Chapter 2: Property and Casualty Insurance Basics Quiz

Any clause, condition or provision contained in a fire policy contrary to the valued policy law will

Be considered to be null and void

Should 2 or more insurers issue a combined Standard Fire Policy insuring a single risk, in the event of a loss, the insured must notify A) all insurers providing coverage B) the insurer providing the larger amount of coverage C) any of the insurers providing coverage D) none of the above

C) any of the insurers providing coverage

An insured is driving her car through a residential area when she loses control and crashes into a neighbor's front porch. The neighbor who was sitting on the porch, is injuried. The insured's liability policy has a limit of $500,000. This amount applies to the total of damages for any bodily injury and property damage resulting from one accidet. Which type of limit of liability does the insured have?

Combined singles

In the event that an insurance company is going to cancel an insurance policy, which of the following must receive written notice of their intent to cancel? A) the named insured B) a mortgagee, if any C) any person shown on the policy as having a financial interest in any loss insured against D) all of the above

D) all of the above

Which of the following reasons for nonrenewing an insurance policy allows the insurer to nonrenew with giving notice of their intentions less than 30 days before the expiration date of the policy? A) in the case of nonpayment of premium B) if it is a commercial property policy C) in cases of fraud by the insured D) any of the above

D) any of the above

The part of a property policy that shows the amount of insurance, premium and policy term is the

Declarations

Which of the following is a mandatory part of an insurance policy that varies with each individual policy?

Declarations

The part of a policy that clarifies terms in the policy is the

Definitions

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?

$30,000

In the event of a member insurer's insolvency, the Association's obligation to pay a covered claim is the lesser of the amount of the loss, the limits of the insurance coverage or

$300,000

An insured's roof cost $4,000 when installed 5 years ago. It has been damaged by hail and must be replaced. The new roof will cost $6,000 at today's prices. If the roof has been depreciating at $200 per year and the insured's policy is written on the actual cash value, ACV, how much will the policy pay toward the insured's new roof?

$5,000

If a commercial policy, in effect for less than 60 days, is to be canceled for nonpayment of premium, how much prior notice must the insurer give to the first named insured?

10 days

If an insurer intends to nonrenew a property or a casualty insurance policy, how much notice prior to the expiration of the policy must be given to the insured of this intention?

30 days

An insurer has just cancelled an insured's policy. How long does the insurer have to explain this cancellation?

6 months

A commercial policy has been in effect for less than 60 days and is not a renewal policy. If the insurer decides to cancel the policy for any reason other than nonpayment of premium, how much notice must it give the first named insured?

60 days

If an insurer decides to nonrenew a commercial policy, how much prior notice must be given to the first named insured?

60 days

Which of the following would NOT be classified as personal property for insurance purposes?

A house

In the event of a loss covered by the policy, if the insurer requests a signed sworn proof of loss, the named insured is required to submit it within

A specific time, usually 60 days but may vary

The declarations page of the homeowners policy provides all of the following information EXCEPT

A statement that earthquake damage is not covered

Which of the following definitions best defines the term "accident"?

A sudden, unplanned and unexpected event, not under the control of the insured, resulting in injury or damage neither expected nor intended

The property condition that precludes the insured from simply turning over damaged property to the insurer and claiming a total loss is called

Abandonment

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?

Additional coverage

Which of the following types of valuation works best for property whose value does not fluctuate much?

Agreed value

Funding for the operation and administration of the Louisiana Insurance Guaranty Association comes from

Annual assessments paid by member insurers

Which of the following is not included in a binder or temporary contract for a Standard Fire Policy?

Effective hours that coverage commences

The Louisiana Insurance Guaranty Association Board of Directors are placed in office by

Election and appointment

All of the following are found in the declarations section of a policy EXCEPT the

Exclusions

The section of an insurance policy that details what perils are not insured against and what persons are not insured is known as the

Exclusions

The policy conditions define

How parties to the contract must act following a loss

Which of the following is the correct formula for computing a loss ratio?

Incurred losses + loss adjusting expense / earned premium

All of the following are conditions commonly found in the insurance policy EXCEPT

Insuring agreement

Which of the following terms desribes the concept of disrupting the chain of events?

Intervening cause

Using an air-cooled engine, a proposed insured has developed a new, experimental aircraft. If the inventor applies for liability insurance, what rating type will the insurer most likely use?

Judgment

What provision in a property policy applies when the insurer broadens coverage but does not increase the premium?

Liberalization clause

Rates that are established based on the similarities of risk with other risks are known as

Manual rates

According to the standard mortgage clause, who has the right to bring a suit in their own name to recover damages, pay policy premiums and submit a proof of loss?

Mortgagee

An insured carries a property policy on her home in the amount of $250,000. A bank is shown as the mortgagor in the policy. Last month the insured made her final mortgage payment, but did not remove the bank from the policy. In the event of a covered loss to her home, how much will the bank receive?

Nothing

Where is the policy period stated?

On the declarations page of the policy

A deli owner has a businessowners liability policy. When a customer slipped and hurt herself at the deli, the liability policy paid for medical expenses. The customer, however, is now suing the business owner beccause she claims there was no caution sign warning her that the floor was wet. What is the insurer obligated to do?

Pay to defend the policyowner in the lawsuit because liability coverage contains a duty-to-defend provision

Which of the following is not required to be printed at the head of a Standard Fire Policy?

Policy exclusions

The value placed on property insured under a fire insurance policy is used to determine the policy's

Premium

A Standard Fire Policy may be written to cover all of the following EXCEPT

Reinsurance

Which method of loss valuation is contrary to the basic concept of indemnity?

Replacement cost

In property insurance, actual cash value is defined as which of the following?

Replacement cost at the time of the loss, less depreciation

A property insurance policy that is not subject to any coinsurance requirements but has a set amount of insurance scheduled for the property would use what loss valuation method?

Stated amount

The transfer of an insured's right to seek damages from a negligent party to the insurer is found in which of the followng clauses?

Subrogation

A mortgage company is named as a loss payee on the insured's homeowners policy, under the standard mortgage clause. If the insured suffers a loss due to a fire, which of the following is true?

The loss is payable to the insured and the mortgagee

An insured's 9-year-old son threw a ball, accidentally breaking a neighbor's plate glass window. The insured was found legally liable for the cost of replacing the window. This is an example of

Vicarious liability

The Associations obligation for the payments of claims is $300,000 per occurrence under all of the following policies, EXCEPT

Workers Compensation

According to the doctrine of contributory negligence, when an individual is found to have contributed to his or her own loss in any way, another party

may not be held liable