Quiz 1
What is the formula for "Actual Cash Value" (ACV)?
Replacement cost minus depreciation.
All the following are conditions commonly found in an insurance contract, except:
a. Appraisal
b. Insuring Agreement
c. Subrogation
d.Cancellation
Insuring Agreement
A fire burning in the middle of the living room would be considered:
a. a hostile fire.
b. a Class II combustion
c. a friendly fire
d. an escaped fire
A hostile fire
What insurance policy provision defines how the policy will respond when there is more than one policy on the risk?
Other insurance
The policy provision that allows the insurer to enhance the coverages during the policy term without commensurate(corresponding) adjustment in premiums is called?
a. Assignment
b. Liberalization
c. Appraisal
d. Pro-rata
liberalization
If a driver chooses to drive recklessly because they have insurance coverage, what kind of hazard do they represent?
A Morale Hazard
What must be true about a fire in order for it to be covered by the Standard Fire Policy?
It must be hostile and have a flame or glow.
Who is insured under the Standard Fire policy?
What are the two types of risks? Define them.
Pure risk- no chance for gain.
Speculative risk- the chance for loss or gain.
What is retention?
What are the two types ? Define them.
Retention is when a person participates in the payment of a loss.
Full retention- No insurance. Person is fully responsible for loss payment.
Partial retention- A deductible.
Which of the following is NOT an essential element of a binding contract?
Legal purpose
Offer and Acceptance
Consideration
It must be in writing
It must be in writing
What is the job of an Underwriter or underwriting team ?
Determine what kind of risk an applicant represents.
A loss due to Civil Authority is only covered if...
the loss occurs by Civil Authorities for the purpose of controlling a fire.
What is the difference between Named Perils and Open Perils policies?
Named perils- names the things that are covered.
Open perils- names (exclusions), things that are not covered
What is the Law of Large Numbers?
It states that the more examples used to develop a statistic, the more reliable the statistic will be.
Insurance policies are contracts of adhesion, which means:
The insurer makes the contract and the insured simply adheres to the terms.
As a general rule, a complete fire insurance policy would be made up of:
a. The Standard Fire Policy with one or more forms attached
b. a Standard Policy alone
c. either a Standard Fire Policy alone or with one or more forms
The Standard Fire Policy with ONE or more forms attached
Travelers’ Insurance Company and Progressive Insurance Company write equal amounts of property insurance on identical policy forms for the same building. If a partial loss occurs, how much of the loss is Travelers’ liable for assuming Progressive does not pay any amount?
50% only
Suppose a fire occurs on February 26th. On April 30th, the insurance company notifies the mortgagee the insured has not filed a proof of loss. To protect their interest, the mortgagee must file a proof of loss within (blank) days after what date?
60 days after the notice on April 30th
How many days Vacant before glass and vandalism coverage is removed?
How many before policy ends ?
30 days
60 days
It is assumed that oral agreements made before contract formation were incorporated into the written contract. Once formed, earlier oral evidence will not be admitted in court to change or contradict the contract. This is known as:
Parol Evidence Rule
Suppose an insured has a piece of equipment for which the replacement cost is $8,500. A fire damages the equipment beyond repair. Since it was purchased two years ago, the equipment depreciated $900 the first year, $650 the second year. For what amount will the Standard Fire policy indemnity the insured?
$ 6,950
When a building with a value of $110,000 is insured by a policy with a 90% coinsurance clause, the amount of insurance required to avoid a coinsurance penalty is:
$ 99,000
Property with an insurable value of $50,000 is insured for $40,000. The policy contains an 80% coinsurance clause. The settlement of a $45,000 loss would be:
$ 40,000
When a person decides not to buy insurance because of cost, what method of risk has been undertaken?
a. Risk avoidance
b. Risk transfer
c. Risk retention
d. Risk reduction
Risk retention