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) […]
Which of the following statements about “open-perils” coverage is (are) true? I. All losses are covered except those losses specifically excluded. II. The burden of proof is on the insured to prove that a loss is covered. A) I only B) II only C) both I and II D) neither I nor II […]
What information is contained in the insuring agreement of an insurance policy? A) a description of the property or life to be insured B) a summary of the major promises of the insurer C) a summary of the obligations of the insured D) a list of the property, losses, and perils that are not covered […]
That part of a property and liability insurance contract that contains information about the property or activity to be insured is called the A) declarations. B) insuring agreement. C) exclusions. D) conditions. ANSWER Answer: A
Reasons why a peril may be considered uninsurable and therefore excluded from insurance contracts include which of the following? I. The losses from the occurrence of the peril may be due to a predictable decline in value. II. The losses from the occurrence of the peril may be incalculable and catastrophic. A) I only B) […]
The exclusion of flood in a homeowners policy is an example of an A) excluded activity. B) excluded condition. C) excluded property. D) excluded peril. ANSWER Answer: D
Exclusions are used in insurance policies for all of the following reasons EXCEPT A) to reduce moral hazard. B) to waive policy conditions. C) to eliminate coverage for uninsurable perils. D) to eliminate coverage not needed by typical insureds. ANSWER Answer: B
The authority of an agent to perform all incidental acts necessary to fulfill the purposes of the agency agreement is called A) implied authority. B) declared authority. C) apparent authority. D) express authority. ANSWER Answer: A
The policy provision requiring the filing of proof of loss with the insurer is an example of a(n) A) declaration. B) condition. C) insuring agreement. D) miscellaneous provision. ANSWER Answer: B
