Chapter 1 Quiz

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 a. 30,000 b. 60,000 c. 20,000 d. 40,000

a. 30,000

Which part of an insurance policy covers claims-related expenses, reasonable expenses incurred by an insured to protect damaged property from further loss, or defense expenses a. additional coverage b. declarations c. insuring agreement d. exclusions

a. additional coverage

For the reported losses of an insured group to become more likely to equal the statistical probability of loss for that particular class, the insured group must become a. larger b. more active c. older d. smaller

a. larger

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 a. stated amount b. specific insurance c. actual cash value d. replacement cost.

a. stated amount

the policy provision found in property insurance policies that prevents the insured from collecting twice for the same loss is a. subrogation b. right of salvage c. appraisal d. consent to settle loss

a. subrogation

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

b. blanket

which of the following is a mandatory part of an insurance policy that varies with each individual policy? a. conditions b. declarations c. exclusions d. insuring agreement

b. declarations

A beauty parlor burns down. What type of loss is this to the owner a. consecutive b. direct c. specific d. consequential

b. direct

what do individuals use to transfer their risk of loss to a larger group? a. insurable interest b. insurance c. exposure d. indemnity

b. insurance

for a contract to be enforceable by law, the purpose of the contract must be a. for the benefit of the general public b. legal and not against public policy c. of pure intent d. for financial gain

b. legal and not against public policy

which of the following best expresses the purpose of a stated value contract? a. to provide maximum limit for which the insurance company may become liable in casualty losses b. to pre-establish the amount of coverage available for property items that are difficult to value c. to establish the value of property subject to loss by theft or robbery d. to ensure that the principle of indemnification applies

b. to pre-establish the amount of coverage available for property items that are difficult to value

an insured's building has an actual cash value of $200,000 and he has insured the property for $120,000 with an 80% coinsurance clause. A $40,000 loss occurs. How much will the policy pay a. 0 b. 40,000 c. 30,000 d. 32,000

c. 30,000

the pro rata liability clause is designed to protect the principle of a. waiver and estoppel b. subrogation c. indemnity d. insurable interest

c. indemnity

Duties of the insurer found in property policy conditions include all of the following except a. pay covered losses b. return any premiums to the insured c. notify the insured in the event of financial difficulty d. provide advance notice of cancellation

c. notify the insured in the event of financial difficulty

the gramm-leach-bliley act was passed to a. allow insurance companies access to medical information for underwriting purposes b. define insurance as interstate commerce c. protect private customer information filed with a financial institution d. allow consumers access to credit and private consumer reports

c. protect private customer information filed with a financial institution

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. condemned b. closed c. vacant d. unoccupied

c. vacant

what type of liability would a person who owns wild animals have a. vicarious b. direct c. implied d. absolute

d. absolute

a situation in which a person can only lose or have no change represents a. speculative risk b. hazard c. adverse selection d. pure risk

d. pure risk

Which method of loss is contrary to the basic concept of indemnity a. agreed value b. market value c. functional replacement cost d. replacement cost

d. replacement cost

the legal process that gives the insurer, after payment of a loss, the right to seek recovery from a third party that was responsible for the loss is known as a. principle of indemnity b. adverse selection c. right of rescission d. subrogation

d. subrogation