Mark reviewed his homeowners policy. He learned that his personal property was insured on an actual cash value basis. He would like replacement cost coverage on his personal property. He contacted his agent who said, “I’ll simply add an amendment to your contract that changes the basis of recovery to replacement cost.” The written provision […]
Deductibles are not used in which of the following type of insurance? A) life insurance B) health insurance C) property insurance D) disability income insurance ANSWER Answer: A
Shauna hurt her back and was unable to work. She filed a claim under her disability income insurance policy. Under terms of the policy, a period of time must pass between when the injury occurred and when the insurer begins to replace lost earnings. This time period is called a(n) A) grace period. B) enrollment […]
David owns a commercial building with a replacement cost of $4 million. The building is insured on a replacement cost basis for $2.4 million under a fire insurance policy that has an 80 percent coinsurance clause. How much will David collect if the building sustains a covered fire loss with a replacement cost of $80,000? […]
At what point in time must an insured meet the coinsurance requirement in a property insurance policy in order to avoid having to pay a portion of the loss? A) only at the time of loss B) only at the time when the policy is issued C) only at the time of policy application D) […]
Purposes of the coinsurance clause in health insurance contracts include which of the following? I. To reduce premiums. II. To exclude coverage for certain medical procedures. A) I only B) II only C) both I and II D) neither I nor II ANSWER Answer: A
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 […]
The primary purpose of coinsurance in property insurance is to A) reduce moral hazard. B) achieve equity in rating. C) minimize problems in settling claims. D) eliminate small losses. ANSWER Answer: B
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? […]
The purpose of other-insurance provisions is to A) eliminate the need for deductibles. B) penalize those insureds who carry inadequate amounts of insurance. C) specify who will pay losses if the insurer is bankrupt. D) preserve the principle of indemnity. ANSWER Answer: D
