim settlement practices, lettered (a) through (n). They include misrepresenting policy provisions, failing to acknowledge communications promptly, refusing to pay without a reasonable investigation, failing to effectuate prompt and equitable settlement once liability is reasonably clear, and forcing insureds to sue by offering far less than is ultimately recovered.

Offering an inducement to buy insurance that is not stated in the policy, such as returning part of the commission, paying the premium, or giving something of value. It is prohibited by M.G.L. c. 175, sections 182 to 184 and by c. 176D, section 3(8), and it penalizes the person accepting the rebate as well.

M.G.L. c. 175, section 1 defines a domestic company as one incorporated or formed in the Commonwealth and a foreign company as one formed under the authority of any other state or government. The industry term alien insurer, meaning a company chartered in another country, has no separate definition in Massachusetts law: it falls within the statutory definition of a foreign company.

It is the Commissioner's authorization for an insurer to transact the named kinds of insurance in the Commonwealth. A domestic company needs the certificate under M.G.L. c. 175, section 32 before it issues policies, and a foreign company needs the license under section 151, which expires each June 30 unless renewed. An insurer holding one is authorized, or admitted; placing business with an unauthorized insurer outside the surplus lines process exposes the producer to penalties.

An insurer that wants a producer to act as its agent files an appointment notice with the Commissioner within 15 days of executing the agency contract or receiving the first application, under M.G.L. c. 175, section 162S. Section 162T governs termination: the insurer notifies the Commissioner within 30 days, states the reason when the termination is for cause, and mails a copy to the producer within 15 days after that.

Under M.G.L. c. 175D, section 5 as rewritten by Chapter 389 of the Acts of 2024, which applies to insurers found insolvent after July 1, 2025, the Fund pays workers compensation covered claims in full, up to $500,000 per claimant for other covered claims, up to $1,000,000 for all first-party property loss claims from a single occurrence, and up to $50,000 per policy for unearned premium.

After a hearing under section 6, the Commissioner may issue an order under section 7 directing a person to stop an unfair or deceptive method, act, or practice. Violating the order supports monetary penalties and license suspension or revocation.

The Insurance Information and Privacy Protection Act. It regulates how insurers and producers collect, use, and disclose personal information gathered in insurance transactions, requires notice of information practices, and gives applicants and insureds the right to access and correct recorded personal data.

Under M.G.L. c. 175, section 162Q the Commissioner may issue a temporary license for up to 180 days without an examination to keep an existing insurance business running: to the surviving spouse or court-appointed personal representative of a producer who dies or becomes disabled, to a member or employee of a business entity producer in the same situation, or to the designee of a producer entering active service in the armed forces.

The Massachusetts Property Insurance Underwriting Association, known as the Massachusetts FAIR Plan. Created under M.G.L. c. 175C, section 4, it is a joint underwriting association of every insurer writing basic property insurance in the Commonwealth, and it supplies basic property insurance to eligible applicants who cannot obtain it in the voluntary market.

Two years from the time the loss occurred, under M.G.L. c. 175, section 99. That is notably longer than the twelve-month suit limitation printed in the standard fire policy of many other states, and it is a favorite exam distinction.

The company must give the insured five days written notice, or ten days when the stated reason is nonpayment of premium, and in either case must give a mortgagee named as payee twenty days written notice. After the policy has been in force sixty days, cancellation is limited to enumerated grounds such as nonpayment, fraud, or an increase in hazard caused by the insured.

Bodily Injury to Others $25,000 per person and $50,000 per accident, Bodily Injury Caused by an Uninsured Auto $25,000 and $50,000, and Damage to Someone Else's Property $30,000 per accident. Chapter 275 of the Acts of 2024 raised them for policies written or renewing on or after July 1, 2025.

Up to $8,000 per person per accident regardless of fault, under M.G.L. c. 90, section 34A. Lost wages are limited to 75 percent of the injured person's average weekly wage. If the injured person carries health insurance, PIP pays the first $2,000 of medical expenses and above that pays only what the health plan does not cover, still within the $8,000 limit.

Under M.G.L. c. 231, section 6D an auto accident plaintiff may recover pain and suffering only if reasonable medical expenses exceed $2,000, or if the injury causes death, loss of a body member, permanent and serious disfigurement, a qualifying loss of sight or hearing, or a fracture.

Two points for a minor traffic law violation, three for a minor at-fault accident, four for a major at-fault accident, and five for a major traffic law violation. Points come from a six-year policy experience period, and incidents in the sixth and oldest year receive no points.

Section 34 temporary total incapacity pays 60 percent of the pre-injury average weekly wage for at most 156 weeks. Section 35 partial incapacity pays 60 percent of the difference between the pre-injury wage and post-injury earning capacity, capped at 75 percent of the section 34 rate, for at most 260 weeks.