Property and Casualty Insurance Practice Exam

What section of an insurance policy states the obligations and responsibilities of both the insurance company and the insured?

1. Exclusions

2. Conditions

3. Explanatory Notes

4. Policies

The correct answer is: Conditions

The section of an insurance policy that delineates the obligations and responsibilities of both the insurance company and the insured is the Conditions section. This part of the policy outlines the duties of each party in the agreement, including but not limited to payment of the premium by the insured, the requirement for the insured to report losses promptly, and the insurer's duty to defend claims brought against the insured. It establishes a framework for how the policy operates, what is expected of both parties, and the procedures that need to be followed to ensure compliance with the terms of the agreement. For example, the Conditions section may specify that in the event of a loss, the insured must cooperate with the insurer’s investigation or that the insurer must provide written notice of cancellation. This structure is essential for both parties to understand their respective rights and responsibilities under the policy.