Insurance

While making a right-hand turn from the right lane, Ben is sideswiped by Roxanne, totaling the car he bought new 12 years ago for $15,000. Roxanne is judged to be at fault. She has an auto policy with limits of 50/100/25 and a $500 deductible on her collision coverage. Assuming Ben's car depreciates at a rate of $1,100 a year, how much will Roxanne have to pay out of pocket when Ben files a claim against her insurer for the damages?

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?

12,000

Stan built a porch for his home three years ago at a cost of $10,000. The value of the porch has depreciated by $6,000, and it would cost $12,000 to replace it today. After Stan's porch burnt down during a BBQ today, how much would a Standard Fire Policy indemnify Stan for his porch?

6,000 The Standard Fire Policy pays on an ACV basis. Recall from earlier in the course, that the formula for calculating ACV is Replacement Cost minus Depreciation. So, in this case: $12,000 - $6,000 = $6,000.

Which of the following statements is NOT true of endorsements? A. An endorsed policy will always provide more coverage than an unendorsed policy. B. An endorsed policy has been changed from the original version. C. Endorsements may be added to a policy at the time of purchase and at renewal. D. Endorsements may be added to a policy at any time during the policy period.

A

On January 27, 2008, Ryan was using an exercise bike purchased from NusquamCycle when the chain broke, causing him to fall and severely bruise his knee. It seemed to heal just fine, but three years later, on January 25, 2011, Ryan's knee gave out while jogging. His doctor told him that he'll need surgery and that this deterioration most likely resulted from the earlier accident with the exercise bike. Which of the following CGL policies would cover Ryan's claim filed January 25, 2011?

A claims-made policy from Jan 31 2010 -Jan 31 2011 with a retroactive date of Jan 1 2008

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?

Assignment

Which of the following would be covered under the peril of "theft" in an homeowners policy?

Attempted theft

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 requires the insurer to settle the claim, in whichever manner it chooses, within 30 days of receiving notice of the claim. 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 allows the insurer the choice of whether to repair, rebuild, or replace damaged property.

B

Which of the following losses may qualify for coverage under Coverage F - Medical Payments? A. Mike breaks his ankle when he trips and falls down the stairs heading to the basement apartment that he rents from Wilma. B. Kevin accidentally shoots himself in the foot with a nail gun while he is helping Joe build a deck in Joe's backyard. C. Stacy gets a full set of veneers after she chips her tooth on a softball while playing catch over at Kathy's house. D. Wilma breaks her ankle when she trips and falls down her basement stairs.

B

Joan files a lawsuit against Andy because his dog escaped and caused her to fall on an icy sidewalk. Which of the following statements is FALSE? A. Andy must submit an answer to avoid a default judgment. B. Andy's insurer is obliged to defend him in court until it proves that there is no coverage under the policy in question, or until the suit is settled. C. Andy's insurer will send Joan a reservation of rights. D. Andy must notify his insurer that he is being taken to court.

C

Which of the following best defines the principle of indemnity? A. In exchange for a premium, the insurer grants peace of mind by reducing the insured's insecurity about the future. B. In order to be legally binding, a contract must have agreement, consideration, competent parties, and legal purpose. C. After a loss, the insured should be restored to his approximate financial condition before the loss. D. Both parties to an insurance contract must contribute something of value.

C

In which section of a Standard Fire Policy would you find information on rules of conduct and obligations the policyholder must follow in order for insurance coverage to apply?

Conditions

Which of the following is NOT a purpose of insurance regulation? A. To promote reasonable insurance rates B. To promote insurance availability C. To prohibit price-fixing D. To prohibit insurance-rating

D

DEC Construction was hired to completely renovate Randall's department store. DEC Construction is in charge of the project, but hires Mac Electric (an independent contractor) to complete the electrical portion of the job and requires Mac to buy Owners & Contractors Protective Liability coverage as a condition of the contract. Who would be listed as the named insured(s) for this coverage?

DEC construction

DEC Construction was hired to completely renovate Randall's department store. DEC Construction is in charge of the project, but hires Mac Electric (an independent contractor) to complete the electrical portion, and requires Mac to have Owners & Contractors Protective Liability coverage for the job. Who is responsible for paying the premiums for this policy?

Mac Electric

Mark is driving along and looking for an address on the East side of Walker Street. As he squints to see the numbers posted on the buildings, he plows into the back of a car waiting at a stoplight. Both the driver and the passenger of the struck car are injured. The driver suffers $60,000 in bodily injury, the passenger suffers $55,000 in bodily injury, and the vehicle Mark hit sustains $30,000 in damage. Mark has liability coverage with split limits of 50/100/25. How much will Mark be responsible for out-of-pocket after this accident?

Mark's liability limits are $50,000 for each injured person, $100,000 for all injuries put together, and $25,000 for property damage. The policy will pay $50,000 for the driver's injuries, so Mark is responsible for the remaining $10,000. The passenger's injuries are also covered up to $50,000, leaving $5,000 for Mark to pay. The property damage is covered up to $25,000, leaving Mark responsible for $5,000. $10,000 + $5,000 + $5,000 = $20,000.

Sally throws a cigarette butt into Neal's dumpster, starting a fire on Neal's property that costs him $10,000. Neal files a claim with his insurer. The insurer pays Neal and then demands $10,000 from Sally to pay for the loss she caused. What gives the insurer the right to collect payment from Sally?

Subrogation

Sherrie's roof and fence are damaged in a violent windstorm. Sherrie has a typical HO-3 policy with a $150,000 limit for Coverage A - Dwelling. Assuming she has no endorsements, how much coverage does she have available for the damage to her fence?

The fence would be covered under Coverage B - Other Structures, which typically has a limit equal to 10% of Coverage A. ($150,000 x 10% = $15,000)

Marlene has been living in her $120,000 home for 31 years. Because she has paid off the mortgage, she decides to save some money on her monthly insurance premiums by reducing her homeowners coverage to $40,000. After a severe hailstorm totals her roof, her adjuster estimates the damage at $12,000. Assuming the insurer imposes the standard coinsurance penalty, and ignoring the deductible, how much will Marlene receive in the settlement?

The standard coinsurance requirement threshold is 80% of the property's value. In this case, Marlene should have had $96,000 in coverage (120,000 x 80%). So, to find the coinsurance penalty, divide how much coverage she had by how much she should have had ($40,000 / $96,000 = 41.67%) and then apply that penalty to the amount of the loss to find the indemnity ($12,000 x 41.67% = $5,000).

Which of the following lines of coverage could be found in a Commercial Package Policy?

business auto insurance

Honey's Bakery is a local coffee shop run by two sisters. In a rush to leave one afternoon, their new employee forgets to turn off the gas stove. The leaking gas causes an explosion, destroying the kitchen. Which condition in their commercial property policy could help the sisters cover the cost of the damage?

control of property

The Severability of Interests condition states that:

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

Due to decreased demand, the market price of beets dropped dramatically during the recent growing season. Consequently, Michelle's crop of beets did not make as much money as she was expecting this year, based on her production history and the harvest-time futures price. However, Michelle is insured for this type of situation. What kind of insurance does she have?

crop-revenue

A large corporation owns a small hunting cabin in the woods, that it uses for occasional weekend getaways. The corporation can insure the cabin against property damage with a:

dwelling policy

Ricky was watching a baseball game at XYZ Stadium, when the railing on which he was leaning gave way and he fell two stories. As a result of his fall, Ricky broke his back and is now paralyzed from the waist down. Ricky sued the owners of XYZ Stadium and was awarded $150,000 to cover his medical bills and $2.5 million in __________ because of the permanent nature of his injury.

general damages

Joe (the principal) is handling the disbursement of a deceased executive's estate, and he is required to carry a bond guaranteeing such work. The surety company requires one of its accountants to be a second signer on the disbursement checks that Joe writes. In this case, the surety has established:

joint control

Phil runs a locomotive repair business, which is insured under a commercial property policy. One night, some blasting powder is accidentally ignited and blows a crowbar through one of the engines. No one is hurt, but the locomotive is severely damaged. Which coverage option may help cover the cost of repairing the engine from this unfortunate event?

legal liability coverage

The factual statements of the insured upon which an insurance policy is based are called:

representations

Which of the following would NOT be covered under Valuable Papers Business Insurance?

stock certificates

The insuring agreement for Part A-Liability in a personal auto policy states that:

the insurer has the right to settle liability cases out of court.