Illinois Casualty Insurance State Practice Exam

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Study for the Illinois Casualty Insurance Test. Enhance your knowledge with flashcards and multiple choice questions, hints, and explanations for each. Prepare confidently for your exam!

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What is the primary function of a Claims Made Policy?

  1. Covers incidents that occur only during the policy period

  2. Covers incidents that happen both before and after the policy period

  3. Covers incidents that arise but are reported outside the policy's time frame

  4. Covers incidents that happen and are reported within the policy's time frame unless a 'tail' is purchased

The correct answer is: Covers incidents that happen and are reported within the policy's time frame unless a 'tail' is purchased

The primary function of a Claims Made Policy is to cover incidents that happen and are reported within the policy's time frame unless a 'tail' is purchased. This type of insurance is designed to protect the insured for claims that are made during the time the policy is active, regardless of when the incident that caused the claim occurred, as long as it is within the policy limits and the occurrence reporting requirements are met. This means that if a claim arises from an incident that occurred during the policy period, it can be reported and addressed as long as the policy is in force. The concept of a 'tail' coverage is crucial; it allows for claims to be reported after a policy has expired, extending protection for claims related to incidents that occurred before the policy was terminated. This feature is particularly important in professions such as medicine or law, where claims may arise long after services have been rendered. The other options provided do not accurately describe the operational framework of a Claims Made Policy, which is specifically tied to both the timing of the incident and the reporting of the claim within the designated time frame of the policy.