Ch. 2 - Property Insurance Basics FLASH CARDS

Question 1

A policy that covers all causes of loss except for those specifically excluded is known as what type of policy?

Answer 1

Open peril (or special) form

Question 2

What determines an insurer’s responsibility for payment, as stated in an insurance policy?

Answer 2

Limits of liability

Question 3

In property insurance, when must insurance interest exist?

Answer 3

At the time of loss

Question 4

What sublimit in a liability policy puts a ceiling on the payment for all claims that arise from a single accident?

Answer 4

Per occurrence

Question 5

What type of limits of liability has the limits separately stated for different coverages?

Answer 5

Split limits

Question 6

If an insured peril was the proximate cause of loss, what type of loss is it?

Answer 6

Direct

Question 7

An insured’s business is damaged by a fire, and temporarily shut down for repairs. As a result, the insured suffers loss of income. What type of loss is the loss of income?

Answer 7

Indirect or consequential loss

Question 8

What is the process that insurers use to determine whether a policy should be issued and on what terms and conditions?

Answer 8

Underwriting

Question 9

How are direct and indirect losses related?

Answer 9

Direct losses can cause indirect losses

Question 10

In property insurance, what is actual cash value?

Answer 10

Replacement cost at the time of loss, minus depreciation

Question 11

What is the difference between cancellation and nonrenewal?

Answer 11

Cancellation is the termination of an insurance policy by either party to the policy’s expiration date. Nonrenewal is the termination of policy at its expiration date by not offering a continuation of the existing policy.