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An insured has a standard HO-4 policy with a $30,000 limit of coverage for personal property. While he was traveling, a fire in his hotel destroys clothes and luggage with a replacement value of $10,000, and jewelry with a replacement value of $10,000. Disregarding any deductible, and assuming a depreciation of 20% has occurred in both properties, what amount is the insurer obligated to pay?

$16,000 This loss would be settled on an ACV basis: $20,000 total for the loss, minus $4,000 for depreciation. Remember, the limitation on loss of jewelry applies to the peril of theft only.

Transportation expenses are usually covered under a personal auto policy for

$20 per day, for a maximum of $600. Other-than-collision coverage provides $20 a day for up to 30 days following the theft of the entire auto, providing the auto is not recovered within 48 hours.

The unique thing about a bailee form is that it covers

Customer's property whether or not the insured has been negligent.

insurance is the transfer of

Risk. Insurance is the transfer of financial responsibility associated with a potential of a loss (risk) to an insurance company.

Which of the following is most likely to occur if it is determined by the audit that the deposit premium was too high?

The insured will receive a return premium. If the audit shows that the initial (deposit) premium to the insured was too high (the exposures were over-estimated), the insured will receive a return premium.

What kind of liability would a person who owns a swimming pool have?

Absolute

The ABC Corporation has $100,000 of coverage on its building through insurance Company A, and $50,000 of identical coverage on the same building through insurance Company B. Assuming coinsurance is not an issue, when a $24,000 loss occurs, how much will each insurer pay?

Company A will pay $16,000; Company B will pay $8,000 Each policy pays its pro rata share of the loss based upon each policy's share of the total amount of coverage.

Events or conditions that increase the chances of an insured loss occurring are referred to as

Hazards are conditions or situations that increase the probability of an insured loss occurring.

If an insured desires protection on property other than money and securities inside the premises from losses caused by breaking and entering after business hours, which of the following Crime Coverage forms should be purchased?

Inside Premises.. -Robbery or Burglary of Other Property Covers taking of property, other than money or securities, when there is visible sign of forcible entry or exit from the premises.

Insurance is a contract by which one seeks to protect another from

Loss. Insurance will protect a person, business or entity from loss.

What type of insurance policy insures against all risks of loss that are not specifically excluded by the policy?

Open peril policy. Open peril (special) policies cover everything except what they say they don't. Named peril policies cover only perils named in them.

A situation in which a person can only lose or have no change represents

Pure risk. Pure risk refers to situations that can only result in a loss or no change. Pure risk is the only type insurance companies are willing to accept.

An insurance policy is a legal contract. Each of the following elements is necessary for formation of a valid contract EXCEPT

Signatures of each party The essential elements of all contracts are agreement, consideration, competent parties, and legality. Oral contracts are legally enforceable.

The Occurrence form trigger is based on which of the following?

The date when injury or damage occurs The "Occurrence" form trigger is based on the date when injury or damage occurs, and covers claims made at any time for injuries that occur during the policy period.

Negligence may be defined as

The failure to use reasonable and prudent care. Just because something bad happens does not mean there was negligence. Negligence is when the failure to use proper care results in injury or damage.

Anyone covered under an insurance policy, whether named or not, is known as the

Insureds. The insureds are anyone covered under a policy, whether named or not.

A professional who wants coverage for all liability exposures should purchase what form of liability insurance?

Commercial general and professional. Commercial general liability excludes professional liability, and professional liability does not cover premises liability.

Which of the following is covered under the Mail floater of a Commercial Inland Marine policy ONLY if is sent by registered mail?

Currency and unsold travelers checks Property covered only when sent by registered mail includes the following: bullion; platinum and other precious metals; currency and unsold travelers checks; or jewelry, watches, precious and semiprecious stones and similar property.

In insurance, anything that modifies the original contract, either adding or removing coverage, is done through a(n)

Endorsement. Endorsements change the policy's original terms, conditions, or coverages. Endorsements can add or delete coverage, or merely correct items such as the insured's name, address, etc.

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

Insuring agreement. The insuring agreement provides information on the policy's coverages. Conditions state the legal obligations and duties of the parties to the contract.

Which of the following covers a carrier for liability for loss to cargo while it is being transported in a truck?

Motor truck cargo policy - truckers form The motor trucker cargo truckers is liability insurance and the owners form is property coverage.

Which of the following is consideration on the part of an insured?

Submitting a Statement of Good Health and premium payment The binding force in any contract is called "consideration". Consideration on the part of the insured is the payment of premiums and the health representations made in the application. Consideration on the part of the insurer is the promise to pay in the event of loss.

Who is covered by an HO-4 policy?

Tenants The HO-4 is a tenant broad form that may not be issued to an owner-occupant.

The primary purpose of a surety bond is to

Make sure obligations are fulfilled. A surety bond guarantees the performance of the principal.

What's the difference between a fidelity bond and a surety bond?

A surety bond guarantees something will happen; a fidelity bond guarantees something will not happen. A fidelity bond is sometimes called an honesty bond and pays if someone has been dishonest. A surety bond is a guarantee someone will perform as promised and pays if they do not.

A company has a businessowners policy on a building with an agreed value of $300,000. The company carries $150,000 of insurance. If a loss occurs, how much will the insured company be paid?

50% of the actual loss If the insured carries only $150,000 of insurance, only one half (50%) of its covered losses will be paid. ($150,000/$300,000 = ½ or 50%)

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 specified time. In the event of a loss covered by the policy, the named insured is required to submit to the insurer a signed sworn proof of loss within the allotted time (usually 60 days, but may vary).

After an insurer's underwriter approves an application, an agent delivers the policy to the applicant, who then submits an initial premium and accepts the terms of the policy. Which of the following terms best describes what the applicant has done

Acceptance An applicant's acceptance is contingent upon receiving an approved policy and paying the initial premium.

Which would NOT be covered by the inside the premises - robbery or safe burglary of other property coverage?

An employee is caught stealing cash from the register. Dishonest or criminal acts of any employee or representative are specifically excluded.

Individuals in the business of selling construction equipment and mobile equipment should insure with Equipment dealers coverage form.

An equipment dealer's coverage form covers dealer's stock in trade consisting primarily of mobile agricultural equipment and construction equipment. It also covers property of others in the dealer's care, custody, or control. It excludes coverage for autos, motorcycles, aircraft, and watercraft.

Lily is driving her car through a residential area. She loses control of the car, and crashes into Max's front porch. Max, who was sitting on the porch, is injured. Lily's liability insurance policy has a limit set at $500,000. This amount applies to the total of damages for any bodily injury and property damage resulting from one accident. Which type of limit of liability does Lily have?

Combined single Combined single is a single dollar limit of liability applying to the total of damages for bodily injury and property damage combined resulting from one accident or occurrence.

An insured's business is damaged because of a fire, and he is forced to close the business temporarily for repairs. As a result, the insured lost income. What type of loss is this?

Consequential. Consequential loss, also known as indirect loss, is a second financial loss caused by a covered direct loss.

Which of the following policies does NOT contain an automatic reinstatement provision?

General liability written with an aggregate limit An aggregate limit is reduced by the payment of claims. It is possible for an insured to run out of coverage before the expiration of the policy. Aggregate limits are restored on the anniversary date of the policy.

Under the professional liability loss settlement provision, what must an insurer do before offering to pay a claimant to settle a claim?

Get the insured's consent If a claim has been filed under a professional liability policy, an insurer MUST get the consent of the insured before offering to pay to settle a claim. If the insured's professional reputation is at risk, and the insured feels he or she is not negligent, the insured can require the insurer to defend the action in court.

What do individuals use to transfer their risk of loss to a larger group?

Insurance Insurance is the mechanism whereby an insured is protected against loss by a specified future contingency or peril in return for the present payment of premium. Because many other individuals with the same or similar risk of loss are paying premiums, funds are available to indemnify those who actually suffer that loss.

Insurance is a contract by which one seeks to protect another from

Loss. Insurance will protect a person, business or entity from loss.

Which of the following does the term "proximate cause" refer to?

Negligence that leads to an injury Proximate cause is reasonably foreseeable act or event that results in an injury or damage. Negligence may often be the proximate cause of the damage; without it, the accident would not have happened. This is also called direct liability.

Statements made by an applicant for a life insurance policy that are true to the best of the applicant's knowledge are referred to as

Representations. Representations are statements that the applicant believes to be true, but that are not guaranteed.

A policy that covers all causes of loss except for those specifically excluded is known as

Special form. Those property policies with a title of "special" form cover loss on an open peril basis, also known as an all risk.

To insure coin collections, stamp collections, and other items that would be difficult to appraise after a loss, it is best to insure with

Stated amount insurance. The insured and insurer agree the policyholder has the property, what it is worth, and insure it for an agreed value.

The legal process that gives the insurer, after payment of a loss, the right to seek recovery from a third party that was responsible for the loss is known as

Subrogation. Subrogation is a provision found in most insurance policies that gives the insurer, after payment of a loss caused by a third party, the insured's rights to recovery against that third party. The insurer's rights are only to the extent of the loss payment.

Which of the following is NOT covered under accounts receivable coverage form?

Any loans required to offset uncollectible amounts Loan principal amounts are not covered under the form. However, other expenses, such as interest on necessary loans, are covered.

Which of the following describes the transfer of a legal right or interest in an insurance policy?

Assignment.. Assignment is the transfer of a legal right or interest in an insurance policy. In property and casualty insurance, assignments of policies usually are valid only with the prior written consent of the insurer.

Which insurance principle states that if a policy allows for greater compensation than the financial loss incurred, the insured may only receive benefits for the amount lost?

Indemnity

Valuable papers and records form provides coverage for the reconstruction of all of the following types of records EXCEPT

Prepackaged software. Coverage for reconstructing prepackaged software is specifically excluded.

An insured stated on her application for life insurance that she had never had a heart attack, when in fact she had a series of minor heart attacks last year for which she sought medical attention. Which of the following will explain the reason a death benefit claim is denied?

Material misrepresentation A material misrepresentation will affect whether or not a policy is issued. If the insured had been truthful, it is very likely that the policy would not be issued.

Which of the following risks are eligible for coverage under a BOP?

1 of them is Condominiums.. ISO maintains a list of those risks not eligible for consideration for a BOP. Financial institutions, auto delers, and bars and grills are specifically excluded from coverage.

All of the following are supplemental payments included in the liability section of a personal auto policy EXCEPT

Up to $100 for the cost to secure the release of a vehicle from an impoundment lot following a covered accident. A personal auto policy does not pay the cost of a release of a vehicle impounded by a law enforcement agency.

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

Declarations Because the declarations tell who, what, when and where, this information is different in each contract.

Employee theft coverage may be written as

Employee theft may be written as any of the above forms.

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 exclusions section of an insurance policy details what perils are not insured against and what persons are not insured.

Which law is the foundation of the statistical prediction of loss upon which rates for insurance are calculated?

Law of large numbers The law of large numbers, which states that the larger a group is, the more accurately losses reported will equal the underlying probability of loss, is the basis for statistical prediction of loss upon which rates for insurance are calculated.

The Physicians and Surgeons Equipment Floater in NOT intended for which of the following?

Medical supplies located in a hospital... This coverage form protects individuals in the medical or dental profession for loss to valuable medical and dental equipment, materials and supplies, including office equipment and furniture, and similar property of others. Coverage is not intended for hospitals, schools or other institutions.

What insurance policy provision defines how the policy will respond if there is more than one insurance policy written on the same risk?

Other insurance is a provision in an insurance policy that defines how the policy will respond if there is other valid insurance written on the same risk.

The mobilehome endorsement alters the homeowners policy to cover a mobilehome and other structures on land

Owned or leased by the resident of the mobilehome. The mobilehome endorsement alters the homeowners policy to cover a mobilehome and other structures on land owned or leased by the resident of the mobilehome.

When a replacement auto is acquired during the policy period, what coverage will apply to it automatically under a personal auto policy?

Whatever coverage applied to the vehicle being replaced Collision and other-than-collision for a newly acquired auto begins on the date the insured becomes the owner. For coverage to apply, the company must insure it within 14 days after the insured becomes the owner if the declarations indicate that collision coverage applies to at least one auto covered under the policy. The company must insure it within 4 days after the insured becomes the owner if the declarations do not indicate that collision coverage applies.

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

declarations. Who, what, when, where, and how much insurance and premium, all are stated in the declarations.

Losses caused by continuous or repeated exposure to conditions resulting in injury persons or damage to property that is neither intended nor expected is the definition of which of the following terms?

Occurrence An occurrence includes those losses caused by continuous or repeated exposure to conditions resulting in injury persons or damage to property that is neither intended nor expected.

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 his policy is ACV, how much will it pay toward the insured's new roof?

$5,000 ACV is calculated as replacement cost less depreciation.

An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following terms best describes what the insurer has violated?

Consideration The binding force in any contract is called "consideration". Consideration on the part of the insured is the payment of premiums and the health representations made in the application. Consideration on the part of the insurer is the promise to pay in the event of loss.

The at-fault driver in an insured's auto crash had the state required minimums for auto liability coverage, but not enough to pay for all the damage done to the insured. This driver is

Considered underinsured. An underinsured driver has at least the minimums required by law but not enough to cover the damages caused someone else. Underinsured motorist is an optional coverage that can be added to an auto policy.

following are true regarding deposit premium

Deposit premium is an estimated premium paid in advance at the time the policy is issued that may be adjusted by the audit based on actual exposures.

The pro rata liability clause is designed to protect the principle of

Indemnity. If more than one policy is in force on the same property at the same time covering the same perils, this is concurrent coverage. The intent of insurance is that after a loss, the insured is restored to the condition he or she was in before the loss (indemnified). Each policy pays a percentage of a loss directly related to the amount of insurance it provides compared to the total amount of coverage.

All of the following coverages are included in the BOP standard form without requesting coverage extensions, EXCEPT

Newly acquired or constructed property.

The policy provision found in property insurance policies that prevents the insured from collecting twice for the same loss is called

Subrogation. When insureds accept loss payment from the insurance company, they must transfer their rights to recovery to the insurer. This prevents the insured from collecting twice for the same loss, and allows the insurer to indemnify the insurance company.

All of the following are factors in rating workers compensation insurance

The hazard of the work, the amount of payroll, and the employer's prior loss experience are all rating factors.

Under the provisions of the business income coverage form, all of the following are true, EXCEPT

The insured is reimbursed for the loss from the date of loss to date of restoration or policy expiration date, whichever comes first. Business Income will pay beyond the expiration date of a policy. It will pay until the business is restored or the limits of coverage are exhausted.

Liability imposed on one party as a result of the actions of another person (i.e., parent/child, employer/employee) is known as

Vicarious liability. When the child makes the parent liable; the contractor makes the principal liable; the employee makes the employer liable, it is termed vicarious.