IA Test 27 Flashcards
Name the coverage that applies to the extra cost the insured incurs to make temporary repairs and speed up the permanent repairs or replacement of damaged covered equipment under an Equipment Breakdown policy.
Answer Choices: Select the Correct Answer Expediting expense coverage Extra expense coverage Removal expense coverage Contributing expense coverage
Question 1 of 100
Your answer: Expediting expense coverage is correct.
EXPLANATION:
This is called expediting expense coverage.
Question 1 of 100
Michelle Winters seeks coverage for her manufacturing company to include premises liability coverage, products liability coverage, insured contracts, and completed operations coverage. Which of the following policies would cover all of these potential loss exposures?
Answer Choices: Select the Correct Answer
Commercial General Liability
Contractual Liability
Products and Completed Operations Liability
Personal Injury Liability
Question 2 of 100
Your answer: Commercial General Liability is correct.
EXPLANATION:
Only the CGL policy can include all the coverages the insured is requesting.
Question 2 of 100
Which of the following dwelling forms may provide replacement cost coverage for buildings?
Answer Choices: Select the Correct Answer The broad and special forms only The basic, broad, and special forms The basic and broad forms only The special form only
Question 3 of 100
Your answer: The special form only is incorrect. The correct answer is: The broad and special forms only.
EXPLANATION:
The broad and special forms provide replacement cost coverage on the structures if the insured carries at least 80% of replacement cost value on the structures. The basic form provides actual cash value coverage only.
Question 3 of 100
Which party has the right to request information about a claim at any time?
Answer Choices: Select the Correct Answer The California Department of Insurance The plaintiff’s attorney Law enforcement The agent
Question 4 of 100
Your answer: The California Department of Insurance is correct.
EXPLANATION:
Only the California Department of Insurance (CDI) has the absolute right to request and be provided any claim information at any time. A plaintiff’s attorney may subpoena such information, but it may be considered private information. Law enforcement would also need a subpoena for claim information.
Question 4 of 100
Six months after a new employee is hired, the insured learns that the employee was fired from a previous job for stealing company property. How will this discovery affect the insured’s crime coverage?
Answer Choices: Select the Correct Answer
Coverage for this employee will be cancelled at the end of the policy period
It will have no effect on coverage because the dishonest act occurred before the employee was hired
Coverage for this employee will be cancelled after 30 days
Coverage for this employee will be cancelled immediately
Question 5 of 100
Your answer: Coverage for this employee will be cancelled immediately is correct.
EXPLANATION:
Coverage for this employee will be cancelled immediately. This happens immediately due to the discovery of the past dishonest acts by that employee. Another example, an employee was caught in May 2011 falsifying documents. The policy in question becomes effective August 2011. In November, the same employee is caught stealing. Since the insured knew of the employee’s dishonest act prior to the policy period, any loss is excluded from coverage.
Question 5 of 100
How soon must a change in the qualified manager of an adjusting firm be reported to the California Department of Insurance?
Answer Choices: Select the Correct Answer Within one year Within 30 days Immediately Does not have to be reported
Question 6 of 100
Your answer: Within 30 days is correct.
EXPLANATION:
A change in the qualified manager, branch manager, officer or partner must be reported to the DOI within 30 days of the change.
Question 6 of 100
The Earthquake Endorsement will provide coverage to the dwelling and/or personal property with the deductible stated as:
Answer Choices: Select the Correct Answer
$1,000
5% of the limit that applies to all Section I coverages.
$500
$2,500
Question 7 of 100
Your answer: 5% of the limit that applies to all Section I coverages. is correct.
EXPLANATION:
The Earthquake Endorsement has a base deductible is 5% of the limit that applies to all Section I coverages, but never less than $500.
Question 7 of 100
An insurer has decided to non-renew a Homeowners policy which has a standard mortgage clause. Who must be notified of this action?
Answer Choices: Select the Correct Answer The Insured and the mortgagee Only the insured Only the mortgagee The realtor
Question 8 of 100
Your answer: The Insured and the mortgagee is correct.
EXPLANATION:
The insurer must notify both the insured and the mortgagee in case of a cancellation or non-renewal of the policy.
Question 8 of 100
The California Code states that standard fire policies must be written on the standard form with very limited omissions. Which of the following modifications are permitted to be made under a Standard Fire policy in California?
Answer Choices: Select the Correct Answer
The coverage can be substantially equivalent to or more favorable to the insured.
The insured can sign a waiver and accept lesser coverage.
The Commissioner can approve any variance in coverage.
The insurer can offer lesser coverage at a lower premium.
Question 9 of 100
Your answer: The coverage can be substantially equivalent to or more favorable to the insured. is correct.
EXPLANATION:
According to the California Insurance Code (CIC 2070), the coverage can be substantially equivalent to or more favorable to the insured than that contained in the Standard Fire insurance policy.
Question 9 of 100
Under the dwelling policy, what is the purpose of adding the EC (extended coverage) endorsement?
Answer Choices: Select the Correct Answer
It adds additional perils to the coverage.
It adds broad form perils to the policy.
It adds open peril coverage to the policy.
It limits coverage.
Question 10 of 100
Your answer: It adds broad form perils to the policy. is incorrect. The correct answer is: It adds additional perils to the coverage. .
EXPLANATION:
The EC endorsement is added to the DP-1 form to add additional perils.
Question 10 of 100
Which of the following Commercial Inland Marine coverage forms covers payments that are due to the insured from customers when these payments cannot be collected due to loss or damage of records?
Answer Choices: Select the Correct Answer Accounts Receivable Equipment Dealers Electronic Data Processing Valuable Papers and Records
Question 11 of 100
Your answer: Valuable Papers and Records is incorrect. The correct answer is: Accounts Receivable.
EXPLANATION:
The purpose of accounts receivable coverage is to protect the insured when their records have been destroyed or damaged by a peril insured against. It pays to reconstruct the records and it also pays for the losses sustained by the insured due to the destruction of the accounts receivable records.
Question 11 of 100
What is the difference between arbitration and mediation in the adjusting of claims?
Answer Choices: Select the Correct Answer
Mediation is not binding whereas with arbitration, the decision is final and binding on the parties
Both involve a signed waiver
Arbitration usually involves a person in the legal profession
Only one involves the law of estoppel
Question 12 of 100
Your answer: Mediation is not binding whereas with arbitration, the decision is final and binding on the parties is correct.
EXPLANATION:
Arbitration is when the parties in a dispute submit their differences to a private body and the private body’s decision is usually final and binding to both parties. Mediation involves an impartial person, usually in the law profession, who helps the parties analyze their dispute and devise a compromise.
Question 12 of 100
Assume a commercial umbrella liability policy is in effect and all conditions are met. Identify the correct statement.
Answer Choices: Select the Correct Answer
An individual claims the insured made libelous statements that have damaged the individual’s career. This damage would be covered under the policy’s Bodily Injury and Property Damage Liability coverage.
An individual suffered embarrassment after tripping over a brick someone had left in the insured’s walkway. This damage would be covered under the policy’s Personal and Advertising Injury Liability coverage.
A customer’s leg was fractured by a fall in the insured’s warehouse. This damage would be covered under the policy’s Personal and Advertising Injury Liability coverage.
An insured is responsible for damaging a client’s million dollar shipment of products. This damage would be covered under the policy’s Bodily Injury and Property Damage Liability coverage.
Question 13 of 100
Your answer: A customer’s leg was fractured by a fall in the insured’s warehouse. This damage would be covered under the policy’s Personal and Advertising Injury Liability coverage. is incorrect. The correct answer is: An insured is responsible for damaging a client’s million dollar shipment of products. This damage would be covered under the policy’s Bodily Injury and Property Damage Liability coverage. .
EXPLANATION:
Only the damage done to the client’s property is covered. Libelous statements are covered by personal injury and not bodily injury and property damage, embarrassment is not covered and the fractured leg is bodily injury and not personal or advertising injury.
Question 13 of 100
Bill’s business employs Meg to clean offices at night, and recently Meg slipped and fell at work, hurting her back. Bill understands that his Workers’ Compensation insurance will provide Meg with:
Answer Choices: Select the Correct Answer
Medical benefits and lost wages.
Psychological counseling.
A representative to help her get benefits from her union.
A lawyer to present her case in court.
Question 14 of 100
Submit
Your answer: Medical benefits and lost wages. is correct.
EXPLANATION:
Workers’ Compensation insurance provides medical benefits and lost wages. The other choices are all incorrect regarding the benefits of Workers’ Compensation insurance.
Question 14 of 100
What does an insurer do when the insured has possibly waived his or her rights in a liability claim?
Answer Choices: Select the Correct Answer
Send a “reservation of rights” letter.
Deny the claim.
Pay only a portion of the proven liability claim.
Insist the insured obtain his or her own legal counsel.
Question 15 of 100
Your answer: Send a “reservation of rights” letter. is correct.
EXPLANATION:
There are situations where the insured has waived the right to coverage under a liability policy. Failure to report a claim in a timely fashion could cause the insured to waive coverage. The insurer will normally issue a reservation of rights letter to the insured advising that it will investigate the claim but will not commit to pay the claim.
Question 15 of 100
If a third party is handed a check from the insured that has been altered and pays the false amount on the check, is such a loss covered? Forgery coverage is carried by the insured.
Answer Choices: Select the Correct Answer
The loss is not covered because it was presented by a third party
The insurance is not designed to cover this type of forgery
The insurance company will honor the claim
The insurance company may send the insured a non-waiver agreement to maintain its rights to conduct a thorough investigation while not admitting liability
Question 16 of 100
Your answer: The insurance company may send the insured a non-waiver agreement to maintain its rights to conduct a thorough investigation while not admitting liability is incorrect. The correct answer is: The insurance company will honor the claim.
EXPLANATION:
This insuring agreement offers the insured protection from forgeries or alterations in several instances. If a forged check is presented to the insured for payment and the insured hands over the money, such a loss is covered. If a third party is handed a check from the insured that has been altered and pays the false amount on the check, such a loss is covered. If an agent of the insured presents a forged draft to a third party and receives a “sum certain in money,” such a loss is covered. This insuring agreement also provides defense costs. If the insured is sued for refusing to pay a check or draft or promissory note because he or she thinks the item is forged or altered, this insuring agreement requires the insurer to pay defense costs. The insured has to have the written consent of the insurer to defend against the lawsuit and the legal expenses have to be reasonable. The defense costs are in addition to the stated limit of insurance applicable to the forgery or alteration coverage. However, the insured has to pay the defense costs up front; this is an indemnification agreement.
Question 16 of 100
You are at home having your roof repaired. An employee of the roofing company needs to go to the hardware store to purchase supplies. Your car is blocking the driveway so you allow him to use your car to go to the store. While driving your car, he is at-fault in an auto accident. Your insurance policy will protect:
Answer Choices: Select the Correct Answer
All of the parties would be protected by your policy.
Only you the insured will be protected.
Only the employee will be protected.
Both you and the insured will be protected.
Question 17 of 100
Your answer: Only you the insured will be protected. is incorrect. The correct answer is: All of the parties would be protected by your policy. .
EXPLANATION:
Under liability coverage the definition includes “any person” using “your covered auto.” This would therefore provide coverage for the worker. The insured is covered for the ownership of the auto. The policy also provides coverage “for any person or organization with respect to legal responsibility for acts or omissions of a person for who coverage is afforded.” This would provide coverage for the employer for the actions of the employee as the actions relate to his employment.
Question 17 of 100
Which of the following is not eligible for coverage under a homeowner policy form?
Answer Choices: Select the Correct Answer
A tenant living in an apartment building
A condominium unit owner
A residence on a farm
A mobile home used as a permanent residence
Question 18 of 100
Your answer: A tenant living in an apartment building is incorrect. The correct answer is: A residence on a farm.
EXPLANATION:
Farm property is not eligible for the homeowner program. Separate farm programs are available.
Question 18 of 100
Kyle owns a woodworking shop where he makes and sells custom furniture. One night, Kyle’s shop is destroyed by a fire, and he files a claim with his insurance company. Which of the following items would be covered under Coverage A - Buildings and Structures of the Building and Personal Property Coverage form of Kyle’s Commercial Property policy?
Answer Choices: Select the Correct Answer
A kitchen table that Kyle has completed.
A bandsaw affixed to the floor.
Kyle’s personal laptop he left in the shop overnight.
A hand-held circular saw.
Question 19 of 100
Your answer: A bandsaw affixed to the floor. is correct.
EXPLANATION:
“Building” by definition is the structure and anything permanently attached to it. The bandsaw is affixed to the floor. The other choices are all personal property and not part of the building.
Question 19 of 100
If a seaman is negligent in a claim against the employer, which of the following is correct?
Answer Choices: Select the Correct Answer
The claim is paid in full.
Violation of posted safety standards can affect the outcome of the claim.
The amount of the claim cannot be reduced because of the seaman’s negligence.
The claim is denied.
Your answer: The amount of the claim cannot be reduced because of the seaman’s negligence. is incorrect. The correct answer is: Violation of posted safety standards can affect the outcome of the claim..
EXPLANATION:
Under the Jones Act, violation of posted safety regulations could point to negligence by the seaman and affect the outcome of the claim against the employer.
Question 20 of 100
Trailer Interchange insurance:
Answer Choices: Select the Correct Answer
Covers physical damage to a non-owned trailer when the trucker is liable under a written interchange agreement.
Is included under Symbol 47.
Covers truckers physical damages when a vehicle is being used on the Interstate Highway system or connecting roads.
Covers truckers liability when a vehicle is being used on the Interstate Highway system or connecting roads.
Question 21 of 100
Your answer: Covers truckers liability when a vehicle is being used on the Interstate Highway system or connecting roads. is incorrect. The correct answer is: Covers physical damage to a non-owned trailer when the trucker is liable under a written interchange agreement. .
EXPLANATION:
Trailer Interchange insurance covers damage to a non-owned trailer and applies when truckers borrow or lease a trailer from another firm for use in their own business - a very frequent practice in the industry.
Question 21 of 100
A farmer has unintentionally libeled a neighboring farmer by stating that the neighbor’s dairy products are inferior to his. This is an example of:
Answer Choices: Select the Correct Answer Advertising/personal injury. Bodily injury. Contractual liability. Vicarious liability.
Question 22 of 100
Your answer: Advertising/personal injury. is correct.
EXPLANATION:
This is an example of personal/advertising injury. No bodily injury or property damage occurred.
Question 22 of 100
The insured has a one family dwelling with a detached garage. The dwelling is insured for $200,000. How much coverage applies to the garage?
Answer Choices: Select the Correct Answer $10,000 $15,000 $20,000 None
Question 23 of 100
Your answer: $20,000 is correct.
EXPLANATION:
The policy provides for 10% of the dwelling limit. Therefore, the garage is insured for $20,000 for the same perils that apply to the dwelling.
Question 23 of 100
As a prerequisite to receive an adjuster license in California, the applicant must have at least two years of claims adjusting experience. The California Insurance Code defines one year of experience as:
Answer Choices: Select the Correct Answer
Not less than 1,000 hours of actual compensated work performed by an applicant, completed prior to submitting the license application.
Not less than 2,000 hours of actual compensated work performed by an applicant, completed prior to submitting the license application.
Not less than 2,000 hours of actual compensated work performed by an applicant, completed after submitting the license application.
Not less than 1,000 hours of actual compensated work performed by an applicant, completed after submitting the license application.
Question 24 of 100
Your answer: Not less than 2,000 hours of actual compensated work performed by an applicant, completed prior to submitting the license application. is correct.
EXPLANATION:
The CIC defines “one year of experience” as not less than 2,000 hours of actual compensated work performed by an applicant, completed prior to submitting the license application. Therefore, if an applicant must have the equivalent of two years of experience, they would need a total of 4,000 hours of compensated work.
Question 24 of 100
A department store has a large inventory of costume jewelry and watches. No single item is valued for more than $100.00. A customer steals most of the items and flees the scene. What theft coverage would be provided by an unendorsed ISO standardized BOP policy?
Answer Choices: Select the Correct Answer
$500
Full contents limit
$2,500
No coverage for the theft of jewelry and watches
Question 25 of 100
Your answer: Full contents limit is correct.
EXPLANATION:
An unendorsed BOP provides theft of jewelry and watches up to the full contents limit if the value per item does not exceed $100.00. For high-end jewelry and watches, the policy provides a maximum theft limit of $2,500 for the entire theft loss. Please keep in mind that these limitations would not apply to losses from the other insured perils.
Question 25 of 100
Insurers conducting business in California must establish an operate a “Special Investigative Unit” to investigate suspected insurance fraud. Employees of the SIU must:
I. Have the ability to conduct effective investigations of suspected insurance fraud.
II. Be familiar with insurance and related laws.
III. Have knowledge or experience in general claims practices.
IV. Have knowledge of current trends in insurance fraud.
Answer Choices: Select the Correct Answer I, II and III only I, III and IV only I, II, III and IV I and IV only
Question 26 of 100
Your answer: I, II, III and IV is correct.
EXPLANATION:
A Special Investigative Unit must be composed of employees who have knowledge and/or experience in general claims practices, the analysis of claims for patterns of fraud, and current trends in insurance fraud, education and training in specific red flags, red flag events, and other criteria indicating possible fraud. They must have the ability to conduct effective investigations of suspected insurance fraud and be familiar with insurance and related law and the use of available insurer related database resources.
Question 26 of 100
The Ordinance or Law Endorsement can be added to a Homeowners form to increase the amount of coverage in ______ increments, up to ______ coverage.
Answer Choices: Select the Correct Answer 20% increments, up to 80% coverage. 25% increments, up to 100% coverage. 30% increments, up to 70% coverage. 15% increments, up to 95% coverage.
Question 27 of 100
Your answer: 25% increments, up to 100% coverage. is correct.
EXPLANATION:
Coverage for Ordinance or Law is already included on all Homeowners forms except the HO-8. The Ordinance or Law Endorsement can be attached to the form, increasing the coverage in 25% increments, up to 100% coverage.
Question 27 of 100
A deductible usually applies to which of the following automobile policy coverages?
Answer Choices: Select the Correct Answer Physical Damage Bodily Injury Liability Property Damage Liability Medical Payments
Question 28 of 100
Your answer: Property Damage Liability is incorrect. The correct answer is: Physical Damage.
EXPLANATION:
Deductibles are never used with medical payment coverage and very seldom used for bodily injury and property damage. Deductibles usually apply only to physical damage coverage.
Question 28 of 100
The Now Company carries a special BOP policy with a liability limit of $500,000. The company is involved in an accident causing $200,000 bodily injury damage and $200,000 property damage. The total amount collectible under the policy is:
Answer Choices: Select the Correct Answer $500,000 $400,000 $200,000 $100,000
Question 29 of 100
Your answer: $400,000 is correct.
EXPLANATION:
BOP policies provide a single limit of liability. Both bodily injury and property damage coverage is provided. Since the amounts for bodily injury and property damage combined do not exceed the 500,000 occurrence limit, the total amount of the claim would be covered.
Question 29 of 100
How are losses settled under a typical inland marine policy?
Answer Choices: Select the Correct Answer Actual Cash Value Replacement Cost Functional Replacement Cost Cost to repair only basis
Question 30 of 100
Your answer: Replacement Cost is incorrect. The correct answer is: Actual Cash Value.
EXPLANATION:
Most inland marine policies pay on an actual cash value basis.
Question 30 of 100
An application for an independent adjuster license in California must include:
I. The full name and business address of the applicant.
II. A recent photograph of the applicant and one classifiable set of his or her fingerprints.
III. A verified statement of his or her experience qualifications.
IV. A statement as to the classification or classifications under which the applicant desires to be qualified.
Answer Choices: Select the Correct Answer I, II, III and IV I, II and III only I, III and IV only I and II only
Question 31 of 100
Your answer: I, III and IV only is correct.
EXPLANATION:
Two recent photographs of the applicant, of a type prescribed by the Commissioner, and two classifiable sets of his or her fingerprints is required.
Question 31 of 100
Under an Equipment Breakdown policy, all of the following are supplementary payments, EXCEPT:
Answer Choices: Select the Correct Answer Expediting expenses. Defense costs. Interest on judgment. Premiums on appeal bonds.
Question 32 of 100
Your answer: Premiums on appeal bonds. is incorrect. The correct answer is: Expediting expenses. .
EXPLANATION:
Expediting expenses are covered in the limit of the coverage. The other items are part of the supplementary payments that are “in addition to” the policy limit.
Question 32 of 100
An insured carries a Personal Property Replacement Cost endorsement attached to his Homeowners policy. He has suffered a loss to his personal property. He submits a claim for actual cash value (ACV) at the time of the loss, but notifies the insurer that he intends to make a claim for replacement cost later. The insurer will honor the insured’s request, but only if the cost to repair or replace the property is:
Answer Choices: Select the Correct Answer More than $500. Less than $500. More than $1,000. Less than $5,000.
Question 33 of 100
Your answer: More than $500. is correct.
EXPLANATION:
If the cost to repair or replace the property is more than $500, the insurer will pay the actual cash value for the loss, until the actual repair or replacement is made.
Question 33 of 100
Under workers compensation rules, if an employee suffers a 5% loss of use of his left arm, he will receive a disability rating of:
Answer Choices: Select the Correct Answer Temporary, partial. Temporary, total. Permanent, total. Permanent, partial.
Question 34 of 100
Your answer: Permanent, partial. is correct.
EXPLANATION:
Any rating between 1% and 99% indicates a permanent, partial disability.
Question 34 of 100
Which is false regarding the California Good Driver Discount?
Answer Choices: Select the Correct Answer
A person must have maintained at least a “B” average in high school.
It shall be at least 20% below the rate the insured would otherwise be charged.
A driver does not have to prior coverage in force to receive the discount.
An insurer may refuse the discount for motorcycles in some cases.
Question 35 of 100
Your answer: A person must have maintained at least a “B” average in high school. is correct.
EXPLANATION:
To qualify for the discount, a driver does not have to be a student.
Question 35 of 100
Under the Commercial Building and Personal Property Coverage form, if no optional coverages are selected, loss valuation/settlement is based on:
Answer Choices: Select the Correct Answer Actual cash value. Market value. Original cost. Replacement cost.
Question 36 of 100
Your answer: Actual cash value. is correct.
EXPLANATION:
Losses are settled on an ACTUAL CASH VALUE basis. If the insured desires replacement cost coverage, then that option must be selected by indicating it on the property declarations. The insured limit should be increased to reflect the higher values involved with a replacement cost settlement.
Question 36 of 100
Which type of damages is not intended to indemnify the plaintiff?
Answer Choices: Select the Correct Answer Special damages. Punitive damages. General damages. Compensatory damages.
Question 37 of 100
Which type of damages is not intended to indemnify the plaintiff?
Your answer: Compensatory damages. is incorrect. The correct answer is: Punitive damages..
EXPLANATION:
Punitive damages are awarded in cases of gross negligence for the purpose of punishing the defendant. Special and general damages are types of compensatory damages, which are intended to indemnify the plaintiff.
Question 37 of 100
Which of the following is generally intended to cover property that moves from one location to another?
Answer Choices: Select the Correct Answer Floaters Endorsements Riders Binders
Question 38 of 100
Your answer: Floaters is correct.
EXPLANATION:
Floaters refer to a form of inland marine insurance. Some, but not all, are designed to cover the property during the course of transportation. Several cover the property wherever it is located.
Question 38 of 100
George went out for target practice one day with his handgun. He has practiced many times with the same target located in the woods behind his house. Unbeknownst to George, a neighbor was walking in the woods behind the target one day and was shot in the leg by George. Intentional acts are never covered by insurance, however, the claim filed by the injured neighbor may be covered under George’s liability coverage. Which of the following is the most likely reason why?
Answer Choices: Select the Correct Answer
Shooting the gun was an intentional act committed by George, but the neighbor did not assume the risk because he did not know George was shooting that day.
Because George’s intent is not taken into account when another person is harmed.
Shooting the gun was an intentional act committed by George, but the consequences of act (his neighbor being shot) were not intended.
Because liability insurance is required to provide a civil remedy to an injured person, no matter if the insured intended to commit the act or not.
Question 39 of 100
Your answer: Because liability insurance is required to provide a civil remedy to an injured person, no matter if the insured intended to commit the act or not. is incorrect. The correct answer is: Shooting the gun was an intentional act committed by George, but the consequences of act (his neighbor being shot) were not intended. .
EXPLANATION:
Intentional acts may be covered if the consequences of the act was not intended. Shooting the gun was an intentional act committed by George, but the consequences of act (his neighbor being shot) was not intended.
Question 39 of 100
The coinsurance clause in commercial property policies encourages the insured to carry insurance:
Answer Choices: Select the Correct Answer
At the full value, or at least 80% to value of the property.
At 70% of the full value of the property.
At 60% of the full value of the property.
At one-half the full value of the property.
Question 40 of 100
Your answer: At the full value, or at least 80% to value of the property. is correct.
EXPLANATION:
The coinsurance clause encourages the insured to insure at full value or to at least 80% of the value of the property. In exchange, the insured will receive a discount in the property insurance rates. Failure to comply with this clause reduces payments for a loss to the insured for partial losses. The insured will be penalized the same percentage as the percentage that he was underinsured. If he would insure the property for 70% to value instead of 80% to value he would receive 10% less on his partial loss. The coinsurance clause does not apply to total losses.
Question 40 of 100
