Exam 10: Analysis of Insurance Contracts

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

Lisa has three fire insurance policies on her office building.The policy from company A is for $400,000,and the policies from companies B and C are for $100,000 each.If Lisa has a $360,000 loss,how much of the loss will be covered by each policy if the loss is settled on a pro rata basis by the insurers?

A provision in a disability income insurance policy that requires a person to be disabled for 60 days before receiving benefits is an example of a(n)

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?

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?

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

Kevin has three liability policies which provide for contribution by equal shares if other insurance applies to a loss.How much will each policy pay for a $3,000,000 liability judgment if policy A provides $500,000 of coverage,policy B provides $1,000,000 of coverage,and policy C provides $3,000,000 of coverage?

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.

Roger owns some farmland that he rents to a tenant.The tenant lives in an old farmhouse on the property and raises crops on the land.Roger is concerned about legal liability if the tenant injures someone.Roger requires the tenant to have liability insurance and to add himself to the liability coverage through an endorsement.Under the tenant's liability insurance,Roger is a(n)

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.

Under the terms of Jenny's auto insurance policy,she must pay the first $500 of any physical damage loss to her vehicle before her insurer will pay anything.What type of deductible is included in Jenny's auto insurance policy?

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?

As an alternative to coinsurance,rate discounts can be given as the amount of insurance to value increases.This alternative is called

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?

Helen and John both own automobiles on which they carry liability insurance.If Helen is negligent and has an accident while driving John's car with his permission,how will each insurer respond to any liability judgment against Helen?

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

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?

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

Eric's property was damaged in an accident.He phoned his agent to see if the loss was covered under his property insurance policy.The agent said,"As long as the cause of loss is not specifically excluded in the policy,the loss is covered." Based on the agent's answer,what type of insuring agreement appears in the policy?

Which of the following statements about a calendar-year deductible is (are)true? I.It requires the insured to pay a specified amount of each claim regardless of when the claim occurs during the year and regardless of any previous claims during the year. II.It is used only in policies which cover direct property losses.