Insurance Terms and Related Concepts

A. hazards

Events or conditions that increase the chances of an insured loss occurring are referred to as... A. hazards B. exposures C. risks D. perils

B. $30,000

A $100,000 house insured on a policy with an 80% coinsurance requirement has a fire that caused $40,000 of damage; the owner has a policy with $60,000 coverage. How much can the owner collect for his loss? A. $20,000 B. $30,000 C. $40,000 D. $60,000

D. it is 50% of the actual premium

All of the following are true regarding deposit premium EXCEPT... A. it could be adjusted by the audit B. it must be paid in advance C. it is an estimated premium paid at the policy issue D. it is 50% of the actual premium

C. indirect loss

An additional loss that results from a direct loss of property is called a/an... A. liability loss B. punitive loss C. indirect loss D. proximate loss

B. $30,000

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? A. $0 B. $30,000 C. $32,000 D. $40,000

A. consequential

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? A. consequential B. direct C. special D. additional

C. $5,000

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 depreciations 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? A. $1,000 B. $4,000 C. $5,000 D. $6,000

C. vicarious liability

Liability imposed on one party as a result of the actions of another person is known as... A. strict liability B. absolute liability C. vicarious liability D. comparative negligence

D. speculative risk

Events in which a person has both the chance of winning or losing are classified as... A. insurable B. pure risk C. retained risk D. speculative risk

D. occurrence

Losses caused by continuous or repeated exposure to conditions resulting in injury to persons or damage to property that is neither intended nor expected is the definition of which of the following terms? A. peril B. hazard C. accident D. occurrence

D. mysterious disappearance

Most insurance policies exclude losses by... A. theft B. burglary C. robbery D. mysterious disappearance

D. the cause of loss insured against

Peril is most easily defined as... A. an unhealthy attitude about safety B. the chance of a loss occurring C. something that increases the chance of loss D. the cause of loss insured against

C. market value

The insured's house is located one mile from the country's new landfill and across the road from the entrance of a rock quarry. It would cost $150,000 to rebuild the house if something happened to it, but when the insured tried to sell it, the best offer he received was $80,000. The insurance company will insured the house for only $80,000. What method of valuation is used to insure the property? A. replacement cost B. functional replacement cost C. market value D. actual cost value

B. loss valuation

The process of determining the premium charges and how much insurance is required for a particular loss is called... A. coinsurance B. loss valuation C. agreed value D. loss payment

C. the proximate cause

When a direct chain of events resulting from a negligent act causes injury or damage, that act is considered to be... A. strict liability B. an intervening cause C. the proximate cause D. the direct cause