Finance

ABC Company insured its building on a replacement cost basis for $700,

ABC Company insured its building on a replacement cost basis for $700,000 under a property insurance policy that included an 80 percent coinsurance clause. The building had a replacement cost of $1 million when it sustained a $40,000 loss. How much will ABC Company receive from its insurer, assuming no deductible applies? A) $33,333 B) […]

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Date: September 19th, 2020

In determining insurance limits and deductibles, an important concept

In determining insurance limits and deductibles, an important concept is that insurance should be used to pay big losses rather than small losses. The objective is to insure big losses that could cause financial ruin and to exclude small losses that can be budgeted out of current income. This concept is called the A) law […]

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Date: September 19th, 2020

Which of the following statements about problems arising from the use

Which of the following statements about problems arising from the use of a coinsurance clause is (are) true? I. The amount of insurance should be periodically evaluated to avoid a coinsurance penalty because of inflation. II. An agreed value coverage option is one method used to solve the problem of values that fluctuate throughout the […]

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Date: September 19th, 2020

Connie has an individual medical expense policy with a $1,000 deductib

Connie has an individual medical expense policy with a $1,000 deductible. She is required to pay 20 percent of covered expenses in excess of the deductible. The insurer will pay 80 percent of expenses in excess of the deductible. If Connie has eligible medical expenses of $26,000, how much will be paid by her insurer? […]

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Date: September 19th, 2020

Helen and John both own automobiles on which they carry liability insu

Helen and John both own automobiles on which they carry liability insurance. If Helen is negligent and has an accident while driving John’s car with his permission, how will each insurer respond to any liability judgment against Helen? A) The insurers will pay the judgment on a pro rata basis. B) John’s insurer will pay […]

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Date: September 19th, 2020

Kevin has three liability policies which provide for contribution by e

Kevin has three liability policies which provide for contribution by equal shares if other insurance applies to a loss. How much will each policy pay for a $3,000,000 liability judgment if policy A provides $500,000 of coverage, policy B provides $1,000,000 of coverage, and policy C provides $3,000,000 of coverage? A) Each policy will pay […]

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Date: September 19th, 2020