Unit 3 Quiz

Question 1

Jewel’s home is insured by XYZ Insurance Company. Last year, she made the final mortgage payment to FBN Mortgage Company. Jewel is considering selling her home to her niece, Cynthia. Which of the following has an insurable interest in the home?

Answer 1

Jewel.

WHY? Jewel stands to lose financially if a loss occurs.

Question 2

The principle that states that an insured should be restored after a loss to approximately the same financial position as before the loss is known as…

Answer 2

Indemnity.

Question 3

Which of the following would NOT generally be included in the supplementary payments portion of a liability policy.

Answer 3

Damage to property owned by the insured.

WHY? This is not part of BAILED and is instead outlined in the NOTICE OF CLAIM (check validity of latter).

Question 4

What part of an insurance policy personalizes the policy as to whom and what are insured?

Answer 4

Declarations.

Question 5

An insurance policy is prepared by the insurance company, with little or no input from the insured. This means that the insurance policy is a…

Answer 5

ADHESION Contract (“Take it” or “Leave it”)

Question 6

Endorsements are used to do all of the following EXCEPT…

Answer 6

… cancel the entire policy.

Question 7

Which of the following is NOT an essential element of a contract?

Answer 7

It must be drafted by an attorney.

Question 8

All of the following are supplementary coverages EXCEPT…

Answer 8

… loss of property

Question 9

The insured has 2 separate dwelling policies that cover the same property: Policy A for $30,000 and Policy B for $60,000. The insured has a $12,000 loss. If both policies use the pro rata method to handle other insurance, how much will Policy B pay for this loss?

Answer 9

$8,000.

Question 10

In liability policies, supplementary payments are…

Answer 10

… payable in addition to the policy limit of liability.

Question 11

When applying for homeowners insurance, Vince Applebee tells his agent that the home is used strictly as a residence. Actually, he manufactures fireworks in the basement of the home. Which of the following best describes the insurer’s likely response if it discovers Applebee’s misrepresentation after the policy is issued?

Answer 11

It will void the policy because Applebee misrepresented a material fact.

Question 12

All of the following are common supplementary payments provided by liability insurance policies EXCEPT…

Answer 12

… defense costs subject to 10% of the applicable policy limit.