2 - F Common Policy Provisions

the Severability of Interest condition states that: A. Coverage applies to each insured separately, as if no other insured existed B. An insurer has the right to cancel an insurance policy at any time C. An insured has the right to cancel an insurance policy at any time D. When an insurer pays a total loss settlement, policy coverage may terminate and any unearned premiums will be refunded to the insured

A. Coverage applies to each insured separately, as if no other insured existed

Which of these is NOT typically excluded from coverage in a property insurance policy? A. Lightning B. Off-premises power failure C. Civil confiscation D. Nuclear events

A. Lightning

Dennis was injured when Ruby rear-ended his car while he was stopped at a red light. Which of the following would NOT be a duty that Ruby's liability insurer may require of Dennis? A. Promptly report the occurrence to his insurer B. Submit tp a physical examination C. Provide proof of the accident D. Authorize access to his medical records

A. Promptly report the occurrence to his insurer

The Cancellation / Non-renewal provision: A. Requires the insurer to provide notice before cancelling a policy B. States that policies may only be canceled within the first policy term - canceling a renewed policy is prohibited C. States that if the insured fails to cancel a policy at least 20 days prior to the renewal date, the policy will remain in effect for at least another policy term D. Limits the allowable reasons an insured may cancel a policy

A. Requires the insurer to provide notice before cancelling a policy

The Liberalization Cause in an insurance policy: A. States that any change to a policy form that broadens coverage without increasing the premium will automatically apply to existing policies B. States that, in the event of a loss, the insurer will only pay up to the insured value of the risk C. States that the insurer is obligated to pay for covered losses only up to the limit set by the policy D. Voids the policy if the insured deliberately conceals or mis-states pertinent info

A. States that any change to a policy form that broadens coverage without increasing the premium will automatically apply to existing policies

Ted gets into an argument with his neighbor over parking arrangements. In a fit of anger, Ted goes over to his neighbor's home and scratches up her car with a key, causing $2,000 in damages. The next day, Ted realizes his poor behavior and files a claim with his insurer for his liability in the damages to his neighbor's car. Why might Ted's insurer deny his claim? A. Ted's vandalism was intentional, and therefore excluded under his policy B. Ted's neighbor will have to file a claim with her own insurer C. Insurance policies do not cover vandalism D. Ted's neighbor was partially responsible for the damage, and thus will pay a pro rata portion of the loss

A. Ted's vandalism was intentional, and therefore excluded under his policy

In insurance terms, which of the following statements about salvage is FALSE? A. The insured may compel the insurer to take the damaged property to keep the salvage value from being deducted from the claim settlement B. The insurer may choose how to handle salvage, depending on the policy C. The insure may take ownership of damaged property after paying the claimant for a total loss D. The insurer may deduct the salvage from the amount paid to the claimant for the loss

A. The insured may compel the insurer to take the damaged property to keep the salvage value from being deducted from the claim settlement

Define: Recoverable depreciation

Amount an insured can be paid after making repairs to damaged property

A lightning strike causes one of the storage building on John's farm to burn to the ground, aided by the fuel tanks he kept in the building. John knows he wasn't supposed to store any fuel in the building, so he keeps that piece of information to himself when he files a claim. John's insurer may deny has claim based on his: A. Arson B. Concealment C. Liberalization D. Hard fraud

B. Concealment

An insurer can rescind a policy if the policyholder does nay of the following, EXCEPT: A. Lies or conceals information in the application B. Fails to pay the premium C. Makes a mistake in the application that significantly affects the insurer D. Makes a fraudulent claim to get benefits

B. Fails to pay the premium

Which of the following is NOT one of the typical duties of the insured after a loss? A. Sign a sworn proof of loss B. Provide a loss estimate from an appraiser C. Cooperate with the adjuster's investigation D. Protect the property from further losses

B. Provide a loss estimate from an appraiser

In an insurance policy, the abandonment clause: A. States that if the property is abandoned, it becomes uninsurable B. States that the insured is prohibited from forcing the insurer to take possession of damaged property C. States that the insured may abandon the policy at any time D. Ensures that the insurer has the right to take possession of any abandoned property

B. States that the insured is prohibited from forcing the insurer to take possession of damaged property

According to the inspection and surveys provision: A. The insured must respond to insurer surveys, which are used to gather information about the insured's payroll or annual sales B. The insured must allow the insurer to inspect the insured premises at any time C. The insurer will conduct a survey at the end of each policy period to determine its actual exposure over the course of the past policy period D. The insured must submit regular self-inspection reports to the insurer, which are used to determine insurability and premiums

B. The insured must allow the insurer to inspect the insured premises at any time

An insured's _____ does not relieve the insurer from its obligation to pay covered claims

Bankruptcy

Frank purchased a $150,000 insurance policy for his home, which is valued at $125,000, with the hopes of making a $25,000 profit in the event his home is destroyed. After Frank burns his house down, he files a claim against his homeowners policy. Assuming that Frank's policy includes an over-insurance provision, how much will his insurer indemnify Frank for his loss? A. $125,000 B. $25,000 C. $0 D. $150,000

C. $0

Melanie's $300,000 home suffers $90,000 in damage from a fire. The adjuster finds the home's value since 2008 has depreciated 25%, making the ACV loss $67,500. Although Melanie's policy covers repairs at their replacement cost, she receives $67,500 at the time of loss. Repairs to her home end up totaling $79,500. How much, if any, further indemnification may Melanie receive from the loss? A. $10,500 B. $0 C. $12,000 D. $22,500

C. $12,000

Jerry owns a hardware store and employs Bill. One day, while Bill is driving a forklift, he gets careless and crashes into a fully stocked shelf, damaging thousands of dollars worth of merchandise and other store property in the process. What policy condition allows Jerry to collect for the loss on his insurance contract? A. Legal action against an insurer B. Subrogation C. Control of property D. Separation of interests

C. Control of property

Define: Concealment, misrepresentation, and fraud policy provisions

Can invalidate coverage and lead to policy rescission

Bob has been in the construction business a long time and is ready to retire. He sells the company to his friend Scott and then lets the insurer know that any claims against his policy should be paid to Scott from now on. The insurer informs Bob that they cannot do this due to which condition? A. Premium audit B. Control of property C. Liberalization D. Assignment

D. Assignment

Which of the following is TRUE of the vacancy condition in a typical insurance policy? A. It states that the insurance policy will terminate if the insured building is vacated B. It states that a dwelling vacant for more than 15 days is not insurable C. In commercial policies, it states that a building is vacant if more than 31% of the building is unoccupied D. It establishes the parameters for considering a building vacant for the purpose of coverage

D. It establishes the parameters for considering a building vacant for the purpose of coverage

Which of the following is NOT true of the Company's Options provision in the standard fire policy? A. It mandates that the insurer notify the claimant of its choices within 30 days of receiving required proof of loss B. It allows the insurer the choice of whether to repair, rebuild, or replace damaged property C. It states that the insurer may choose whether to take all, or part, of the damaged property at the agreed or appraised value D. It requires the insurer to settle the claim, in whichever manner it chooses, within 30 days of receiving notice of the claim

D. It requires the insurer to settle the claim, in whichever manner it chooses, within 30 days of receiving notice of the claim

Nina is deep in debt and files bankruptcy after crashing her car into Ben's luxury sedan and can't afford to pay the portion of the damage that exceeds her policy limit. Which of the following statements is true? A. The apportionment clause allows Nina's insurer to share the loss with Ben's insurer, splitting it equally between the two policies B. Nina's insurer is relieved of its duty to pay the claim because she filed for bankruptcy and can write off all of her debts C. The assignment clause allows Nina's insurer to assign the claim to Ben's insurer because of Nina's bankruptcy D. Nina's insurer will still pay the claim, up to the limit of her liability coverage

D. Nina's insurer will still pay the claim, up to the limit of her liability coverage

Tina has two policies (Policy X and Policy Y) that cover the same risk on a pro rata basis. Policy X has a limit of $100,000 and Policy Y has a limit of $25,000. When Tina suffers a loss totaling $75,000, how will the two policies respond? A. Policy X will pay $50,000 and Policy Y will pay $25,000 B. Policy X will pay $37,500 and Policy Y will pay $25,000 C. Policy X will pay $75,000 and Policy Y will pay nothing D. Policy X will pay $60,000 and Policy Y will pay $15,000

D. Policy X will pay $60,000 and Policy Y will pay $15,000

Define: Restoration of limits policy provision

Defines how limits are affected after a loss

Define: Apportionment policy provision

Defines how policy will respond when more than one policy covers the same risk

Intentional acts, wear and tear, war, and nuclear events are common _____.

Exclusions

Define: Severability of insurance policy provision

If more than one person is insured under the same policy, each is covered separately

An _____ must also cooperate with the insurer's investigation (not just the policyholder)

Injured third party

Define: Cancellation and non-renewal policy provisions

Insured may cancel at any time, but insurer is much more restricted

_____ must fulfill several duties after a loss.

Insureds

Define: Liberalization policy provision

Insureds benefits automatically, at no extra cost, when an insurer expands coverage

Define: Assignment policy provison

Insureds cannot transfer policy coverage to someone else without insurer's approval

These two clauses protect lender's interest:

Loss Payee Mortgagee

Insureds are prohibited from abandoning _____ to the insurer.

Property

Define: Control of property policy provision

Protects insured's property from negligent actions committed by other people

Who has the right to inspect a company's insured premises, as well as company books and records?

The insurer

Define: Salvage

Value remaining after a loss