Chapter 2 Flashcards
The minimum property deductible for Commercial Property Forms is usually:
Select one: a. $0 b. $100 c. $250 d. $1,000 Feedback The key here is to focus on the "deductible" part of the question. Some companies are demanding a minimum of a $500 deductible, but most have a minimum $250 deductible.
The correct answer is: $250
Nonrenewal requires the Insurer to:
Select one:
a. mail notice to the insured in advance.
b. provide 90 days notice to the state insurance department.
Feedback
The state’s Insurance Department prefers not to hear about such trivial matters.
The correct answer is: mail notice to the insured in advance.
Property ownership is evidence of:
Select one: a. taxation b. an insurable interest Feedback The correct answer is: an insurable interest
A peril is:
Select one:
a. any factor which increases the likelihood of a loss.
b. the proximate cause of the loss.
Feedback
The correct answer is: the proximate cause of the loss.
A deductible:
Select one: a. reduces moral hazards b. increases the cost of insurance Feedback The deductible reduces both moral and morale hazards.
The correct answer is: reduces moral hazards
Which covers only listed perils?
Select one: a. Open Perils (All-Risk) b. Specified (Named) Perils Feedback The correct answer is: Specified (Named) Perils
Molly has been driving a car which has tires that are severely worn and should be replaced. The tires are an example of a:
Select one: a. peril b. hazard c. catastrophe d. loss Feedback The worn tires are hazards because they increase the likelihood that a peril will occur. The worn tires are merely hazards because they have not yet resulted in a loss - the cause of a loss is a peril but we don't yet have a loss.
The correct answer is: hazard
The insurer’s exposure under a policy is restricted by:
Select one: a. reserve requirements. b. the Limit of Liability. Feedback The correct answer is: the Limit of Liability.
Each of the following can have an insurable interest EXCEPT:
Select one:
a. a mortgagee
b. a tenant
c. an ex-owner carrying the mortgage
d. an ex-owner who didn’t cancel the policy
Feedback
The ex-owner who neglected to cancel the policy has no financial interest in the property and thus no longer has an insurable interest.
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?
Select one: a. Cancellation b. Nonrenewal Feedback The correct answer is: Cancellation
The insured cancels a policy half way through its term yet receives less than a 50% refund. This is:
Select one: a. a short-rate refund b. fraud Feedback The correct answer is: a short-rate refund
A loose handrail on a staircase is a:
Select one: a. peril b. hazard Feedback The correct answer is: hazard
Property ownership represents:
Select one: a. a peril. b. an insurable interest. Feedback The correct answer is: an insurable interest.
A lender financing a boat purchase may require the insured to name the lender as an insured party. The lender has:
Select one: a. an insurable interest b. a right of subrogation Feedback The correct answer is: an insurable interest
A property policy which lists the perils covered is:
Select one: a. Named Peril b. Open Peril (All-Risk) Feedback The correct answer is: Named Peril
Which CANNOT be an Insurer’s reason for cancellation?
Select one: a. claims filed b. substantial increase in the risk c. nonpayment of premiums d. misrepresentation Feedback Although an Insurer may nonrenew at will, the Insurer may only cancel a policy mid-term for one of these reasons:
- Nonpayment of premium
- Concealment or misrepresentation
- Substantial increase in the risk, and (in some states)
- Financial impairment of the Insurer.
Be sure that you note the difference between cancellation (mid-term) and nonrenewal (at the end of the policy term).
The correct answer is: claims filed
To prevent recovery beyond the amount of the insured’s actual loss, the policy will contain:
Select one: a. an Other Insurance Clause b. a Coinsurance Clause Feedback The correct answer is: an Other Insurance Clause
A document outlining the coverage with evidence that coverage is in effect is known as a/an?
Select one: a. certificate of insurance b. endorsement Feedback The correct answer is: certificate of insurance
The cause of the loss is:
Select one: a. risk b. peril Feedback The correct answer is: peril
The limit of liability is the most the policy will pay:
Select one: a. per Insured b. per loss Feedback The correct answer is: per loss
A brush fire which spreads to a garage is an example of a:
Select one: a. risk b. peril Feedback The correct answer is: peril
The maximum the insured can collect under the policy is the:
Select one: a. limit of liability b. coinsurance Feedback The correct answer is: limit of liability
An assignment must be:
Select one:
a. agreed to prior to a property loss.
b. agreed to in writing by the insurer.
c. notarized.
d. approved by the state insurance commissioner.
Feedback
An assignment is an agreement to transfer coverage or benefits under a policy. The assignment must be written and agreed to by all parties.
The correct answer is: agreed to in writing by the insurer.
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?
Select one: a. $17,000 b. $20,000 c. $80,000 d. $100,000 Feedback Under the coinsurance requirement, 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.
The correct answer is: $80,000