Chapter 2 Flashcards
An assignment must be:
agreed to in writing by the insurer
Molly has been driving a car which has tires that are severely worn and should be replaced. The tires are an example of a:
Hazard
A hazard
Increases the likelihood of a peril occurring
Assume that a property is insured by two policies. Each policy has an equal amount of coverage. If the property is damaged by a covered peril:
both insurers will share equally in the loss.
Q sold a building but did not cancel the policy. The building was later destroyed by a covered peril. Q will not collect under the policy
lack of insurable interest
The Other Insurance Clause:
Prohibits stacking by the Insured who might try to collect in full under multiple policies.
The other insurance clause upholds the principle of:
indemnification
A written document providing evidence that coverage is in effect and which summarizes the coverage is known as:
a certificate of insurance
The insured cancels a policy half way through its term yet receives less than a 50% refund. This is:
a short-rate refund
An insured who cancels a Commercial Property Form will receive a:
short-rate refund
A document outlining the coverage with evidence that coverage is in effect is known as a/an?
certificate of insurance
A loose handrail on a staircase is a:
Hazard
The proportionate distribution of the amount to be paid by insurance companies insuring the same loss is covered by
other insurance/pro rata
To have an insurable interest, one must:
have a monetary interest in the property
An Insurer may cancel a property policy due to
fraudulent property valuation
Cindy and Hal own a commercial building. Cindy asks the Insurer to increase the coverage but Hal objects. What should the Insurer do?
Comply with the desire of whichever Insured is named first in the policy’s declarations.
Which component of the policy requires the insured to assume a stated amount of the loss?
Deductible
One who can lose financially in the event of a loss has:
an insurable interest
An insurer’s discontinuation of a policy after expiration is:
nonrenewal
The earthquake deductible is
percentage
The maximum the policy will pay for any one loss is the:
limit of liability
If your client complains that your premiums are too high, suggest:
raising the deductible.
A peril is:
the proximate cause of the loss.
The insurer’s exposure under a policy is restricted by:
the Limit of Liability.
If there is duplicate property insurance, the parties will utilize which provision?
pro rata
A careless employee routinely leaves the rear door to the store unlocked. This is a?
morale hazard
Which is a hazard?
a.
a flood
b.
a collision
c.
a slippery road
d.
a fire
a slippery road
Deductibles:
eliminate small claims and reduce administrative expenses.
The minimum property deductible for Commercial Property Forms is usually:
$250
The maximum the insured can collect under the policy is the
limit of liability
Special covers:
all risks except those excluded
The cause of the loss is:
peril
Increasing the deductible:
lowers the premium
A policy may be voided due to each of these EXCEPT
failure to file a proof of loss form
The amount an insured may recover under an airplane policy is restricted by the
limit of liability
A clogged exhaust vent on the kitchen’s deep-fat fryer in a fried chicken restaurant is a?
physical hazard
The limit of liability in a policy refers to the extent of the:
insurer’s liability.
The deductible:
specifies the amount of the claim that won’t be paid by the policy.
The deductible does each of these EXCEPT:
a.
lower premium costs.
b.
excludes payment for small claims.
c.
indemnify the insured.
d.
reduce loss costs.
indemnify the insured.
Payment based on the fact that the Insured owns the property involved is:
Insurable interest
A deductible does each of the following EXCEPT:
a.
lowers the premium cost
b.
increases the cost of insurance
c.
lowers the quantity of claims
d.
improves the availability of insurance
increases the cost of insurance
The limit of liability is the most the policy will pay:
per loss
Deductibles are used to:
encourage the insured to be careful.
A shopping mall with only one exit is a
physical hazard
Mary has an agreement stating that if she wrecks her car, the insurer will make the payments to Mary’s banker. This is:
an assignment
Any condition increasing the chance of loss is a
hazard
A’s homeowner policy is valid for one year. During the year, A sold the home to B. A’s lender is willing to allow A to transfer the homeowner policy to B. A must first obtain written permission from
the insurer
The policy specifies the amount of the loss the insured must pay for through the:
deductible
The deductible
decreases the insurer’s losses
The liberalization clause applies when:
the coverage is increased but the premium is not
A certificate of insurance
summarizes the policy’s coverage
Fire wood stored next to a wood stove is a
physical hazard
Property ownership represents:
an insurable interest.
The limit of liability is the maximum amount that:
the insured can collect for any one loss.
Josephine wants to insure her home. Her fear is that a fire will damage her stained glass window (which she just purchased for $17,000). The value of the home is $100,000 and the policy has an 80% coinsurance requirement. Josephine should purchase a minimum of how much insurance so that the window will be fully insured
Josephine must insure the home to 80% of the home’s value to be fully insured on a partial loss. Thus, $80,000 coverage is required to fully cover a $17,000 loss.
With regard to cancellation:
The insured may cancel without reason or prior notice to the insurer.
Which covers only listed perils?
Specified (Named) Perils
Tim owes Visa $800 on a credit card bill. Visa purchased a fire insurance policy covering Tim’s home. If Tim’s home is destroyed by fire, how much will Visa be able to collect from the Insurer?
$0, Visa has no insurable interest
Faulty wiring is an example of a:
physical hazard
When must an insurable interest exist under a liability policy?
at the time of the loss
Nonrenewal involves:
the insurer’s refusal to continue the coverage at the end of the policy term
Which CANNOT have an insurable interest?
insurer
To prevent recovery beyond the amount of the insured’s actual loss, the policy will contain
an Other Insurance Clause
A deductible:
reduces moral hazards
Complete the coinsurance formula: (Did carry/divided by what????) X Loss = Amount of recovery.
a.
Replacement cost
b.
Required coverage
c.
Requested coverage
d.
Actual cash value
Required coverage
A brush fire which spreads to a garage is an example of a:
peril
The portion of the claim not covered by the policy is specified in the?
deductible
Policy provisions designed to cover property not covered under the policy are known as:
extensions
Which CANNOT be an Insurer’s reason for cancellation?
claims filed
Nonrenewal requires the Insurer to
mail notice to the insured in advance
A property policy which lists the perils covered is:
Named Peril
Each of the following can have an insurable interest EXCEPT:
a.
a mortgagee
b.
a tenant
c.
an ex-owner who didn’t cancel the policy
d.
an ex-owner carrying the mortgage
an ex-owner who didn’t cancel the policy
Brenda is no longer covered by her insurance policy. Which of the following methods of policy termination would have resulted in a premium refund to Brenda?
Cancellation
Property ownership is evidence of:
an insurable interest
A lender financing a boat purchase may require the insured to name the lender as an insured party. The lender has:
an insurable interest
With the consent of the insurer, Albert assigned his warehouse insurance policy to Benson. Benson is the:
assignee
Cancellation involves
termination by either the insurer or insured during the policy term.
Under the Other Insurance Clause, if the Insured is covered by two policies, what will happen if a loss occurs?
Each policy will pay a part of the loss
T has insured his $400,000 home for $250,000 under a replacement cost policy. In the event of a total loss, he will recover
$250,000
