Property Insurance and General Insurance basics

Company A has issued a policy in the amount of $200,000, and a Company B has issued a policy in the amount of $300,000. Under the Other Insurance or Pro Rata Liability condition or provision, how much will Company A pay of a $100,000 loss?

$40,000

The replacement value of an insured building is $200,000. In the standard commercial property policy, what is the SMALLEST coverage amount required for full replacement valuation to apply if a loss occurs?

$160,000

When a property policy has been in effect less than 60 days and the insurer cancels for nonpayment of premium, the insurer must give the insured ___ days written notice.

10

The named insured is found in what section of a property policy? A. insuring agreement B. declarations C. conditions D. definitions

B

When duplicate coverage exists, what policy condition determines how loss payment is made? A. other insurance B. nonrenewal C. pro-rata D. cancellation

C

When property is damaged by fire, the loss is said to be a(n) ____ loss.

Direct

____ is defined as the reduction in, decrease in, or disappearance of value

Loss

A peril is defined as a cause of loss. True or False

TRUE

Which of the following has certain rights and duties that don't apply to other insureds? A. additional insureds B. Second insured C. first names insured D. Last insured

C

An insurer may nonrenew a Homeowners policy with oral notice to the insured. True or False

False

Policy A is written for $100,000, and an excess Policy B is written for $200,000 on the sme property. In the event of a $20,000 loss, how much will each policy pay?

Policy A $20,000 Policy B $0

When the insurer cancels a property policy, the unearned premium is returned ___.

Pro rata

Insuring more than 1 property on 1 policy for a single amount of insurance that applies to all properties covered under the policy is known as ___ coverage.

blanket

When someone provides misleading or false information to the insurer on the application it is considered _______.

misrepresentation

A producer's/agent's binding authority is stated in his/her contract with the insurer. true or false

true

Underwriters like to select insureds whose actual loss will be similar to expected losses. true or false

true

The insurance contract is a contract of ___ ___ ___ because each party is entitled to rely upon the assumption that there has been full, fair, and honest disclosure.

utmost good faith

A building that has neither occupants nor personal property is ___.

vacant

The ___ ___ law requires an insurer to pay the full amount of insurance on an insured structure in the event of a total loss.

valued policy

An insurer's failure to enforse a provision in an insurance contract is called a(n) _____.

waiver

Could an order to vacate the property possibly cause an insurer to cancel a commercial property policy? (Yes or No)

yes

Does coverage under a property policy extend to include a legal representative of the named insured's estate in the event of the death of the named insured? (Yes or No)

yes

Would the storage of flammables on the premesis be considered a physical hazard? yes or no

yes

As the fire dept doses a fire to an insured dwelling, the dwelling sustains severe fire and water damage. The fire damage is what type of loss? A. indirect loss B. consequential loss C. contingent loss D. direct loss

D

The ___ part or portion of a property policy sets forth the rights, rules, duties, and obligations of the insurer and insured to be followed throughout the policy period.

conditions

When an insured desires to add coverage to a policy, the insurer usually will ___ the policy.

endorse

A producer's/agent's powers that are stated in his/her agency contract are called _____ powers.

express

A person who may be dishonest is said to be a(n) ___ hazard.

moral

A copy machine was purchased 8 years ago for $9,000. It had depreciated 50% at the time of loss and will cost the insured $12,000 to replace. If the policy's loss settlement provision is on an Actual Cash Value basis, how much will the insurer pay for the insured's loss of the copier?

$6,000

For replacement cost coverage to apply in Dwelling policies, the insured must carry insurance at least equal to ___% of the cost of the replacement of the building.

80

What would an insurer use to revise coverage provided by a property insurance policy? A. endorsement B. arbitration C. concurrent causation D. a binder

A

A policy that provides coverage for all perils except those specifically excluded is called: A. Open perils B. Actual perils C. Direct perils D. stated perils

A

Actual Cash Value is defined as: A. Cost at today's prices, to replace or repair damaged property, less depreciation B. Cost, at purchase, to replace or repair damaged property, less depreciation C. Cost to replace or repair the damaged property at today's value D. Depreciated value

A

If a policy had a concurrent causation exclusion, which of the following is true? A. if a loss results from two or more perils that occur at the same time, no coverage is provided if any of the perils is excluded B. If a loss results from two or more perils that occur at the same time, coverage is provided--even if one of the perils are excluded C. There is no coverage if a loss is caused by more than one peril D. only the first peril causing loss is covered

A

Policy A is a primary policy that insures a building for $200,000. Policy B is an excess policy that insures the same building for $400,000. In the event of a covered $40,000 loss, how much will policy B pay for the loss? A. $0 B. $10,000 C. $20,000 D. $30,000

A

The address and legal description of insured property are found in the: A. Declarations B. Insuring agreement C. Conditions D. Exclusions

A

The insuring agreement includes which of the following? A. Insurer's promise of payment B. Exclusions C. The obligations the insured and insurer agree to follow D. Loss payable clause

A

Which of the following is NOT contained in the conditions section of an insurance policy? A. exclusions B. Appraisal C. Changes D. assignment

A

if an insured must insure a building to 80% of its replacement value, what policy condition applies? A. coinsurance B. appraisal C. Nonrenewal D. Cancellation

A

In a homeowners policy, the term ___ ___ ___ is defined as the cost to repair or replace the damaged property less depreciation.

Actual cash value

When an insurance policy is not clear, the court will usually interpret in favor of the insured, because the policy is a contract of ______.

Adhesion

Which condition or provision of a property insurance policy applies when the insured and insurer cannot agree on the amount of the loss?

Appraisal

A building was purchased 10 years ago for $100,000. It currently has a replacement value of $200,000. It has depreciated 3% each year. What is the building's actual cash value today? A. $200,000 B. $140,000 C. $70,000 D. $100,000

B

A loss that occurs as a consequence of direct damage to property is known as: A. a second loss B. an indirect loss C. a direct loss D. a non-concurrent loss

B

A policy insures two types of property on one policy and each is insured for a different limit. The policy is written on what basis? A. Blanket limit B. Scheduled limit C. Specific limit D. conditional limit

B

A policy that pays the full cost to replace or repair damage to property without any adjustment for depreciation is called: A. a depreciated policy B. A replacement value policy C. A valued policy D. A direct loss policy

B

All of the following are true of coinsurance EXCEPT: A. the higher the coinsurance percentage, the lower the premium rate B.It only applies to total losses C. It's used in most commercial property policies D. It's used to encourage the purchase of insurance to value

B

In a property policy, when an insurer automatically increases coverage mid-term without an increase in premium, what condition applies? A. extra coverage B. liberalization C. endorsement D. actual cash value

B

The insured's duties after a loss include all the following, EXCEPT: A. notify police in the event of a theft B. Have property repaired quickly, then notify insurer C. Prepare an inventory of damaged property D. Give prompt written notice to the insurer

B

The person or organization whose name appears first on the Declarations is known as: A. named insured B. First named insured C. Mortgagee D. Loss Payee

B

The section of a property policy that specifies the obigations and duties of the insured and insurer is the: A. insuring agreement B. conditions C. declarations D. loss evaluation

B

What happens when an insured chooses a property deductible of $250 instead of $1000? A. a lower deductible results in lower premiums B. a lower deductible results in the submission of a greater number of small claims C. a higher deductible results in the submission of a greater number of small claims D. a higher deductible is tax-deductible

B

When a building contains insufficient personal property or furnishings to support its intended occupancy or use, it is: A. unoccupied B. vacant C. empty D. cancelled

B

Which of the following parties must sign and submit a proof of loss after a loss? A. insurer B. insured C. Appraiser D. Adjuster

B

Who is the 'first party' to an insurance contract? A. the agent B. the insured C. the claimant D. the insurance company

B

An individual or organization who has taken into their care, custody, and/or control the property of another for servicing, repair, or storage is known as a ____.

Bailee

An individual who negotiates insurance contracts on behalf of the prospective insured is called a(n)_________.

Broker

A property policy's limits of coverage are stated in what section? A. insuring agreement B. conditions C. declarations D. provisions

C

An ember pops out of a fireplace and burns a hole in the carpet. This is said to be what type of a fire? A. an out of bounds fire B. a covered fire C. a hostile fire D. a friendly fire

C

If two seperate causes result in a loss, and the policy excludes one of the causes but not the other, what provision in the policy describes how losses will be paid? A. concurrency B. nonconcurrency C. concurrent causation D. other insurance

C

Property policies only cover losses specifically listed in the policy are referred to as A. stated peril policies B. open peril policies C. named peril policies D. fixed peril policies

C

The Declarations includes all of the following information, except: A. The named insured B. The deductible C. duties after a loss D. The policy effective date

C

The McCoys own and insure a building for $300,000. The policy has an 80% coinsurance clause. A $10,000 fire loss occurs and the replacement value at the time of the loss is $500,000. How much will the policy pay for the loss? A. $12,000 B. $9,000 C. $7,500 D. $6,000

C

What section of a property insurance policy summarizes the insurer's promise to make payment? A. definitions B. conditions C. insuring agreement D. declarations

C

When a policy pays for the cost to repair or replace damaged property at its current value less depreciation, the loss settlement is on what basis? A. Stated Value B. Scheduled value C. Actual cash value D. Pro-rata

C

Which of the following causes of loss does an open perils policy include? A. ocean and see perils B. perils that would affect business C. perils that are not specifically excluded D. perils named in the policy

C

Which of the following defines "proximate cause?" A. an unexplainable event or circumstance that causes a loss B. a suspicious cause of a loss C. the primary cause of loss in an unbroken chain of events D. the negligent act that causes boldily injury or property damage

C

if a fire damages a building and causes a power outage that, in turn, causes contents of a freezer to spoil, the food spoilage is what type of loss? A. direct B. property C. indirect D. second

C

A property policy excludes which of the following perils, or causes of loss? A. wind B. aircraft C. hail D. war

D

The amount of a property policy's deductible is found in what section? A. insuring agreement B. conditions C. provisions D. declarations

D

Which components of an insurance policy indicate who and what are insured? A. conditions B. perils C. insuring agreement D. declarations

D

Which of the following conditions applies when the insured and the insurer cannot agree on the amount of a loss? A.abandonment B. loss payable C. Claim settlement D. Appraisal

D

Which of the following is an example of a hostile fire? A. A fire in a fireplace B. A burning cigarette C. A grass fire set intentionally by a rancher D. An ember from a fireplace jumps out and burns a hole in the carpet

D

the _____ clause of a property policy requires a certain percentage of property's replacement value to be insured. A. value B. Stated C. agreed D. coinsurance

D

The amount of the deductible is found in the ___ part or portion of a property policy.

Declarations

What part or portion of a property policy contains the effective and expiration dates of the policy?

Declarations

Which part or portion of a property insurance policy is it that specifies the causes of loss (perils) that are not covered?

Exclusions

Under a Commercial Lines property policy, who is responsible for making the premium payments in a timely manner and has the right to request changes to the policy?

First named insured

What method of loss valuation allows the replacement of damaged property with less costly property when replacement with identical property is impossible due to some technological change?

Functional Replacement cost

if a fire on the premises caused a power outage, which caused meat in the freexer to spoil, would the meat spoilage be considered a direct loss or an indirect loss?

Indirect

A condition or defect that exists within property itself that causes the property to spoil, break, become defective, or destroy itself, is known as ___ ____.

Inherent Vice

Would a stated amount method of valuation likely be used when insuring gold bullion? yes or no

No

If a property owner does not desire any deduction for depreciation following a covered loss, he/she should purchase a(n) ___ ___ policy.

Replacement cost

When there is a possibility of loss or gain, the risk is deemed a(n) ___ risk

Speculative

The name of the insured is found on the Declarations page of the policy. True or False

True

War is typically excluded in property policies. True or False

True

open peril policies include losses caused by theft. True or False

True

A breach of warranty under an insurance company may______ the contract.

Void

A fire is said to be a ____ of a potential loss.

cause

The provision contained in most policies insuring commercial property that is used to encourage the insured to purchase and maintain insurance to value is the ___ provision.

coinsurance

Something that increases the chance or likelihood of a loss is known as a(n) ________.

hazard

in the event of a loss under a Homeowner's policy, a proof of loss must be signed and sworn by the ___.

insured

When an insured suffers a loss, they are required to prepare an inventory of the damaged property at the ___ request.

insurer's

What part or portion of the policy is it that contain's the insurer's promise of protecton to the insured?

insuring agreement

The ____ clause allows insurers to automatically broaden coverage without endorsement on existing policies with no increase in premium.

liberalization

Indifference to loss is called a(n) ___ hazard.

morale

When rates cannot be used until they are approved by the Dept or Division of Insurance, they are called ___ ___ rates.

prior approval

When more than 1 property policy covers the same loss, each policy pays no more than its ___ share of the loss.

pro rata

The ____ ____ doctrine states that an insured is entitled to coverage that a reasonable and prudent buyer can expect.

reasonable expectation

A ______ contract is an arrangement where one insurer transfers or shares the risk with another insurer.

reinsurance