In Property Insurance, what is Actual Cash Value?
Replacement cost at the time of loss, minus depreciation
In property insurance, when must insurable interest exist?
At the time of loss
What is the difference between cancellation and nonrenewal?
Cancellation is the termination of an insurance policy by either party prior to the policy's expiration date. Nonrenewal is the termination of a policy at its expiration date by not offering continuation of the existing policy
What is the process that insurers use to determine whether a policy should be issued and on what terms & conditions?
Underwriting
If an insured peril was the proximate cause of loss, what type of loss is it?
Direct
An insured's business is damaged by a fire, and temporarily shut down for repairs. As a result, the insured suffers loss of income. What type of loss is the loss of income?
Indirect or consequential
A policy that covers all causes of loss except for those specifically excluded is known as what type of policy?
Open peril (or special) form
How are direct and indirect losses related?
Direct losses can cause indirect losses.
What determines an insurer's responsibility for payment, as stated in an insurance policy?
Limits of liability
What type of limits of liability has the limits separately stated for different coverages?
Split limits
What sublimit in a liability policy puts a ceiling on the payment for all claims that arise from a single accident?
Per occurrence
Which of the following is the correct formula for computing a loss ratio?
(Incurred losses + loss adjusting expense)/earned premium
Which of the following would modify the original insurance contract by either adding or removing coverage?
endorsements
Replacement cost is defined as
Full replacement of property at its current cost, new and without reduction for depreciation.
which of the following best expresses the purpose of a stated value contract?
To pre-establish the amount of coverage available for property items that are difficult to value
An insured is driving through a residential area when she loses control and crashes into a neighbor's front porch. The neighbor who was sitting on the porch, is injured. The insured's liability policy has a limit of $500,000. This amount applies to the to
Combined single
An insured owns a building that is valued at $400,000. To comply with the 80% coinsurance provision of his insurance policy, how much should he insure the property for?
80% of the property's replacement cost or more
Which part of an insurance policy covers claims-related expenses, reasonable expenses incurred by an insured to protect damaged property from further loss, or defense expenses?
Additional coverage
Which of the following would e named on the declarations page of a property or liability policy?
First named insured
Using an air-cooled engine, a proposed insured has developed a new, experimental aircraft. If the inventor applies for liability insurance, what rating type will the insurer most likely use?
Judgement
The legal process that gives the insurer, after payment of a loss, the right to seek recovery from a third party that was responsible for the loss is known as
Subrogation
According to the standard mortgage clause, who has the right to bring a suit in their own name to recover damages, pay policy premiums, and submit a proof of loss?
Mortgagee