Chapter 2: Property Basics

Question 1

An insured owns a building that is valued at $400,000. To comply with the 80% coinsurance provision of his insurance policy, how much should he insure the property for?

A. 100% of the market value
B. 400,000
C. 32, 000
D. 80% of the property’s replacement cost or more

Answer 1

80% of the property’s replacement cost or more

Question 2

Which of the following is a mandatory part of an insurance policy that varies with each individual policy?
A. Declarations
B. Conditions
C. Exclusions
D. Insuring Agreement

Answer 2

Declarations (who, what, when and where are all different in each contract)

Question 3

All of the following are considered parts of the policy structure EXCEPT
A. Insuring clause
B. Conditions
C. Provisions
D. Exclusions

Answer 3

Provisions (Communicates the policy’s benefits, conditions, etc)

Question 4

Which is the limit of coverage for a direct loss caused by a mine subsidence?
A. $300,000
B. 500,000
C. 250,000
D. 100,000

Answer 4

$300,000

Question 5

Which part of an insurance policy covers claims-related expenses, reasonable expenses incurred by an insured to protect damaged property from further loss, or defense expenses?
A. Insuring agreement
B. Additional coverage
C. Exclusions
D. Declarations

Answer 5

Additional Coverage

Question 6

The part of the policy that sets forth the rules of conduct, duties, and obligations of the parties is called the
A. Insuring clause
B. Conditions
C. Exclusions
D. Declarations

Answer 6

Conditions

Question 7

An insured’s building has an actual cash value of $200,000, and he has insured the property for $120,000 with an 80% coinsurance clause. A $40,000 loss occurs. How much will the policy pay?
A. $0
B. $30,000
C $32,000
D. 40,000

Answer 7

30,000 - NO IDEA WHY : /

Question 8

Which of the following would not be a violation of state insurance regulations?
A. Agent A uses her license to write only insurance for herself and her immediate family
B. Agent B charges his clients a consulting fee, in addition to the premium for placing a policy
C. Agent C uses her license to write only business other than controlled
D. Agent D collects premiums due on policies and deposits the funds in his own personal account

Answer 8

Agent C using her licence to write only business other than controlled

Question 9

The ABC Corporation has $100,000 of coverage on its building through insurance company A, and 50,000 of identical coverage on the same building through insurance company B. Assuming coinsurance is not an issue, when a $24,000 loss occurs and the pro rata method is used, how much will each insurer pay?
A. Company A will pay 20,000; company B will pay 4,000
B. Company A will pay $12,000; company B will pay 12,000
C. Company A will pay 24,000; Company B will pay 0
D. Company A will pay $16,000; Company B will pay 8,000

Answer 9

Company A will pay 16,000; company B will pay $8000-NOT SURE HOW : /

Question 10

An insured’s business is damanged because of a fire, and he is forced to close the business temporarily for repairs. As a result, the insured lost income. What type of loss is this?
A. Special
B. Additional
C. Consequential
D. Direct

Answer 10

Consequential

Question 11

In the event of a loss covered under mine subsidence coverage, the deductible is set at
A. There is no deductible for mine subsidence losses
B. A flat amount
C. A minimum of 250
D. An amount that is the same as other property losses covered under the policy

Answer 11

A minimum of 250

Question 12

Which of the following coverages in dwelling and homeowners policies is for indirect losses?
A. Loss of use
B. Dwelling
C. Structures
D. Contents

Answer 12

Loss of use

Question 13

All of the following are found in the declarations section of a policy EXCEPT the
A. Policy premiums
B. Name of the insured
C. Limits of insurance
D. Exclusions

Answer 13

Exclusions

Question 14

An insured’s 9 year old son threw a ball, accidently breaking a neighbors plate glass window. The insured was found legally liable for the cost of replacing the window. This is an example of
A. Intervening cause
B. Juvenile delinquency
C. Absolute liability
D. Vicarious liability

Answer 14

Vicarious liability

Question 15

Replacement cost is defined as
A. Payment of the full policy limits in the event of a total loss
B. Full replacement of property at its current cost, new and without reduction for depreciation
C. The market value of property of like kind and quality
D. Full replacement of property with like kind and quality, less an allowance for physical deterioration and depreciation

Answer 15

Full replacement of property at its current cost, new and without reduction for depreciation

Question 16

All of the following are conditions commonly found in the insurance policy EXCEPT
A. Insuring agreement
B. Cancellation and nonrenewal
C. Subrogation
D. Appraisal

Answer 16

Insuring agreement

Question 17

Which of the following lists all the required elements for establishing a charge of negligence?
A. Breach of reasonable person rule and proximate degree of care
B. Legal duty owed, standard of care, proximate cause, damages
C. Legal duty owed, proximate cause, intervening cause, damages
D. Legal duty owed, deliberate attempt to cause harm, damages

Answer 17

Legal duty owed, standard care, proximate cause, damages