5. Property and Casualty Policies - General
Which of the following would modify the original insurance contract by either adding or removing coverage? Conditions Flexibility Policy Endorsements Additional coverage form
Endorsements
Which of the following would NOT be classified as personal property for insurance purposes? A house A vehicle Equipment Furniture
A house. Personal property is property that is moveable; real property is nonmoveable
The declarations page of the homeowners policy provides all of the following information EXCEPT The insured's address. What deductible amount applies to each loss covered by the policy. A statement that earthquake damage is not covered. The amount of premium charged for each coverage.
A statement that the earthquake damage is not covered.
If an insured holds more than one policy on a property, and the only difference is the coverage amount or coverage period, this is called: Coinsurance Co-Coverage policy Concurrent policy coverage Side-by-side coverage
Concurrent policy coverage
All of the following are found in the declarations section of a policy EXCEPT the Name of the insured Limit of insurance Exclusions Policy premiums
Exclusions. This only tells what is not covered.
All of the following are factors in the determination of actual cash value EXCEPT Age of the property Replacement cost Insurance premium paid Type of quality of property
Insurance premium paid
The process of determining the premium charged and how much insurance is required for a particular loss is called: Loss payment Coinsurance Loss valuation Agreed value
Loss valuation
An insured's home is mortgaged by the local bank. The insured is required to carry insurance on the home, showing the bank as the mortgagee. If the home is damaged by a covered peril, which of the following is true?
Losses will be paid to the mortgagee and mortgagor as their interest appears.f
All of the following are considered parts of the policy structure EXCEPT Exclusions Insuring clause Conditions Provisions
Provisions. Sections or clauses of an insurance policy that communicate the policy's benefits, conditions, etc.
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 Actual cash value Replacement cost Reproduction cost
Stated amount
When the amount of insurance written in a property policy is not subject to any coinsurance provision and that amount is paid in the event of a covered loss, the coverage is said to be written as
Stated amount
Which of the following property clauses allows the extension of a major coverage, applying to specific losses not already insured? The pair and set clause The extensions of coverage clause The additional coverage clause The right of salvage clause.
The extensions of clauses.
The homeowner sells his house to a friend. The friend wants to keep the homeowner's current policy in effect. Under the assignment provision, which of the following is most likely? The homeowner should let the friend take over the premium payments. the friends will have to apply for coinsurance from another insurance company. The homeowner will need to get written consent from the insurer before the policy can be reassigned. The policy will have to be cancelled.
The homeowner will need to get written consent from the insurer before the policy can be reassigned.
The ACV method of valuation:
reinforces the principle of indemnity because it recognizes the reduction of value of property as it ages. To calculate ACV, depreciation id subtracted from the current replacement cost.
In property insurance, actual cash value is defined as?
Replacement cost at the time of the loss, less depreciation.
What will happen if a house covered by a standard mortgage clause is a total loss?
The insurer pays the mortgagee according to the mortagee's interest in the property.
In which of the following types of property valuation will the policy pay the full value as specified on the policy schedule, regardless of the insured property's appreciation or depreciation?
Agreed value
All of the following are conditions commonly found in the insurance policy EXCEPT Cancellation and non-renewal Subrogation Appraisal Insuring agreement
Insuring agreement. This provides information on the policy's coverages. Conditions state the legal obligations and duties of the parties to the contract.
When and insurer cancels an automobile insurance policy for a reason other than nonpayment of premium, the insurer must meet all of the the following requirements EXCEPT Send a 20-day notice Inform the policy owner about the automobile liability assigned risk plan Explain the reason for policy cancellation Offer the insured to renew the policy at a different rate.
Offer the insured to renew the policy at a different rate.
Which method of loss valuation is contrary to the basic concept of indemnity?
Replacement cost
Which of the following is a mandatory part of an insurance policy that varies with each individual policy?
Declarations This tells who, what, when and where, this information is different in each contract.
The part of a property policy that shows the amount of insurance, premium, and policy term is the
Declarations.
Replacement cost is defined as:
Full replacement of property at its current cost, new and without reduction for depreciation
When an auto insurance policy is cancelled for nonpayment of premium, how many days' notice must the insurer provide to the policy owner?
10 days
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
Which of the following types of valuation works best for property whose value does not fluctuate much? Agreed value Market value State amount Inflation guard
Agreed value
Which of the following describes the transfer of a legal right or interest in an insurance policy? Legal purpose Assignment Abandonment Obligation
Assignment. This would need prior written consent of the insurer.
An insured can cancel the policy: At any time with a 10-day advanced notice. Only after the policy has been in force for 120 days. Only at time of renewal. At any time by mailing a written notice of cancellation.
At any time by mailing a written notice of cancellation.
The part of the policy that sets forth the rules of conduct, duties, and obligations of the parties is called the Declarations Insuring clause Conditions Exclusions
Conditions
The part of a policy that clarifies terms in the policy is the Insuring agreement Conditions Exclusions Definitions
Definitions
Replacement cost is defined as
Full replacement of property at its current cost, new and without reduction for depreciation.
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 Insurance Company Governor Policy holder
Mortgagee
What type of information would be found in a policy's insuring agreement? Renewal dates Location of premises Policy limits Insurer's address
Renewal dates All others can be found in the Declarations.
What is used in the formula for calculating the actual cash value of a property?
Replacement cost.
The standard provision that allows the coverage, which is afforded by the policy, to be applied separately to each insured who is seeking coverage or against whom a claim is being made known as: Severability clause Stop loss clause Limited liability clause Separation clause
Severability clause. This clause has been instrumental in the interpretation of the common exclusion for bodily injury to an employee of the insured.
Liberalization Clause
States that if an insurer changes a policy form to the benefit of the policy holder, all policies issued within a certain time before the change will be interpreted as if they has been changed, provided the change does not require additional premium.
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 dues to a fire, what happens?
The loss is payable to the insured and the mortgagee.
Under which of the following circumstances would it be acceptable for an insurer to recommend an auto repair facility to an insured?
The referral is requested by the claimant in writing.
The purpose of a stated value contract is:
To per-establish the amount of coverage available for property items that are difficult to value. The value of the insured items is determined at the time the policy is written, not at the time of the loss.
A type of policy that is used to provide a specific amount of replacement cost for a given risk after an insured property has been destroyed is called a(n)
Valued policy. Provides for payment of the full policy amount in the event of a total loss WITHOUT regard to actual value or depreciation.
The insured owns an older home with lath and plaster walls. Following a kitchen fire, the insurance company pays to have the wall replaced with drywall that is just as functional, but costs less than lath and plaster. Which loss valuation allows the insurance company to have plaster replaced with drywall?
Functional replacement cost.
The policy conditions define: The basic underwriting information The excluded perils The amount of coverage How parties to the contract must act following a loss
How parties to the contract must act following a loss
The part of the insurance contract that describes the covered perils and the nature of coverage of the contractual agreement between the insurer and the insured is called the
Insuring agreement
Which of the following policy provisions would automatically broaden coverage under a policy without requiring additional premium? Liberalization Other insurance Subrogation Assignment
Liberalization.
The insured's house is located one mile from the county'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 insure the house for only $80,000. What method of valuation is used to insure this property?
Market Value
