State Farm Insurance License Exam 2024

State Farm Insurance License Exam Abandonment Condition - ✔A condition often contained in property insurance policies that states that the insured cannot abandon damaged property to the insurer and demand to be reimbursed for its full value.

Accident - ✔A loss that occurs at a specific time and place Actual Cash Value (ACV) - ✔Today's replacement cost minus depreciation.

Depreciation from wear and tear, or obsolescence. admitted insurer; authorized insurer - ✔Company that meets a state insurance department's standards and is allowed to do business in that state.

Adverse Selection - ✔the tendency of insureds with a greater than average chance of loss to purchase insurance Annual Transit Policy - ✔Nonfiled commercial inland marine transportation form that insures a property owner's incoming or outgoing shipments of goods during a year Appraisal Clause - ✔A survey of property to determine the insurable value of the property or the value of the loss sustained.

Appraisal Condition - ✔Policy condition that outlines a procedure for when the insured and insurer disagree on the amount of a loss Assignment - ✔The legal transfer of one's interest in an insurance policy to another person.

Aviation Hull Insurance - ✔Provides coverage for physical damage to an aircraft.

Bailee's Customers Policy - ✔Nonfiled commercial inland marine form obtained by a bailee to cover loss or damage to customers' property in the bailee's custody without regard to liability.

Appurtenant Structures - ✔Buildings of lesser value that are on the same premises as the main building insured under a property policy; they are usually covered by the policy.

Assignment Condition - ✔Condition in insurance policies that specifies that the policy cannot be transferred to another unless the company consents to the transfer in writing.

Bailee - ✔A person or organization that has temporary possession of someone else's personal property.

Basic Perils in Homeowners Policy - ✔There are 14 perils. Fire, lightening, riot, explosion, vehicles, volcanic eruption, civil commotion, smoke, hail, aircraft, windstorm, vandalism, malicious mischief, theft.

Basic Property Policy Structure (DICEE) - ✔D - Declarations I - Insuring agreement C - Conditions E - Exclusions E - Endorsements Blanket Insurance - ✔Type of insurance policy that covers more than one item of property at a single location or one or more items of property at multiple locations Builders Risk Coverage Form - ✔Commercial property coverage forms that covers commercial, residential, or farm buildings that are under construction or during remodeling.

Cargo Insurance - ✔Type of ocean marine insurance that covers goods while they are in transit over water.

Binder - ✔Oral or written statement that provides immediate insurance protection for a specified period; designed to provide temporary coverage until a policy is issued or denied.

BOP - ✔Package policy designed to provide broad property and liability coverage for small businesses; eligibility requirements are stricter than the CPP. Business Income Policy - ✔Pays for loss of income that the insured sustains due to a direct physical loss from a covered peril that forces the insured to suspend operations until the property can be repaired, rebuilt, or replaced with reasonable speed; available with or without extra expense coverage.

Causes of Loss Form - ✔Separate form used with the commercial property coverage part of the commercial package policy that lists covered perils and exclusions. Several different versions provide increasingly broader coverage from basic to broad to special.

Condominium Association Coverage Form - ✔Commercial Property coverage form that covers the buildings in a condominium complex. Does not cover condominium owner's personal property.

Coverage D on a HO Policy - Loss of Use - ✔If property loss makes the residence premises uninhabitable, the additional living expenses are covered; or if a covered loss

to the insured's property makes a part of the residence premises uninhabitable that is rented to others or held for rental by the insured, this coverage will pay the fair rental value. coverages excluded on dwelling policy - ✔Theft, vandalism, and malicious mischief excluded on basic policy. Liability excluded on all policies.

Coverage B of homeowners policy - ✔Other structures; covers building and structures on the premises other than the dwelling set apart by a clear space from the dwelling; 10% of Coverage A. Coverage D on a dwelling policy - ✔Fair rental value is covered on a dwelling policy.

Coverage limit on money in HO - ✔$200 limit on personal property with special limits Coinsurance Clause on Property - ✔Insurance carried/Insurance required X amount of loss Coverage F on homeowners policy - ✔Medical payments to others; pays all necessary medical expenses for up to three years after an accident.

Deductible - ✔The amount of expenses that must be paid out of pocket before an insurer will pay any expenses from a covered loss.

Direct Loss - ✔Financial loss resulting directly from a loss to property Equipment Breakdown Coverage; boiler and machinery coverage - ✔Part of the commercial package policy that covers a loss due to breakdown of business equipment due to direct or indirect loss.

Excess Insurance - ✔When two or more policies or coverage apply to the same loss, the one that applies only after the limits of the primary coverage have been exhausted.

Difference in Conditions Insurance (DIC) - ✔Type of commercial property policy that covers most insurable perils but excludes basic fire and extended coverage perils.

Eligible for Dwelling Policy - ✔Provides coverage for the following: -Up to five boarders -Up to four apartments -Mobile home -Residence rented to others -Vacation home -Townhouse/rowhouse -Home under construction

Estoppel - ✔Principle that states that if one intentionally or unintentionally creates the impression that a certain fact exists, and an innocent party relies on that impression and is injured as a result, the guilty party may be legally prohibited from asserting that the fact does not exist Extra Expense - ✔Commercial property coverage form that covers additional expenses incurred by the insured business to continue operations following a direct loss by a peril insured against.

Fair Access to Insurance Requirements (FAIR) - ✔Program established by law that makes property insurance available to insureds who might otherwise be uninsurable in the standard market.

Fiduciary - ✔Someone who has undertaken to act for and on behalf of another in a particular matter in circumstance which give rise to a relationship of trust and confidence Flood - ✔- an overflow of inland or tidal waves - usual and rapid accumulation of runoff of surface water from any source, unless general flooding exists - mudslides caused by accumulations of water on the ground or underground - collapse of land as a result of excessive erosion due to flood Freight Insurance - ✔Type of ocean marine insurance that protects the insured against the loss of shipping costs Farm Policy Coverages - ✔Farm property Coverage A - dwelling Coverage B - other structures non-farming Coverage C - household personal property Coverage D - loss of use Farm Property Coverages Coverage E - scheduled farm personal property Coverage F - unscheduled farm personal property Coverage G - barns, outbuildings, other farm structures Farm Liability Coverages Coverage H - BI and PD Coverage I - personal and advertising injury Coverage J - medical payments to others Floater - ✔An insurance policy, or an addition to another insurance policy, covering personal property deemed to be easily moveable. It covers property lost, damaged, or destroyed (e.g. jewelry, electronics, and furs.)

Fraud - ✔A deliberate misrepresentation that causes harm; an all out effort by one party to deceive and cheat the other, must have intent.

Functional Replacement Cost - ✔Damaged property is repaired or replaced with less expensive, but functionally equivalent, materials HO-3 Policy Perils - ✔Dwelling covered for open perils and personal property covered for broad perils in this HO policy.

HO-4 Policy - ✔Renters policy. Personal property covered for broad perils.

Indemnity - ✔Restores an insured to the approximate conditions before the loss, no better or worse.

Inherent Vice - ✔Characteristic in property itself causing it to depreciate, spoil, break, become defective, disintegrate, or destroy itself.

Implied Warranties - ✔In ocean marine insurance, warranties that are not written into the policy, but have become a part of the policy by custom.

Indirect Loss - ✔Loss that is the result or consequence of a direct loss Inland Marine Insurance - ✔Property insurance coverage designed to insure exposures that cannot be conveniently or reasonably confined to a fixed location or insured under a standard form. Includes coverage for property in transit, overland, moveable property, instruments of transportation and communication (bridges, roads, and television/radio towers), legal liability for bailees coverage, and computerized equipment.

Insuring Agreement - ✔Section in the policy that describes what property is covered and the perils the policy insures against.

Jettison - ✔A voluntary action to rid a ship of cargo to prevent further damage or peril.

Liberalization Clause - ✔Condition found in property insurance contracts that provides that if the insurer broadens coverage under a policy form or endorsement without requiring an additional premium, then all existing similar policies or endorsements will be construed to contain the broadened coverage MCS-90 - ✔Endorsement attached to the truckers coverage form to provide public liability coverage.

Intervening Cause - ✔An independent action that breaks the chain of causation and sets in motion a new chain of events; when this occurs, it became the new proximate cause.

Legal Liability - ✔Commercial property coverage form that covers the insured for liability arising out of negligent damage to the property of others while it is in the insured's care, custody, or control.

Market Value - ✔The amount property could be sold for at the time of of loss. May be used to determine the amount of reimbursement for a loss.

Messenger - ✔In a crime policy, defined as an insured , partner, or employee who has care and custody of insured property outside the premises.

Morale Hazard - ✔Hazard created by an individual's tendency to contribute to a loss through his own irresponsible actions or carelessness.

Motor Truck Cargo Policy - ✔Commercial inland marine policy that protects a carrier against its liability for damage to domestic shipments in its custody.

Named (specified) Peril Policy - ✔Insurance policy that insures only against perils specifically listed in the policy.

National Flood Insurance Program (NFIP) - ✔Program run by the federal government that makes flood insurance available to eligible communities at subsidized rate; includes coverage for both building and personal property with separate deductible for each.

Motor Carrier Coverage Form - ✔commercial auto coverage form that is an alternate to the truckers coverage form; it can be used to cover anyone who transports property by auto in a commercial enterprise Mysterious Disappearance - ✔Loss of property due to unknown cause; theft must be ruled out.

Named Insured - ✔Person, business, or other entity named in the declarations to whom the policy is issued.

Nonconcurrency - ✔Situation that exists when the same property is covered by more than one policy, but the policies are not identical as to the extent of coverage provided.

Ocean Marine - ✔Insurance designed to provide broad coverage for cargo and ships in transit over sea; includes cargo insurance, hull insurance, freight insurance, and protection and indemnity insurance.

Pair and Set Provision - ✔Found in some property and inland marine policies stating the company will pay for loss of part of a set by either repairing or replacing the damaged

article or paying the difference between the ACV of the intact set and the ACV of the articles remaining after the loss.

Parts of a legal contract (CLOC/CLAC) - ✔Competent parties Lawful objective Offer and acceptance Consideration Personal effects form - ✔Inland marine form that covers an insured's personal belongings, such as baggage, while traveling.

Open Peril; all risk; special coverage - ✔Insurance policy that protects the insured from losses caused by any peril that is not specifically excluded by the policy Parts of a Homeowners Policy - ✔Coverage A - dwelling Coverage B - other structures Coverage C - personal property/contents Coverage D - loss of use/additional living expenses Coverage E - personal liability Coverage F - medical payments to others Personal Articles Form - ✔Inland marine form that provides scheduled coverage for nine optional classes of personal property: jewelry, furs, cameras, musical instruments, silverware, golf equipment, fine arts, stamp collections, and coin collections.

Primary Insurance - ✔When two or more coverage or policies apply to the same loss, the one that pays first, up to its limit of liability or the amount of the loss, whichever is less.

Pro Rata Basis - ✔Insurance company cancels the policy; unearned premium is returned to the insured. No penalty is applied to this method of cancellation.

Protection and Indemnity - ✔Form of ocean marine liability insurance that covers a variety of types of liability, such as a damage to cargo through negligence and damage to other property or another boat resulting from collision.

Pure Risk - ✔A risk in which there in no chance of gain, only loss; only risk that is insurable.

Repair Cost - ✔The cost to fix a damaged or destroyed item of property; may be the basis of reimbursement for a loss.

Pro Rata other insurance; contribution by limits - ✔Method of handling insurance when more than one coverage applies to a loss; each coverage pays a portion of the loss in

proportion to the relationship its limit of liability bears to the total limit of liability under all applicable insurance Proximate Cause - ✔An action that, in a natural and continuous sequence produces a loss. "If it had not been for..."

Recovery Clause - ✔In a property form, if the property is recovered after the insured have received payment for the loss the insured must notify the insurance company. The insured must make a decision either to keep property or the settlement amount but not both.

Replacement Cost - ✔The cost to replace the lost or damaged property with property of like, kind, and quality without a deduction for depreciation Representation - ✔Statements on an insurance application that the applicant believes are true; not considered a matter to which the parties contract, so a policy cannot be voided on this basis.

Scheduled Coverage - ✔Property that is specifically listed in the declarations and covered for a specific amount; also called specific insurance.

Short Rate - ✔When an insured cancels a policy before the expiration date, the insurance company keeps the premium for insurance already provided (called earned premium), but also keeps an allowance (called penalty or surcharge) for expenses on the unearned premium.

Subrogation - ✔Prevents double recovery by assigning or substituting the right of one party (insured) to another (insurer) to collect damages from another party.

Salvage - ✔Insured property that is damaged by a covered peril; the insured is paid by the insurance company who may take possession of the property.

Self-insurance - ✔alternative to purchasing insurance where a company or individual assumes the risk of paying for its losses and sets aside the necessary funds to pay for such losses Stated-value Policy - ✔Insurance contract written to insure property or a piece of property for specific amount. Fine arts, collectibles, and other hard-to-value assets may be valued this way.

Terrorism Risk Insurance Act (TRIA) - ✔Federal law designed to ensure that insurance coverage for terrorism losses under commercial line policies will be available and affordable; it requires insurers to pay a specified amount for terrorism losses in a given calendar year; once that limit is reached, the federal government will reimburse insurers 85% of insured losses that exceed the limit.

Act of terrorism to be certified by the Secretary of the Treasury in concurrence with Secretary of State and Attorney General of the United States.

Time Element Coverage - ✔Coverage for the loss of business income over a period of time that results from direct physical loss.

Unilateral Contract - ✔A type of contract that is one-sided; an insurance policy is onesided because only the insurer is bound to perform its part of the agreement.

Vacancy - ✔Absence of both people and property from the insured premises - no contents/no activity Warranty - ✔A specific agreement between the insured and the insurer that becomes a part of the insurance policy; a breach of warranty can void the policy.

Trip Transit Policy - ✔Nonfiled commercial inland marine policy that covers a single shipment of goods.

Unoccupied - ✔Absence of people from the insured premises - contents with no activity.

Value Reporting Endorsement - ✔Endorsement used with the commercial property coverage part to provide coverage based on the actual values of property at certain locations at specific times.

Watercraft Policy - ✔Package policy that provides property liability and medical payments coverage for losses arising out of the ownership maintenance or use of a watercraft.

Absolute Liability - ✔Type of liability imposed by law on those participating in certain activities that are considered especially hazardous; a person involved in such operations may be held liable for the damages of another even though the individual was not negligent Advertising Injury - ✔Coverage in the CGL that covers losses caused by oral or written material that slanders or libels, violates privacy rights or infringes on copyrights, titles or slogans.

Assigned Risk Plan; Automobile Insurance Plan - ✔A state-sponsored plan that provides automobile insurance to those who are uninsurable under standard auto insurance policies.

Bid Bond - ✔Type of surety bond that if a contractor's price is accepted, the contractor will enter into a contract and provide the required performance bond.

Additional Coverage; Coverage Extensions; Extended Coverages; Other Coverages ✔Supplement insurance coverage that apply only in certain circumstances, have reduced or separate limits of liability, or require the insured to meet certain requirements before they are applicable Aggregate Limit - ✔Type of policy limit found in liability policies that limits coverage to a specified total amount for all losses occurring within the policy period Assumption Risk - ✔Defense against liability based on the common law principle that a person who knowingly exposes themselves to danger or injury takes on the risk of loss and cannot hold another person responsible for the loss.

Bodily Injury (BI) - ✔Defined in most policies to include injury sickness disease and death resulting from any of these at any time.

Burglary - ✔The taking of property by a person unlawfully entering or leaving the premises as evidenced by visible signs of forced entry or exit Claims-made Form - ✔CGL coverage form that pays off bodily injury (BI) or property damage (PD) losses for which a claim was first made against the insured during the policy period Comparative Negligence - ✔Law that allows an injured party to collect from another party for a loss, even when the injured party contributed to her own loss. Damages are reduced to the extent of the injured party's negligence.

Blanket Position Bond - ✔Fidelity bond that covers losses arising from the dishonesty of one or more employees acting separately or in collusion; provides a single limit of liability applicable to each employee involved in a loss.

Certificate of Insurance - ✔Written form that verifies a policy has been written. Provides a summary of the coverage provided under the policy.

Collision - ✔Type of physical damage coverage that covers loss that occurs when the insured auto strikes another object or vehicle; may also include upset or overturn of the insured auto.

Compensatory Damages - ✔Damages that reimburse an injured party for losses that were actually sustained.