Exam 10: Analysis of Insurance Contracts

Exclusions are used in insurance policies for all of the following reasons EXCEPT

Maria's property was damaged by an earthquake.Maria is unsure whether earthquake is covered by her property insurance.Which two sections of the property insurance policy should Maria review to determine whether earthquake damage to her property is covered?

What information is contained in the insuring agreement of an insurance policy?

The purpose of other-insurance provisions is to

Jane purchased a $50,000 liability insurance policy from Insurer A.Fearing that she did not have enough liability insurance,she purchased an additional $100,000 of liability coverage from Insurer B.As a result of a negligent act,Jane was ordered to pay $75,000 in damages.Assuming the coverage from Insurer A is primary and the coverage from Insurer B is excess,how will this claim be settled?

James purchased liability insurance with a $100,000 limit from Insurer A.When Insurer A denied a claim that James thought should be covered,he bought a second liability insurance policy with a $150,000 limit from Insurer B.Before he cancelled the policy with Insurer A,a $60,000 loss occurred.If this loss is settled on a pro rata basis,how much must each insurer pay?

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.

All of the following statements about endorsements and riders are true EXCEPT

XYZ Company insured its building on a replacement cost basis for $450,000 under a property insurance policy that included an 80 percent coinsurance clause.The building had a replacement cost of $500,000 when it sustained a $50,000 loss.How much will XYZ Company receive from its insurer,assuming no deductible applies?

The exclusion of flood in a homeowners policy is an example of an

One of the purposes that deductible are used in insurance policies is to

Connie has a major medical policy with a $200 deductible.She is required to pay 25 percent of covered expenses in excess of the deductible.The insurer will pay 75 percent of expenses in excess of the deductible.If Connie has eligible medical expenses of $10,000,how much will be paid by her insurer?

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.

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.

The section of the insurance policy that includes provisions that qualify or limit the insurer's promise to perform is the

Kate is covered under her employer's group health plan.She is also covered as a dependent under her husband's group health plan.Under the usual coordination-of-benefits provision,how will each company respond to a claim filed by Kate?

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?

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 policy term.

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

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?