Chapter 1 Quiz - Insurance Terms and Related Concepts

A policy that insures all property at multiple locations for a single amount is referred to as a) blanket b) reporting c) special d) specific

a) blanket

Which insurance principle states that if a policy allows for greater compensation than the financial loss incurred, the insured may only receive benefits for the amount lost? a) indemnity b) stop-loss c) consideration d) reasonable expectations

a) indemnity

All of the following are factors in the determination of actual cash value EXCEPT a) insurance premium paid b) type and quality of property c) age of the property d) replacement cost

a) insurance premium paid

Losses caused by continuous or repeated exposure to conditions resulting in injury persons or damage to property that is neither intended nor expected is the definition of which of the following terms? a) occurrence b) peril c) hazard d) accident

a) occurrence

All of the following statements describe the concept of strict liability EXCEPT a) it is applied in product liability cases. b) it is imposed on defendants engaged in hazardous activities. b) claimants may need to provide proof that a product defect caused an injury. d) it is imposed regardless of fault.

b) it is imposed on defendants engaged in hazardous activities.

An additional loss that results from a direct loss of property is called a/an a) liability loss b) punitive loss c) indirect loss d) proximate loss

c) indirect loss

A property insurance policy that is not subject to any coinsurance requirements but has a set amount of insurance scheduled for the property would use what loss valuation method? a) replacement cost b) reproduction cost c) stated amount d) actual cash value

c) stated amount

What is the purpose of the coinsurance clause found in property insurance policies? a) encourage higher standards of care by requiring the insured to pay a portion of every loss b) ensure that insureds do not overinsure their property c) prevent insureds from profiting from a loss d) encourage the insured to insure the property closer to its full value

d) encourage the insured to insure the property closer to its full value

In case of a loss, the indemnity provision in insurance policies a) allows the insured to collect 20% more than the actual loss b) pays the insured a percentage of the loss above and beyond the loss c) pays the insured as much as 95% of the loss d) restores an insured person to the same financial state as before the loss

d) restores an insured person to the same financial state as before the loss

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? a) general b) special c) tort d) normal

b) special

When a direct chain of events resulting from a negligent act causes injury or damage, that act is considered to be a) an intervening cause b) the proximate cause c) the direct cause d) strict liability

b) the proximate cause

What type of insurance policy insures against all risks of loss that are not specifically excluded by the policy? a) specified peril policy b) binder policy c) named-peril policy d) open peril policy

d) open peril policy

Negligence is defined as a) an unbroken chain of events that results in bodily injury or property damage to another person b) conduct that is so hazardous that the individual engaging in it will be held fully responsible for any resulting injury or damage c) an intentional act that results in bodily injury or property damage to another person d) the failure to do what a responsible prudent person would do under given circumstances

d) the failure to do what a responsible prudent person would do under given circumstances

A building is insured, but no one has lived or worked in it for 10 years. The building is completely empty of any furniture or personal belongings. From an insurance standpoint, the building is considered a) unoccupied b) condemned c) closed d) vacant

d) vacant

An insured's 9-year-old son threw a ball, accidentally breaking a neighbor's plate glass window. The insured was found legally liable for the cost of replacing the window. This is an example of a) intervening cause b) juvenile delinquency c) absolute liability d) vicarious liability

d) vicarious liability

Peril is most easily defined as a) the cause of loss insured against b) an unhealthy attitude about safety c) the chance of a loss occurring d) something that increases the chance of loss

a) the cause of loss insured against