Characteristics of Insurance
The immediate cause and reason for a loss occurring, such as a hurricane, is referred to as a:
peril
Amanda owns a home with a $400,000 replacement value. This January, a snowstorm causes $75,000 in damages to the home. Amanda has an insurance policy with 80% coinsurance and a $1,000 deductible. How much will the insurer pay if Amanda carries $300,000 of coverage?
$69,312.50 ($300,000/(0.80 mulitplied by $400,000))*$75,000 = $70,312.50 $70,312.50-$1,000 = $69,312.50
Which of the following statements is/are correct regarding insurance contracts? 1. The principle of insurable interest is closely aligned with the principle of indemnity, which both limit the insured from experiencing a gain using insurance. 2. A subrogation clause in an insurance policy requires that the insured relinquish a claim against a negligent third party of the insurer has already indemnified the insured.
Both 1 and 2
Which of the following is a risk reduction technique?
Parking your car at the end of the parking lot, away from other cars
Which of the following statements regarding risk is incorrect?
Particular risk is a risk that will impact a large group of individuals simultaneously.
Which type of hazard results from a physical condition that increases the likelihood of a loss occurring?
Physical hazard
Premium rates set by insurance companies are regulated at which level of government?
State
Which of the following is not an element of the Principle of Utmost Good Faith?
Waiver
All of the following statements regarding insurance policies are correct EXCEPT:
an endorsement is a modification or change to a life or health insurance policy
The section of an insurance contract that describes exactly which property or person is being covered is the:
declarations section