Analysis Of Insurance Contracts

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Question 1
Free
Multiple Choice

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

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A

declarations.

B

insuring agreement.

C

exclusions.

D

conditions.

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Question 2
Free
Multiple Choice

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

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A

a description of the property or life to be insured

B

a summary of the major promises of the insurer

C

a summary of the obligations of the insured

D

a list of the property, losses, and perils that are not covered

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Question 3
Free
Multiple Choice

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.

Choose correct answer/s
A

I only

B

II only

C

both I and II

D

neither I nor II

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Question 4
Free
Multiple Choice

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

Choose correct answer/s
A

excluded activity.

B

excluded condition.

C

excluded property.

D

excluded peril.

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Question 5
Free
Multiple Choice

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

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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.

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Question 6
Multiple Choice

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.

Choose correct answer/s
A
I only
B
II only
C
both I and II
D
neither I nor II
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Question 7
Multiple Choice

The policy provision requiring the filing of proof of loss with the insurer is an example of a(n)

Choose correct answer/s
A
declaration.
B
condition.
C
insuring agreement.
D
miscellaneous provision.
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Question 8
Multiple Choice

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.

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A
I only
B
II only
C
both I and II
D
neither I nor II
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Question 9
Multiple Choice

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

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A
They are usually written.
B
They can be used to add or delete policy provisions.
C
They normally take precedence over other conflicting policy provisions.
D
They are primarily used to circumvent legislation requiring specific policy provisions.
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Question 10
Multiple Choice

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

Choose correct answer/s
A
life insurance
B
health insurance
C
property insurance
D
disability income insurance
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Question 11
Multiple Choice

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

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A
eliminate coverage for small claims.
B
place restrictions or limits on the insurer's promise to perform.
C
provide broader coverage by increasing the number of perils covered.
D
exclude perils that are not insurable.
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Question 12
Multiple Choice

The deductible used for automobile collision losses is an example of a(n)

Choose correct answer/s
A
calendar year deductible.
B
elimination period.
C
straight deductible.
D
aggregate deductible.
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Question 13
Multiple Choice

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.

Choose correct answer/s
A
I only
B
II only
C
both I and II
D
neither I nor II
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Question 14
Multiple Choice

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)

Choose correct answer/s
A
calendar year deductible.
B
grace period.
C
elimination period.
D
probationary period.
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Question 15
Multiple Choice

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?

Choose correct answer/s
A
only at the time of loss
B
only at the time when the policy is issued
C
only at the time of policy application
D
both at the time when the policy is issued and at the time of loss
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Question 16
Multiple Choice

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?

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A
$50,000
B
$60,000
C
$66,667
D
$80,000
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Question 17
Multiple Choice

The primary purpose of coinsurance in property insurance is to

Choose correct answer/s
A
reduce moral hazard.
B
achieve equity in rating.
C
minimize problems in settling claims.
D
eliminate small losses.
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Question 18
Multiple Choice

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.

Choose correct answer/s
A
I only
B
II only
C
both I and II
D
neither I nor II
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Question 19
Multiple Choice

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?

Choose correct answer/s
A
$10,000
B
$11,000
C
$20,000
D
$21,000
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Question 20
Multiple Choice

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.

Choose correct answer/s
A
I only
B
II only
C
both I and II
D
neither I nor II
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