Insurance fundamentals module 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? -$6,400 -$120,000 -$80,000 -$24,000

$24,000

A document that temporarily obligates an insurance company to provide coverage while the issuance of a policy is pending is known as: -A binder. -An application. -An endorsement. -A rider.

A binder.

Which of the following is a "general summary" of a policy?

A certificate of insurance.

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: -An additional insured. -A first named insured. -A named insured. -An unnamed insured.

A named insured.

All of the following statements are TRUE regarding a proof of loss statement, EXCEPT: -The insurance company will provide the proof of loss forms to be completed by the insured. -The proof of loss will contain the amount of the loss being claimed by the insured. -A proof of loss is the formal statement of a claim completed by the insured. -A proof of loss is also known as a loss notice.

A proof of loss is also known as a loss notice.

Which of the following statements best describes "the law of agency"? -The activities of any party who receives a percentage of the profits from a business transaction. -A relationship in which someone is authorized by contract to represent another party. -The duties of a professional who is trained and licensed to prepare legal documents. -The activities of any licensed insurance professional.

A relationship in which someone is authorized by contract to represent another party.

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.

The nonrenewal of an insurance policy occurs:

At the end of the policy period.

Chris is insured through Binders Keepers Insurance Company and his policy period ends in 12 months. However, Chris has decided that he wants to cancel his policy in order to purchase another one from a company that advertises with cute commercials on television. Chris calls his agent to cancel the policy and is informed that the unearned premium (UEP) on the cancelled policy will be returned to him by mail in a couple of weeks. When Chris receives the check, he is surprised to find that it's made out for less than the amount of unearned premium he should have received. What is the most likely reason for this?

Chris' policy had a provision stating that UEP must be returned on a short-rate basis.

A written modification of an insurance policy is known as a(n):

Endorsement form.

Before an insured can bring a lawsuit against their insurer to provide coverage under their policy, the insured must: -Cancel the policy. -Have reason to believe the insurer is committing fraud. -File a complaint with the Department of Insurance. -Fulfill all of their required duties as outlined in the policy.

Fulfill all of their required duties as outlined in the policy.

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 time period after the policy inception and before the policy expiration is known as:

The policy period.