Chapter 2 Exam review

Question 1

The assignment provision requires that:

A. The insured must give prompt notice to the company upon loss

B. The naming of parties other than the insured on loss payment checks is prohibited

C. The insured may not transfer ownership of the policy without the insurer’s written permission

D. No requirements may be placed upon the insured without legal action

Answer 1

c. The insured may not transfer ownership of the policy without the insurer’s written permission

Question 2

What is the only policy section that may change or be different for each customer?

A. The Exclusions

B. The Conditions

C. The Insuring Agreement

D. The Declarations

Answer 2

D. The Declarations

***The Declarations is specific to each property insured under a policy.

Question 3

All of the following statements regarding the property policy structure are correct, except:

A. The insured’s duties and obligations are listed in the Conditions section

B. Additional Coverages are added to the policy for an additional premium

C. The Insuring Agreement describes the perils that are covered under the policy

D. The Declarations Page lists other parties having an insurable interest in the property

Answer 3

B. Additional Coverages are added to the policy for an additional premium

** Additional Coverages are automatically included without an additional premium.

Question 4

All of the following statements regarding property insurance are correct, except:

A
The insurer may cancel a policy, after providing proper notice

B
A property that contains neither occupants nor personal property is deemed vacant

C
The owner of clothing left in the care of a dry cleaner is called a bailee

D
A binder is a temporary proof of insurance

Good Job!

Answer 4

C
The owner of clothing left in the care of a dry cleaner is called a bailee

***The owner of clothing taken in for cleaning would be a bailor. The dry cleaner in custody of the clothes is the bailee.

Question 5

The part of an insurance contract that varies with each individual policy, but is still a mandatory part of the policy, is the:

A
Declarations

B
Insuring agreement

C
Conditions

D
Exclusions

Answer 5

The Declarations section of the policy contains specific information about the insured, and thus will vary by policy, even when the type of coverage provided is the same.

A. Declorations

Question 6

Which of the following best describes a direct loss?

A
Transportation expenses after a personal auto loss

B
Increased living expenses following a fire loss

C
Water damage resulting from a burst pipe

D
Loss of rents from a dwelling following a fire loss

Answer 6

C
Water damage resulting from a burst pipe

***A direct loss is a physical loss proximately caused by a covered peril.

Question 7

Which of the following best defines short-rate cancellation?

A
The insured will receive less than the full amount of the unearned premium

B
The insured will receive exactly half of the unearned premium

C
The insured will receive none of the unearned premium

D
The premium is fully earned by the insurance company

Answer 7

A
The insured will receive less than the full amount of the unearned premium

***With short-rate cancellation, the premium refund is based upon a short-rate table in which the insurer retains a portion of the unearned premium.

Question 8

Which section lists the perils insured against by a property insurance policy?

A
Declarations

B
Definitions

C
Additional Coverages

D
Insuring Agreement

Answer 8

D
Insuring Agreement

***The Insuring Agreement is the company’s commitment to protect the insured and includes a description of the perils insured against.