Chapter 8

Question 1

Under liability policies that include a deductible, the insurer usually pays all defense costs on a

Answer 1

first-dollar basis.

Question 2

With insurance-to-value provisions under homeowners (HO) and businessowners (BOP) policies, the amount payable by the insurer will never be less than the

Answer 2

Actual cash value (ACV) of the damaged property, subject to policy limits.

Question 3

If Barbara carried $120,000 of insurance on her home but to meet insurance-to-value requirements should have carried $160,000, how much would her policy indemnify for her for a $180,000 loss?

Answer 3

$120,000 – the policy limit.

Question 4

Benny borrowed a riding lawnmower from his brother Kyle who used it to mow his neighbor’s lawn. The neighbor then loaned it to his friend, Frank, before he returned it to Kyle. In this situation, the bailor is

Answer 4

Kyle

Question 5

covered by a valued policy

Answer 5

commercial watercraft

Question 6

Martin, Sara, Adam and Laura concurrently own and operate a riding stable. Each of them has rights of survivorship and an insurable interest worth the full value of the business. This type of ownership is referred to as

Answer 6

tenancy in partnership