What Goes Into an Insurance Policy? (#6)

An insurer has decided to take an extremely narrow interpretation of a property insurance policy provision to limit the number of loss payments it will need to make. It realizes that its interpretation is probably wrong, but it knows that individual insured's loss amounts will be small, such that most insureds will not take the trouble to file lawsuits against it. The insurer may be violating the principle that an insurance policy is Select one: A. A contract of utmost good faith. B. A contract of indemnity. C. A conditional contract. D. A contract of adhesion.

A. A contract of utmost good faith.

An insurer will make a loss payment if an insured loss occurs and if the insured performs certain duties. This illustrates that an insurance policy is a Select one: A. Conditional contract. B. Contract of indemnity. C. Contract of adhesion. D. Personal contract.

A. Conditional contract.

When preprinted forms do not provide the terms of coverage needed by a particular insured or small group of insureds, the insurer may Select one: A. Draft a manuscript form to meet the customer's needs. B. Incorporate statutes into a policy. C. Work with an advisory organization to develop a form. D. Ask the customer to resubmit an application.

A. Draft a manuscript form to meet the customer's needs.

Adhering to the characteristics of an ideally insurable loss exposure in selling insurance help assure that Select one: A. The insurer is able to charge a premium that the insured can afford to pay. B. The losses associated with it typically involve small amounts. C. The insurer can charge a high premium for the coverage. D. The insurer is able to predict the amount and timing of each future loss.

A. The insurer is able to charge a premium that the insured can afford to pay.

Which one of the following types of insurance policies would be most likely to incorporate state-specific statutory terms? Select one: A. Workers compensation B. Homeowners C. Auto D. Professional liability

A. Workers compensation

The Insurance Services Office, Inc. (ISO) commercial package policy is an example of a Select one: A. Manuscript form. B. Modular policy. C. Single insurance document. D. Self-contained policy.

B. Modular policy.

Ling has noticed that her neighbor has recovered money for two homeowners property claims and an auto damage claim he has filed in recent years. Ling has been paying insurance premiums for many years and has never suffered a loss or made a claim. She feels that her insurance contracts over the years have been worthless to her. What Ling does not understand is that she has been paying premiums for a contract Select one: A. Of utmost good faith. B. Of unequal amounts. C. Of adhesion. D. That is nontransferable.

B. Of unequal amounts.

Which one of the following is true concerning the provisions in an insurance policy? Select one: A. The declarations and the definitions form the core of every insurance policy. B. The insuring agreement states the insurer's promises to the insured. C. The declarations section defines policy terms. D. The definitions are usually the first page of an insurance policy.

B. The insuring agreement states the insurer's promises to the insured.

Ideally insurable loss exposures are subject to losses that Select one: A. Are immeasurable in terms of frequency or severity. B. Occur gradually over long periods of time. C. Are definite in time, cause, and location. D. Result from unidentifiable causes.

C. Are definite in time, cause, and location.

Every insurance policy includes how many main provisions? Select one: A. Three B. Six C. Five D. Four

C. Five

Insurance deals primarily with loss exposures that are fortuitous. Which one of the following statements best characterizes fortuitous losses? Select one: A. Fortuitous loss exposures are expected. B. Fortuitous losses are intentional. C. Fortuitous losses are beyond the insured's control. D. Fortuitous loss exposures are generally predictable

C. Fortuitous losses are beyond the insured's control.

Private insurers are reluctant to provide windstorm insurance on coastal properties. This is because the loss exposures fail to meet the criterion that ideally insurable exposures must be Select one: A. A large number of similar exposure units. B. Fortuitous. C. Independent and not catastrophic. D. Definite and measurable.

C. Independent and not catastrophic.

An insurance policy is considered a contract of adhesion when it is drafted by the Select one: A. Third party. B. Insured. C. Insurer. D. Insurance commissioner.

C. Insurer.

The big differences between property and liability policies are found in their Select one: A. Exclusions B. Conditions C. Insuring Agreements D. Definitions

C. Insuring Agreements

All of the following may be found in an insurance policy, EXCEPT: Select one: A. Endorsements B. State specific information C. Officers of the insurer D. The original application

C. Officers of the insurer

New homeowner and small business owner Sallie learns that an insurance policy may contain other documents than its insurance forms. Accordingly, which one of the following will Sallie find is true regarding her new insurance purchases? Select one: A. As Sallie's policy coverages are relatively common, she will simply require a manuscript policy. B. Sallie learned all policies, personal and commercial, contain relevant statutory terms for clarity. C. Sallie's application may contain endorsements which modify the basic policy form. D. Sallie's application for insurance was returned to her as it was no longer useful after receiving her policy

C. Sallie's application may contain endorsements which modify the basic policy form.

Claims supervisor Charlotte is reviewing the incoming claims for the day to decide which ones to assign to various claims reps. Of those claims, which one of the following descriptions will Charlotte find is an example of a fortuitous loss? Select one: A. An insured demolishes a deck that has been allowed to rot. B. The value of an insured's home decreases due to a lack of maintenance. C. Insureds intentionally set a fire and burn their house down. D. An unknown vandal spray-paints graffiti on the insured's garage.

D. An unknown vandal spray-paints graffiti on the insured's garage.

Insurance policies are written in such a way that the parties have to perform only under certain conditions, because an insurance contract is a Select one: A. Contract of adhesion. B. Contract of indemnity. C. Contract of utmost good faith. D. Conditional contract.

D. Conditional contract.

Which one of the following most accurately describes one of the policy provisions in an insurance policy? Select one: A. The declarations state the insurer's promise to the insured. B. The definitions contain a list of forms included in the policy. C. The conditions state what the insurer specifically will not cover. D. The exclusions are in place to reduce duplicate coverage.

D. The exclusions are in place to reduce duplicate coverage.