Chapter One Quiz questions

A $100,000 house insured on a policy with an 80% coinsurance requirement has a fire that caused $40,000 of damage; the owner has a policy with $60,000 coverage. How much can the owner collect for his loss

$30,000

If a liability policy had split limits of 50/100/30, what is the maximum amount that would be payable in the event of injury to a single person

$50,000

In which of the following types of property valuation will the policy pay the full value as specified on the policy schedule, regardless of the insured property's appreciation or depreciation

Agreed Value

Insurable interest in a property policy must be proven

At the time of loss

In property and casualty insurance, what is the term for the amount of a loss that the insured must cover out of pocket, and the insurer will only pay for the additional amount of the loss above this limit

Deductible

Replacement cost is defined as

Full replacement of property at its current cost, new and without reduction for depreciation

An additional loss that results from a direct loss of property is called a/an

Indirect loss

The reduction, decrease, or disappearance of value of the person or property insured in a policy by a peril insured against is know as

Loss

What type of damages may be awarded by the court to create disincentives that discourage behavior that is deemed highly undesirable by society

Punitive

A situation in which a person can only lose or have no change represents

Pure risk

The risk of loss may be classified as

Pure risk and speculative risk

Which method of loss valuation is contrary to the basic concept of indemnity

Replacement cost

In property insurance, actual cash value is defined as what

Replacement cost at the time of the loss minus depreciation

For insurance purposed, when an insured loses property to another because the person used violence or threat of violence to gain the property, this is defined as

Robbery

Payment for medical expenses, loss of wages, funeral expenses, or the cost to repair or replace damaged property are known as what type of compensatory damages

Special

An insured owns several buildings, each at a different location and insured on a separate policy. What type of coverage does the insured have

Specific

Property insurance that provides $100,000 coverage for a building and $50,000 coverage for personal property at a single location is called

Specific coverage

When the amount of insurance written in a property policy is not subject to any coinsurance provision and that amount is paid in the event of a covered loss, the coverage is said to be written as

Stated Amount

The policy provision found in property insurance policies that prevents the insured from collecting twice for the same loss is called

Subrogation

What is not true concerning coinsurance

The coinsurance formula will also be applied to total losses

Which of the following is most likely to occur if it is determined by the audit that the deposit premium was too high

The insured will receive a return premium

When a parent is required to pay for damages caused by his or her children, this is an example of

Vicarious liability

What is a certificate of insurance

a written document showing the types and amount of insurance that have been issues to the insured

With respect to the business of insurance, a hazard is

any condition or exposure that increases the possibility of loss

What is not true regarding deposit premium

it is 50% of the actual premium

What are true statements that describe the concept of strict liability

it is applied in product liability case, claimants may need to provide proof that a product defect caused an injury, and it is imposed regardless of fault

What is not true regarding the concept of strict liability

it is imposed on defendants engaged in hazardous activities

What is true regarding deposit premium

it must be paid in advance, it is an estimated premium paid at the policy issue, and it could be adjusted by the audit

Burglary is defined as

taking of property from within the premises leaving visible signs of forced entry

What is true regarding coinsurance

the insured agrees to maintain insurance equal to some specified percentage of the value of the property, if the insurance carried is less than required the insurance may not cover the whole loss, and it is used to help adequacy and equity in rates.

For the purposes of insurance, risk is defined as

the uncertainty or chance of loss