Unit 4 (Basics of Property)

Which of the following terms describes a single limit of insurance that applies to all items of that property type?

Blanket

Which of the following terms specifies the rights and duties of the mortgagee under the policy?

The standard mortgage clause

Which of the following terms describes a building in which no one is present but to which the occupants intend to return?

Unoccupied

Which term is used to describe an empty building that is not being used?

Vacant

A financial loss resulting directly from a loss to property, such as a house fire or a diamond ring being stolen, is called

a direct loss

a policy under which the insured and insurer agree on the property value and list the value in the policy is known as

an agreed value policy

A business loses money because it was forced to close after a fire on the premises. This loss is described as

an indirect loss

An all risk or open perils policy protects against

any peril except those that are specifically excluded

An insured owns 4 stores. As inventory is sold, the insured transfers new inventory from the other locations to the store making the sales. Which type of policy would best fit this insureds needs?

blanket policy

Actual Cash Value is the replacement cost of the property minus ____

depreciation

Most losses are reimbursed on an actual cash value (ACV) basis. This is calculated by figuring the items replacement value cost and subtracting the _______

depreciation

All of the following are insured in the broad perils coverage form EXCEPT -burglar damage -weight of ice and now -freezing of plumbing -flooding from river or lake

flooding from river or lake

Which of the following amounts is the maximum that an insurer will pay in case of a loss?

limit of liability

The policy limit is known as all of the following terms EXCEPT -limit of coverage -limit of liability -limit of insurance -limit of responsibility

limit of responsibility

Which peril policy insures a property against all perils specifically listed in the policy?

named peril policy

A property that is vacant is described as having an absence of

people and property

A persons property can be divided into two classes: real property (buildings) and

personal property

Appliances, clothing, tools, furniture, and electronics are examples of

personal property

Which of the following is an example of property that might be insured on a valued basis? -coin collection -golf equipment -rare painting -jewlery

rare painting

The standard coinsurance clause provides that property must be insured for a specific percentage - usually 80% of its _____

replacement cost

A bailee is

someone who has taken temporary custody of another person's property for a special purpose.

A parking valet at a hotel uses a guests car to do a personal errand and damages the car in a collision. The guest has a personal auto policy (PAP). The insurance company will pay the claim and

subrogate against the parking valet

Which condition is used to resolve other areas of disagreement besides value of loss between the insured and insurance company and is typically used before an insured seeks legal advice?

the arbitration condition

As it relates to property insurance, the person or business that has temporary possession of someone else property is known as

the bailee

All of the following statements regarding appraisal are true EXCEPT -either party may demand an appraisal of a loss -the claimant selects the umpire -the appraisers select the umpire -each party pays its own appraiser and splits the cost of the umpire

the claimant selects the umpire

This statement is NOT correct following loss valuation

the deductible increases any amount after the loss has been valued

An insured fails to pay their homeowners insurance premium. The mortgagee becomes aware of this fact and remits the premium to the insurance company. Shortly thereafter the insured sets fire to their home in an attempt to receive payment for the loss. Any loss payment settlement would be made to the____.

the mortgagee

Which of the following statements about the standard mortgage clause is CORRECT? -the mortgagee is the only party that can submit claims under the policy -the mortgagee may have to pay the premium if the insured fails to do so -the mortgagee has no right under the policy -the mortgagee can only collect from the policy with the prior consent of the policyowner

the mortgagee may have to pay the premium if the insured fails to do so

There are 6 classes of construction that are recognized by underwriters. The class of the building is determined by the types of materials used in the building and

the roof of the insured structure

Mr. and Mrs. Kim own a home in Chicago and a lake home in Wisconsin. Every year, they travel to their lake home for Memorial Day Weekend. While the Kim's are at the Lake house, their home in Chicago is considered to be

unoccupied

The term that describes the absences of both people and property from the premises is

vacant

Which of the following is NOT automatically covered under the basic form? -water -fire -lightning -internal explosion

water

Which of the following is NOT on the basic cause of loss form? -internal explosion -fire -lightning -weight of ice snow sleet

weight of ice snow sleet

Which of the following perils is extended coverage insured by basic? -wind -falling objects -freezing of plumbing -weight of ice snow sleet

wind

An insured owns a $200,000 home and insures it for $100,000. If the insured's home was completely destroyed by a fire, how much money would the insurance company pay if the insured has a policy that requires a minimum of 80% coverage?

$100,000 (do not use coinsurance formula in this situation since it is a total loss it is paid in full)

An insured owns an office building valued at $200,000. He carries a deductible of $1,000. The building sustains a loss of $40,000. If the insurance policy carries an 80% coinsurance clause, how much coverage must the insured carry to ensure that the loss is paid in full?

$160,000

When a small business is damaged by a tornado, the owners are forced to close for 1 month while the property is repaired. The building suffers damages of $20,000. The owners estimate they will lose $50,000 in business receipts. To keep their staff, the owners must continue to pay salaries totaling $5,000, Ignoring any deductible how much of the direct loss will the business owners policy (BOP) pay?

$20,000

The insured had a covered loss in which the replacement cost of the item is $5,000; current market value is $4,500; depreciation is $2,000; and the repair cost is $3,500. How much will be paid on this claim if it is settled on an actual cash value (ACV) basis?

$3,000 (5k-2k)

The insured has a building with a replacement cost of $200,000 but has insured it for only $100,000. An 80% coinsurance provision is present in the policy. When an $80,000 loss occurs, the policy will pay

$50,000 (coinsurance formula 100k/160k x 80k)

The furniture Harold purchased 10 years ago was destroyed in a fire. The furniture cost $9,000 when new and has depreciated by $5,000. It would cost $12,000 to replace this furniture today. What is the actual cash value of Harold's destroyed furniture?

$7,000 (ACV = 12,000 - 5,000 = 7K)

The insured has a named peril policy that covers hail, fire, wind and lightning. Which one of the following events would be covered?

A roof that is damaged in an electrical storm

When the insurer and the insured cannot agree on the value of a loss, the matter is submitted to disinterested parties for resolution. Under a standard appraisal clause, how many parties are involved in determining the value of the loss?

3 (2 appraisers and 1 umpire)

In a broad peril policy, burglary and accidental discharge of water are not covered if the building has been vacant for more than

60 days

Adam has a blanket policy on his house. Which of the following best describes the items that are covered under this policy?

All of the contents in his house are covered

Which policy insures against all risks of direct physical loss except those specifically excluded in the policy

An open peril policy

The amount of payment that comes into play when an insured fails to carry the sufficient amount of insurance is sometimes referred to as the

Coinsurance penalty

Which one of the following coverages insures against all risks of direct physical loss that are not specifically excluded in the policy?

Special Perils

Timothy has an antique boat, and it was recently damaged while on a fishing trip. The insurance company agreed to repair the boat with less expensive, working materials. This is an example of which type of claim settlement?

Functional replacement cost

Which of the following phrases best describes actual cash value? -original cost minus depreciation -original cost minus appreciation -replacement cost plus appreciation -replacement cost plus depreciation

Replacement cost minus depreciation

What would not be covered by a broad peril coverage? -Tim's roof collapsed from weight of snow after blizzard -Amy home was robbed and burglars caused damage to doors and windows -Rhonda ceiling damage after faucet had been leaking for months -David had damage to his roof after a tree fell on his home

Rhonda had ceiling damage in her basement after her upstairs faucet had been leaking for over 2 months

Renee has a policy that covers all risks of direct physical loss except for flooding because it is specifically excluded. Which coverage does Renee most likely have?

Special (open) Peril coverage

An insured may be reimbursed on a damaged items repair cost when the repair cost is less than

The actual cash value

Bernie and his insurer came up with a price value of his grandfathers baseball card collection that he now owns. If a loss occurs to this collection, what will be the amount that the insurer will pay?

The agreed value

When a semi truck hit Greg's house, he and his family had to stay in a nearby hotel for two weeks while repairs were being made. The hotel bill came to $1,000 and the cost of food came to $415. What was the indirect loss?

The hotel bill and cost of food