Alabama Property & Casualty Insurance License Exam — All Questions
3 questions
The part of an insurance policy that identifies the insured, the property or risk, the policy period, and the coverage limits is the:
- a.Declarations✓
- b.Insuring agreement
- c.Conditions
- d.Exclusions
The declarations page (the 'dec page') states the specific facts of the policy: the named insured, description of the covered property or risk, policy period, limits of insurance, premium, and any forms attached. The insuring agreement states what the insurer promises to cover, the exclusions state what is not covered, and the conditions set the rules and duties both parties must follow.
Subrogation is best defined as the insurer's right to:
- a.Cancel a policy for any reason at any time
- b.Increase the premium after a claim
- c.Recover a paid claim from a negligent third party responsible for the loss✓
- d.Deny coverage after paying the claim
Subrogation is the insurer's right, after paying a covered claim, to step into the insured's shoes and pursue recovery from the third party who caused the loss. It prevents the insured from collecting twice and helps hold the responsible party accountable, which supports the principle of indemnity. The insured must not do anything after a loss that impairs the insurer's subrogation rights.
A binder in property and casualty insurance is:
- a.A permanent replacement for the policy
- b.Temporary evidence of coverage until the formal policy is issued✓
- c.A document that cancels coverage
- d.A list of policy exclusions
A binder is a temporary agreement, oral or written, that provides immediate evidence of insurance coverage until the insurer issues the formal policy or declines the risk. It contains the essential terms so the insured is protected in the interim. A binder is not permanent; it is superseded once the actual policy is delivered or the coverage is formally declined.