Ch. 1- Insurnace Terms and Related Concpets

Question 1

Replacement cost is defined as:

Answer 1

A. Full placement of property at its current cost, new and and without reduction for depreciation
B. The market value of property of like kind and quality.
C. Full replacement of property with like kind and quality, less an allowance for physical deterioration and depreciation.
D. Payment of the full policy limits in the event of a total loss.

Answer: A

Question 2

True or false:

Replacement cost is defined as the cost to replace damaged property with like kind and quality at today’s price, without any deduction or depreciation.

Answer 2

True

Question 3

Define the term “stated amount”

Answer 3

An amount of insurance in a property policy that is not subject to any coinsurance requirements in the event of a covered loss.

Question 4

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:

Answer 4

A. Specific insurance
B. Stated amount
C. Replacement cost
D. Actual cash value

Question 5

What are the two types of losses in property and casualty?

Answer 5

Direct and Indirect

Question 6

True or False:

Property insurance only covers direct losses

Answer 6

True

Question 7

True or False:

Indirect losses are related to direct loss and insurance coverage to protect against these indirect losses is often added to property insurance.

Answer 7

True

Question 8

Consequential losses are also known as __________________

Answer 8

Indirect losses.

Question 9

Define the term “Property Damage Liability”

Answer 9

Legal liability arising from physical damage to tangible property of others caused by the negligence of an insured.

Question 10

Agreed value works best for what type of items?

Answer 10

Items that do not fluctuate much.

Question 11

What is Market Value?

Answer 11

A seldom-used method of valuing loss based upon the amount a willing buyer would pay to a willing seller for the property prior to the loss.

Question 12

Insurable interest in a property policy must be proven when?

Answer 12

At the time of loss

Question 13

ACV formula = ?

Answer 13

Replacement Cost - Depreciation = ACV

Question 14

Define Stated Amount

Answer 14

An amount of insurance scheduled in a property policy that is not subject to any coinsurance requirements in the event of a covered loss.

Question 15

Define Accident

Answer 15

A sudden, unplanned, or unexpected event

Question 16

What does a Direct loss mean?

Answer 16

Direct losses mean direct physical damage to buildings and/or personal property

Question 17

What does subrogation mean?

Answer 17

It is an insured’s right to seek damages from a negligent party.

Question 18

What are statements concerning coinsurance?

Answer 18

• The insured agrees to maintain insurance equal to some specified percentage of the value of the property.
• If the insurance carried is less than required, the insurance may not cover the whole loss.
• It is used to help adequacy and equity in rates.

Question 19

What is an Occurrence?

Answer 19

Loss caused by continuous or repeated exposure to conditions resulting in injury to a person or damage to property

Question 20

What is the purpose of the coinsurance clause found in property insurance policies?

Answer 20

Encourage the insured to insure the property closer to its full value

Question 21

Replacement cost is defined as:

Answer 21

the cost to replace damaged property with like kind and quality at today’s price, without any deduction or depreciation.

Question 22

What are the two compensatory damages that may be awarded?

Answer 22

special and general damages

Question 23

Examples of Special Damages are….

Answer 23

Payments for medical expenses, loss of wages, funeral expenses, or the cost to repair or replaced damaged property. Items that are tangible

Question 24

What does Blanket Coverage provide?

Answer 24

It provides one limit of insurance for multiple locations or classes of property with the entire limit of insurance available to respond to any loss.

Question 25

Define the term “Combined Single”

Answer 25

It is a single dollar limit of liability applying to the total of damages for bodily injury and property damage combined, resulting from one accident or occurrence.

Question 26

What are Hazards?

Answer 26

They are conditions or situations that increases the probability of loss occurring.

Question 27

What are examples of General Compensatory damages?

Answer 27

They are damages for intangible elements that cannot be specifically measured in terms of dollars.

Question 28

Property Insurance only covers ______

Answer 28

Direct Losses

Question 29

What is a deductible?

Answer 29

A dollar amount an insured must pay on a claim before the insurance policy provides coverage.

Question 30

Stated _____________ coverage is not subject to any ______________ provision and that amount is paid in the event of a __________loss.

Answer 30

1. Amount
2. Coinsurance
3. Covered loss

Question 31

The indemnity provisions in insurance policies….. “restores”

Answer 31

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

Question 32

What are 3 TRUE facts regarding deposit premium?

Answer 32

1. They can be adjusted by the audit.
2. It must be paid in advance.
3. It is an estimated premium paid at the policy issue.

Question 33

Strict liability is commonly applied in product __________ cases. Therefore, a business is then held _______ for defective products regardless of fault or ___________.

Answer 33

1. Liability
2. Liable
3. Negligence

Question 34

In what type of property valuation will a policy pay the full value as specified on the policy schedule? Regardless of the insured property’s appreciation or deprecation?

Why?

Answer 34

Agreed value, because is a provision agreed upon by the insurer and insured at the time the insurance was written. When a loss occurs, the agreed value is paid regardless of appreciation or depreciation.

Question 35

What type of limit sets the amount for all claims that arise from a single accident at a certain number?

Answer 35

Per occurence

Question 36

What would likely occur if it is determined that a deposit premium is too high?

Answer 36

The insured will receive a returned premium.