CHAPTER 1 QUIZ

an insurance contract must contain all of the following to be considered legally binding EXCEPT? A-competent parties B-beneficiary's consent C-offer and acceptance D-consideration

beneficiary's consent

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? A-occurrence B-peril C-hazard D-accident

occurrence

A policy that insures all property at multiple locations for a single amount is referred to as? A-REPORTING B-SPECIAL C-SPECIFIC D-BLANKET

BLANKET

Which of the following is NOT an essential element of an insurance contract? A-CONSIDERATION B-AGREEMENT C-LEGAL PURPOSE D-COUNTEROFFER

COUNTEROFFER

A beauty parlor burns to the ground. What type of loss is this to the owner? A-CONSECUTIVE B-DIRECT C-CONSEQUENTIAL D-SPECIFIC

DIRECT

Anyone covered under an insurance policy, whether named or not, is known as the? A-ADDITIONAL INSURED B-INSUREDS C-NAMED INSURED D-FIRST NAMED INSURED

INSUREDS

All of the following are conditions commonly found in the insurance policy EXCEPT? A-INSURING AGREEMENT B-CANCELLATION AND NONRENEWAL C-SUBROGATION D-APPRAISAL

INSURING AGREEMENT

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? A-AGGREGATE B-PER OCCURRENCE C-SINGLE D-SPLIT

SINGLE

Which of the following would be covered under personal injury liability? A-SLANDER B-A BROKEN ARM C-A CONCUSSION D-DEATH

SLANDER

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

hazards

What do individuals use to transfer their risk of loss to a larger group? A-insurable interest B-exposure C-indemnity D-insurance

insurance

Leila's insurer has made all of the decisions regarding the provisions included in her policy. She finds an objectionable provision and wants to negotiate it with her insurer but is not allowed to do so. Her only options are to reject the policy because of the provision or accept the policy anyway. Which contract element does this describe? A-DICTATORIAL B-ADHESION C-UNILATERAL D-CONDITIONAL

ADHESION

Insurable interest in a property policy must be proven? A- WHEN A CLAIM IS PAID B-AT THE TIME OF APPLICATION C-AT THE TIME OF LOSS D-WHEN A POLICYOWNER IS CHANGED

AT THE TIME OF LOSS

The part of the policy that sets forth the rules of conduct, duties, and obligations of the parties is called the? A-CONDITIONS B-EXCLUSIONS C-DECLARATIONS D-INSURING CLAUSE

CONDITIONS

When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following? A-CONTRACT OF ADHESION B-ACCEPTANCE C-CONSIDERATION D-LEGAL PURPOSE

CONSIDERATION

Which of the following would modify the original insurance contract by either adding or removing coverage? A-additional coverage form B-conditions C-flexible policy D-endorsements

Endorsements

The transfer of an insured's right to seek damages from a negligent party to the insurer is found in which of the following clauses? A-APPRAISAL B-SUBROGATION C-ARBITRATION D-SALVAGE

SUBROGATION

All of the following are factors in the determination of actual cash value (ACV) EXCEPT? A-TYPE AND QUALITY OF PROPERTY B-AGE OF THE PROPERTY C-REPLACEMENT COST D-INSURANCE PREMIUM PAID

INSURANCE PREMIUM PAID

Which of the following statements best describes the abandonment clause of the standard fire policy? A-The abandonment clause prohibits abandoning the property (vacant or unoccupied) for more then 60 days. B- The abandonment clause prohibits abandoning the property to the insurer in order to claim total loss. C-Any loss occurring while a described building intended for occupancy is vacant or unoccupied for more than 60 days is not covered. D-If the property is sold, the policy may not be abandoned to the new owner, except with the written consent of the company.

The abandonment clause prohibits abandoning the property to the insurer in order to claim a total loss.

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? A-FUNCTIONAL REPLACEMENT COST B-REPLACEMENT COST C-MARKET VALUE D-ACTUAL CASH VALUE (ACV)

FUNCTIONAL REPLACEMENT COST

Which law is the foundation of the statistical prediction of loss upon which rates for insurance are calculated? 1-Law of group evaluation 2-Law of large numbers 3-Law of masses 4-Law of averages

Law of large numbers

An insured has a liability policy that sets the amount for all claims that arise from a single incident at $50,000. Which type of limit of liability does this insured's policy have? A-PER OCCURRENCE B-PER PERSON C-AGGREGATE D-SPLIT

PER OCCURRENCE

A situation in which a person can only lose or have no change respresents? 1-Adverse selection 2-Hazard 3-Pure risk 4-Speculative risk

Pure risk

In cases of a loss, the indemnity provision in insurance polices? A-allows the insured to collect 20% more than the actual loss B-Pays the insured a percentage of the loss above and beyond the loss C-Pays the insured as much as 95% of the loss. D-Restores an insured person to the same financial state as before the loss

Restores an insured person to the same financial state as before the loss

Adverse selection is a concept best described as? A-underwriters slanting the odds in favor of the company B-Poor choices of applicants to be covered C-only offering coverage to good risks D-Risks with higher probability of loss seeking insurance more often than other risks

Risks with higher probability of loss seeking insurance more often than other risks

Negligence is defined as? A- conduct that is so hazardous that the individual engaging in it will be held fully responsible for any resulting injury or damage. B-an intentional act that results in bodily injury or property damage to another person. C-the failure to do what a reasonable prudent person would do under given circumstances. D-An unbroken chain of events that results in bodily injury or property damage to another person.

The failure to do what a reasonable prudent person would do under given circumstances.