Property Insurance Basics

Question 1

The policy conditions define

Answer 1

How parties to the contract must act following a loss

Question 2

Which of the following would be named on the declarations page of a property or liability policy?

Answer 2

First named insured

Question 3

Which rating method provides an insurer with that portion of a rate that does not include provisions of expense or profit and is based on historical aggregate loss and loss adjustment expenses projected through development to their ultimate value ?

Answer 3

Loss cost rating

Question 4

ABC corporation has $100,000 of coverage on it’s building through Company A, and $50,000 through 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?

Answer 4

Company A will pay $16,000, Company B will pay $8,000

Question 5

All of the following are found in the declarations section EXCEPT the

Answer 5

Exclusions

Question 6

Using an air-cooled engine, a proposed insured has developed a new, experimental aircraft. If the inventor applies for liability coverage, what rating type will the insurer most likely use?

Answer 6

Judgement

Question 7

The pro rata liability clause is designed to protect the principle of

Answer 7

Indemnity

Question 8

Which of the following would NOT be classified as personal property for insurance purposes?

Answer 8

A house

Question 9

What provision in a property policy applies when the insurer broadens coverage but does not increase the premium?

Answer 9

Liberalization clause

Question 10

The transfer of an insured’s right to seek damages from a negligent party to the insurer is found in which of the following clauses?

Answer 10

Subrogation

Question 11

An insured’s roof cost $4,000 when installed 5 years ago. It has been damaged by hail and must be replaced. The new roof will cost $6,000 at today’s prices. If the roof has been depreciating at $200 a year and the insured’s policy is written on the actual cash value, how much will the policy pay toward the insured’s new roof?

Answer 11

$5,000

ACV is replacement cost - depreciation

Question 12

Which of the following would modify the original insurance contract by either adding or removing coverage?

Answer 12

Endorsements

Question 13

With regards to fire insurance premiums, structures with which of the following type of construction would most likely have the most favorable premium rate for the peril of fire?

Answer 13

Fire-resistive

Question 14

The declarations page of the homeowners policy provides all of the following information EXCEPT

Answer 14

A statement that earthquake damage is not covered.

Question 15

To purchase insurance, the policyowner must have financial interest in the property being insured. This is known as

Answer 15

Insurable interest

Question 16

A type of policy that is used to provide a specific amount of replacement cost for a given risk after an insured property has been destroyed is called a(n)

Answer 16

Valued policy

Question 17

Which of the following is used in the formula for calculating the actual cash valued of a property?

Answer 17

Replacement Cost

Question 18

All the following are conditions commonly found in the insurance policy EXCEPT

Answer 18

Insuring agreement

Question 19

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?

Answer 19

Additional coverage

Question 20

A building insured, but no one has lived or worked in it for 10 years. The building is completely empty of furniture of personal belongings. From an insurance standpoint, the building is

Answer 20

Vacant

Question 21

The part of the insurance contract the describes the covered perils and the nature of coverage of the contractual agreement between the insurer and the insured is called the

Answer 21

Insuring agreement

Question 22

An insured has a liability policy that sets amount from all claims that arise from a single incident at $50,000. Which type of limit of liability does the insured’s policy have?

Answer 22

Per occurence

Question 23

The loss ratio compares

Answer 23

Earned premium to losses

Question 24

Which of the following types of valuation works best for property whose value does not fluctuate much?

Answer 24

Agreed value

Question 25

Which of the following describes the transfer of a legal right or interest in an insurance policy?

Answer 25

Assignment

Question 26

Termination of an in-force insurance policy prior to the expiration date shown in the policy is known as

Answer 26

Cancellation