Chapter 11: Insurance Contracts

Question 1

Deductible

Answer 1

Insured required to pay first dollars of insured loss

Question 2

What do deductibles mitigate (3)

Answer 2

loss covered by insurer
moral hazard
expense in settling a claim

Question 3

Straight or flat deductible

Answer 3

insured pays deductible up to a limit and all loses above that limit is covered by insurer

Question 4

Percentage deductible

Answer 4

insured pays first percentage of loss with the insurer paying all excess loses above the percentage limit

Question 5

Larger the deductible the lower the

Answer 5

premium

Question 6

Exclusions

Answer 6

identify losses that are not covered by insurance

Question 7

What happens if insurer denies claim based on exclusion

Answer 7

they must provide provide proof to the insured that they applied exclusion correctly

Question 8

Purposes of exclusions: eliminate losses from (2)

Answer 8

catastrophic events
moral hazard

Question 9

Purposes of exclusions: Eliminate coverage (2)

Answer 9

coverage not needed by typical insured
where another policy is designed to provide coverage

Question 10

Purpose of exclusion to prevent

Answer 10

noninsured parties from benefiting coverage