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
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
If a third party is led to reasonably believe that an agent is acting within the scope of his/her authority, even though the agent is exceeding his/her authority, the principal may still be bound by the agent’s actions. In this case, the agent has bound the principal by A) implied authority. B) apparent authority. C) […]
Which of the following statements about the definition of the insured is (are) true? I. In some cases, a person who is not specifically named may be classified as an insured. II. Under no circumstances can more than one person be named as an insured. A) I only B) II only C) both I and […]
Powers specifically conferred on an agent to act on behalf of a principal are A) incidental authority. B) apparent authority. C) implied authority. D) express authority. ANSWER Answer: D
