Exam 10: Analysis of Insurance Contracts

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

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.

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?

That part of a property and liability insurance contract that contains information about the property or activity to be insured is called the

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?

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 possible 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)

The purpose of other-insurance provisions is to

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

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?

Deductibles are not used in which of the following type of insurance?

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.

Maria's home was damaged by an earthquake. As Maria has open-perils coverage on her home, she was surprised to learn that her loss was not covered. Which section of a property insurance policy specifies which perils, property, and types of losses are not covered?

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)

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

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?

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

Property insurance policies contain declarations, conditions, definitions, exclusions, and an insuring agreement. However, some policy terms, such as subrogation, cancellation, other insurance, and assignment do not fall into these categories. The part of an insurance contract in which these provisions can be found is the

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

Laura's medical insurance policy includes a $500 deductible. Laura is required to pay 20 percent of covered expenses in excess of the deductible, and her insurer will pay 80 percent of covered expenses in excess of the deductible. Laura was hospitalized and her covered medical expenses were $10,500. How much of the $10,500 will be paid by the insurer?

Janet hit a wall causing a large dent in the fender of her car. She was busy at work and delayed reporting the damage to her insurer for 9 months. When she finally reported the claim, her insurer denied payment, stating, "Although such a loss is usually covered, you are required under the terms of the contract to provide prompt notification in case of loss." The prompt notification requirement is an example of a(n)