Ch. 1- Insurnace Terms and Related Concpets Flashcards
Replacement cost is defined as:
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
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.
True
Define the term “stated amount”
An amount of insurance in a property policy that is not subject to any coinsurance requirements in the event of a covered loss.
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:
A. Specific insurance
B. Stated amount
C. Replacement cost
D. Actual cash value
What are the two types of losses in property and casualty?
Direct and Indirect
True or False:
Property insurance only covers direct losses
True
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.
True
Consequential losses are also known as __________________
Indirect losses.
Define the term “Property Damage Liability”
Legal liability arising from physical damage to tangible property of others caused by the negligence of an insured.
Agreed value works best for what type of items?
Items that do not fluctuate much.
What is Market Value?
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.
Insurable interest in a property policy must be proven when?
At the time of loss
ACV formula = ?
Replacement Cost - Depreciation = ACV
Define Stated Amount
An amount of insurance scheduled in a property policy that is not subject to any coinsurance requirements in the event of a covered loss.
Define Accident
A sudden, unplanned, or unexpected event
What does a Direct loss mean?
Direct losses mean direct physical damage to buildings and/or personal property
What does subrogation mean?
It is an insured’s right to seek damages from a negligent party.
What are statements concerning coinsurance?
- 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.
What is an Occurrence?
Loss caused by continuous or repeated exposure to conditions resulting in injury to a person or damage to property
What is the purpose of the coinsurance clause found in property insurance policies?
Encourage the insured to insure the property closer to its full value
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.
What are the two compensatory damages that may be awarded?
special and general damages
Examples of Special Damages are….
Payments for medical expenses, loss of wages, funeral expenses, or the cost to repair or replaced damaged property. Items that are tangible
What does Blanket Coverage provide?
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.
