Insurance Fundamentals - C

Leland has two insurance policies covering his home. Indemnify Insurance carries a $120,000 limit of liability on the home, while Binders Keepers, Inc. carries a limit of $80,000. A fire breaks out in Leland's kitchen and causes $40,000 in damage. Remember, when there are two or more policies covering the same risk, the "other insurance clause", determines the method used to calculate each company's share of the claim. Leland's policy states that the pro-rata share method will be used. Which of the following is the correct amount that will be paid by Indemnify Insurance?

$24,000

Margaret is a co-owner of a business. She purchases an insurance policy to cover the property of the business and lists Charlie, the other co-owner, on the policy. There are others covered by the policy that are referred to as employees. For the purposes of this policy, Charlie is considered to be

A named insured

All of the following are part of the "entire contract", EXCEPT

An agreement made between the insured and the agent stated verbally, that the agent will personally service the insured's policy, and it will not be delegated to a staff member is part of the entire contract

The provision in an insurance contract that outlines the process of bringing a contract dispute before an objective third party for resolution is known as

Arbitration

If the "other insurance" clause in a policy specifies that more than one policy will share equally in the loss until the lowest policy limit is exhausted and continue in that fashion until all policy limits are exhausted. This is known as

Contribution by equal shares

Before an insured can bring a lawsuit against their insurer to provide coverage under their policy, the insured must

Fulfill all of their required duties as outlined in the policy

Rick has three insurance policies covering his small commercial building for $700,000. Insurer 1: Carries $400,000 of the coverage. Insurer 2: Carries $200,000 of the coverage. Insurer 3: Carries $100,000 of the coverage. According to the provisions of the policies, the loss will be settled using the contribution by equal shares method. When Rick's building suffers a $500,000 covered loss, which of the following statements is correct on the amount each insurer will pay?

Insurers 1 and 2 will each pay $200,000 and Insurer 3 will pay $100,000.

When the insurer pays the proportion that its policy limit bears to the limits of all policies, this is known as

Pro-rata share

The "liberalization clause" of an insurance policy

States that if an insurer decides to broaden its standard policy coverages, then all outstanding policies issued prior to that decision will automatically receive those new coverages at no additional premium.

The predetermined amount of an insurance claim that is paid by the policyholder is known as

The deductible

Libby completed an application for a new residential policy to cover her home, stating that she does not use the dwelling for business purposes. However, Libby has been conducting business operations from the home and has hired several employees who work out of the home. She also has several clients per day coming to the home for business purposes. When Libby's insurer finds out about the additional business exposures, they decide to take action. Which of the following actions is Libby's insurer most likely going to take

Void her policy to inception