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Question 1

In an insurance contract, ___ are statements that provide information about the particular property or activity to be insured. They’re usually on the first page of the policy. In property insurance, it contains the name of the insured, the location of the property, the period of protection, the amount of insurance, and the premium and deductible information.

Answer 1

Declarations

Question 2

In an insurance contract, the ___ summarizes the major promises of the insurer.

Answer 2

Insuring Agreement

Question 3

Name the two basic forms of insuring agreements in property insurance.

Answer 3

• Name Perils Coverage, where only those perils specifically named in the policy are covered.
• Open-Perils, or Special Coverage, where all losses are covered except the losses that are specifically excluded.

Question 4

An insurance contract contains which 3 major exclusions?

Answer 4

• Excluded perils
  
  • Floods, intentional act
• Excluded losses
  
  • Professional liability loss not covered by homeowners policy
• Excluded property
  
  • Pets are not covered as personal property in homeowners insurance

Question 5

Why are exclusions necessary in insurance contracts?

(6 points)

Answer 5

• Some perils aren’t commercially insurable
• Extraordinary hazards are present
• Coverage is provided by other contracts
• Moral hazards are present
• Attitudinal hazard problems
• Some coverage isn’t needed by typical insureds

Question 6

___ are provisions in a policy that qualify or place limitations on the insurer’s promise to perform.

Answer 6

Conditions

Ex: cancellation, subrogation, grace period, misstatement of age

Question 7

The ___ is the person(s) named in the declarations section of an insurance contract.

Answer 7

Named Insured

Question 8

The ___ has certain additional rights and responsibilities that don’t apply to other named insureds.

Answer 8

First Named Insured

Question 9

In property and liability insurance, a(n) ___ is a written provision that adds to, deletes from, or modifies provisions in the original contract.

Answer 9

Endorsement

Question 10

In life and health insurance, a(n) ___ is a provision that amends or changes the original policy.

Answer 10

Rider

Question 11

A(n) ___ is a provision by which a specified amount is subtracted from the total loss payment that otherwise would by payable.

Answer 11

Deductible

Question 12

Name the three main purposes of a deductible.

Answer 12

• Eliminate small claims that are expensive to handle and process
• Reduce the premiums paid by the insured
• Reduce moral hazard and attitudinal hazard

Question 13

With a(n) ___, the insured must pay a certain number of dollars of the loss before the insurer is required to make a payment.

Answer 13

Straight Deductible

Question 14

A(n) ___ means that all losses that occur during a specified time period, usually a year, are accumulated to satisfy the deductible amount.

Answer 14

Aggregate Deductible

Question 15

A(n) ___ is a type of aggregate deductible that is found in basic medical expenses and major medical insurance contracts.

Answer 15

Calendar-Year Deductible

Question 16

A(n) ___ is a stated period of time at the beginning of a loss during which no insurance benefits are paid.

Answer 16

Elimination (Waiting) Period

Question 17

A(n) ___ in a property insurance contract encourages the insured to insure property to a stated percentage of its insurable value.

Answer 17

Coinsurance clause

Question 18

What happens if the coinsurance requirement isn’t met at the time of the loss?

Answer 18

The insured must share in the loss as a coinsurer.

Question 19

Regarding coinsurance, how is the amount of recovery by insurance after a loss calculated?

Answer 19

(Amount of insurance carried) / (Amount of insurance required) x (Loss)

Question 20

What is the fundamental purpose of coinsurance in property insurance?

Answer 20

To achieve Equity in Rating

Question 21

A(n) ___ in a health insurance contract requires the insured to pay a specified percentage of covered medical expenses in excess of the deductible.

Answer 21

Coinsurance clause

Question 22

What are the two main purposes of coinsurance in health insurance?

Answer 22

• Reduce premiums
• Prevent overutilization of policy benefits

Question 23

The purpose of ___ is to prevent profiting from insurance and violating the principle of indemnity.

Answer 23

Other-Insurance Provisions

Question 24

Under a(n) ___ provision, each insurer’s share of loss is based on the proportion that its insurance bears to the total amount of insurance on the property.

Answer 24

Pro Rata Liability

Question 25

Under ___, each insurer shares equally in the loss until the share paid by each insurer equals the lowest limit of liability under any policy, or until the full amount of the loss is paid.

Answer 25

Contribution by Equal Shares

Question 26

Under a(n) ___ provision, the primary insurer pays first, and the excess insurer pays only after the policy limits under the primary policy are exhausted.

Answer 26

Primary and Excess Insurance

Question 27

The ___ in group health insurance is designed to prevent over insurance and the duplication of benefits if one person is covered under more than one group health insurance plan.

Answer 27

Coordination of Benefits Provision