Definition of coinsurance:
A requirement that the insured carry insurance equal to a specified percentage of the property's value to qualify for replacement cost coverage under the policy
Which of the following would NOT be found in the policy declarations page?
A. Insurers promise of protection
B. Limits of insurance, deductibles, amount of premium
C. A description of the property to be insured
D. A legal representative in the event of th
Insureds promise of protection
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The insurers promise of protection would be found in the policy's Insuring Clause, not the Declarations.
All of the following are 'your duties in the event of a loss' except:
A. The insured should protect damaged property from further loss and separate damaged property from undamaged property
B. The insured should seek legal council and file a law suit again
The insured should seek legal council and file a law suit against the party that caused the claim
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Providing prompt notice, notifying the police, protecting property from further loss are all considered to be the insured's duties in the event of a loss.
What is the term used to describe an insurance company terminating an insurance relationship at the end of the policy period?
Nonrenewal
A binder:
A. Has a different effective date than the actual policy, once the policy is issued
B. None of the answers listed
C. Guarantees that the policy will be issued within 30 days
D. Can only be issued by the writing agent
None of the answers listed
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A binder can be an oral or written document. If its oral, the written binder is usually provided within a short period of time. The binder provides temporary insurance protection, usually 90 days or until the policy is issued
All of the following would normally be included with the insured's 'proof of loss' when being submitted to the insurer, EXCEPT:
A. Any appropriate receipts, evidence, or affidavits to support the loss
B. Any other insurance that may cover the loss
C. A si
A signed and authorized estimate by an approved contractor
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When submitting proof of loss, the insured would be required to provide the time and cause of loss, indicate any other insurance that covers the loss, and submit receipts, evidence, or affidavi
An unforeseen and unintended event that happens at a known time in a known place is defined as a/an:
Accident
The process where disputed claims between insured's and insurer's are decided by a neutral party without a jury trial is called:
Arbitration
Carl's home sustains 50k damage in an electrical fire. The home is insured under a Homeowners policy for 75k. At the time of the loss, the homes replacement cost is 125k. How much will Carl's homeowners policy pay for his loss?
$37,500
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Formula:
125k x .80 = 100k (coverage amount insurance requires)
75k / 100k = .75
.75 x 50k = $37,500
When the insurance company chooses to broaden coverage with no increase in premium, the broadened coverage automatically applies to all existing policies without the need for an endorsement. The company in exercising what clause?
Liberalization clause
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The insurer has liberalized and broadened coverage out of the kindness of their heart.
An additional loss that results from a direct loss to property is called a/an:
Indirect/consequential loss
Insurance binders are:
Temporary or interim insuring agreements
Which of the following describes the 'Loss of Payment' condition regarding how long an insurer has to pay for a loss after receiving the proof of loss and having reached an agreement with the insured?
A. Personal lines 90 days and Commercial lines 60 days
Personal lines 60 days and Commercial lines 30 days
All of the following are parts of an insurance contract, except:
A. Exclusions
B. Indirect loss
C. Insuring agreement
D. Conditions
Indirect loss
The condition that provides a means to settle the amount of a loss when the insured and the insurance company cannot agree is the:
Appraisal condition
Who has the ability to cancel a policy?
Both insured and insurer
What type of policy would you purchase to provide coverage for everything that is not excluded?
Special form
It will cost Gary $5,000 to put a new roof on his home to replace a roof destroyed in a windstorm. Assume that the original roof, which Gary paid $3,500 for 10 years ago, depreciated $300 per year. What was the actual cash value of the roof that was destr
$2,000
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Forumula:
$300 x 10 = $3,000 (Depreciation over 10 years)
$5,000 (Replacement cost) - $3,000 (Depreciation) = $2,000 (Actual Cost Value)
The action, which in a natural and continuous sequence, produces a loss is known as the:
Proximate cause
The insured has two separate Dwelling policies that cover the same property: Policy A for $30k and Policy B for $60k. The insured has a $12k loss. If both policies use the pro rata method to handle other insurance, how much will Policy B pay for this loss
$8,000
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Formula:
$30,000 (Policy A) + $60,000 (Policy B) = $90,000
$60,000 (Policy B) / $90,000 = .66
.66 x $12,000 (Loss) = $8,000
What type of insurance policy insures against all risks of loss that are not specifically excluded by the policy?
Open peril policy
Once an insurance company has restored the insured following a covered loss, which of the following has the right of salvage of the destroyed property?
A) Insured
B) Insurer
C) Both A and B
D) Neither A nor B
Insurer
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The insurance company always retains the right of salvage. They may sell you the right but ultimately the right belongs to the insurer.
What part of the policy would you find the insurance company's promise to pay?
Insuring agreement
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This describes the insurer's promise to pay and the description of covered perils
Michael has taken his shoes to a shoe repair center. Michael has taken his shoes to a:
Bailee
When grease pops out and catches a kitchen on fire, it is considered to be a:
Hostile fire
A building owner purchases a property policy in the amount of $60k on his $100k building. The contract contains an 80% coinsurance clause. If he suffers a covered loss of $10k, how much will he receive in a settlement disregarding any deductible?
$7,500
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Formula:
$100k (Building cost) x .80 (Insurance required) = $80k (Insurance amount required)
$60k/$80k = .75 (Insurance amount bought)
.75 x $10k (Loss) = $7,500
An insured purchases new furniture for $6k. At the time of fire loss, it has depreciated $2k. The same furniture will cost $7k to replace. What is the actual cash value of the furniture?
$5,000
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Formula:
$7k - $2k = $5k
Replacement - Depreciation = ACV
What formula describes ACV?
Replacement - Depreciation = ACV