Question 1

An insured usually must provide a formal proof of loss within 60 to 90 days to receive payment.

Accepted Answer

A) True 
 B)False  True

Question 2

In the case in the previous question, if it is determined that the loss is $80,000, the insured may recover

Accepted Answer

A)  $64,000, 
B)  $80,000, 
C)  $60,000, 
D)  nothing, 
E)  none of these. 
A)  $64,000, 
B)  $80,000, 
C)  $60,000, 
D)  nothing, 
E)  none of these. C

Question 3

Match the descriptions with their terms:
-The person whose name appears on the policy to receive the benefit of coverage is called the _________________.

Accepted Answer

A)  Actual cash value 
B)  Aggregate dollar limits 
C)  coinsurance 
D)  disappearing deductible 
E)  franchise deductible
F) insuring agreement
G) mortgagee
H) mortgagee clause
I) named insured
J) named peril
K) open-perils agreement
L) pro-rata clause
M) pure premium
N) replacement cost
O) Specific dollar limits 
A)  Actual cash value 
B)  Aggregate dollar limits 
C)  coinsurance 
D)  disappearing deductible 
E)  franchise deductible
F) insuring agreement
G) mortgagee
H) mortgagee clause
I) named insured
J) named peril
K) open-perils agreement
L) pro-rata clause
M) pure premium
N) replacement cost
O) Specific dollar limits I

Question 4

Inflation could cause an insured to suffer coinsurance penalties.

Accepted Answer

A) True 
 B)False

Question 5

Match the descriptions with their terms:
-In property insurance, the _________________ states that the policy will only pay a portion of the loss if more than one policy applies.

Accepted Answer

A)  Actual cash value 
B)  Aggregate dollar limits 
C)  coinsurance 
D)  disappearing deductible 
E)  franchise deductible
F) insuring agreement
G) mortgagee
H) mortgagee clause
I) named insured
J) named peril
K) open-perils agreement
L) pro-rata clause
M) pure premium
N) replacement cost
O) Specific dollar limits 
A)  Actual cash value 
B)  Aggregate dollar limits 
C)  coinsurance 
D)  disappearing deductible 
E)  franchise deductible
F) insuring agreement
G) mortgagee
H) mortgagee clause
I) named insured
J) named peril
K) open-perils agreement
L) pro-rata clause
M) pure premium
N) replacement cost
O) Specific dollar limits

Question 6

Jane Smith insures her $30,000 house as follows: $10,000 in insurer A, $20,000 in insurer B, and $10,000 in insurer C. In the event of a loss of $10,000, each insurer must pay as follows:

Accepted Answer

A)  A pays $10,000, B and C pay nothing, 
B)  each insurer pays one-third, 
C)  A pays one-fourth, B pays one-half, and C pays one-fourth, 
D)  nothing is payable because Jane violated the policy by overinsuring, 
E)  none of these. 
A)  A pays $10,000, B and C pay nothing, 
B)  each insurer pays one-third, 
C)  A pays one-fourth, B pays one-half, and C pays one-fourth, 
D)  nothing is payable because Jane violated the policy by overinsuring, 
E)  none of these.

Question 7

Match the descriptions with their terms:
-The _________________ protects the interest of the lending institution when a loan is made on a building.

Accepted Answer

A)  Actual cash value 
B)  Aggregate dollar limits 
C)  coinsurance 
D)  disappearing deductible 
E)  franchise deductible
F) insuring agreement
G) mortgagee
H) mortgagee clause
I) named insured
J) named peril
K) open-perils agreement
L) pro-rata clause
M) pure premium
N) replacement cost
O) Specific dollar limits 
A)  Actual cash value 
B)  Aggregate dollar limits 
C)  coinsurance 
D)  disappearing deductible 
E)  franchise deductible
F) insuring agreement
G) mortgagee
H) mortgagee clause
I) named insured
J) named peril
K) open-perils agreement
L) pro-rata clause
M) pure premium
N) replacement cost
O) Specific dollar limits

Question 8

Match the descriptions with their terms:
-When a/an _________________ is used, the size of the deductible decreases as the size of the loss increases.

Accepted Answer

A)  Actual cash value 
B)  Aggregate dollar limits 
C)  coinsurance 
D)  disappearing deductible 
E)  franchise deductible
F) insuring agreement
G) mortgagee
H) mortgagee clause
I) named insured
J) named peril
K) open-perils agreement
L) pro-rata clause
M) pure premium
N) replacement cost
O) Specific dollar limits 
A)  Actual cash value 
B)  Aggregate dollar limits 
C)  coinsurance 
D)  disappearing deductible 
E)  franchise deductible
F) insuring agreement
G) mortgagee
H) mortgagee clause
I) named insured
J) named peril
K) open-perils agreement
L) pro-rata clause
M) pure premium
N) replacement cost
O) Specific dollar limits

Question 9

Insurance contracts exclude certain perils only because they are uninsurable.

Accepted Answer

A) True 
 B)False

Question 10

Under the mortgagee clause the actions of the insured

Accepted Answer

A)  are held to the mortgagee, 
B)  have no effect on the policy, 
C)  are always disregarded with respect to the mortgagee, 
D)  are held to the mortgagee if the mortgagee is aware of such actions before the loss occurs, 
E)  none of these. 
A)  are held to the mortgagee, 
B)  have no effect on the policy, 
C)  are always disregarded with respect to the mortgagee, 
D)  are held to the mortgagee if the mortgagee is aware of such actions before the loss occurs, 
E)  none of these.

Question 11

Match the descriptions with their terms:
-_________________ restrict payments to some maximum amount of any one group of items of property.

Accepted Answer

A)  Actual cash value 
B)  Aggregate dollar limits 
C)  coinsurance 
D)  disappearing deductible 
E)  franchise deductible
F) insuring agreement
G) mortgagee
H) mortgagee clause
I) named insured
J) named peril
K) open-perils agreement
L) pro-rata clause
M) pure premium
N) replacement cost
O) Specific dollar limits 
A)  Actual cash value 
B)  Aggregate dollar limits 
C)  coinsurance 
D)  disappearing deductible 
E)  franchise deductible
F) insuring agreement
G) mortgagee
H) mortgagee clause
I) named insured
J) named peril
K) open-perils agreement
L) pro-rata clause
M) pure premium
N) replacement cost
O) Specific dollar limits

Question 12

An insured has a building with an actual cash value of $100,000 insured for $60,000 under an 80 percent coinsurance clause. If there is a loss of $10,000, the insured may recover

Accepted Answer

A)  $10,000, 
B)  $7,500, 
C)  $8,000, 
D)  nothing, 
E)  none of these. 
A)  $10,000, 
B)  $7,500, 
C)  $8,000, 
D)  nothing, 
E)  none of these.

Question 13

Match the descriptions with their terms:
-The part of the premium that is designed to cover the expected losses due to covered perils is the _____________________.

Accepted Answer

A)  Actual cash value 
B)  Aggregate dollar limits 
C)  coinsurance 
D)  disappearing deductible 
E)  franchise deductible
F) insuring agreement
G) mortgagee
H) mortgagee clause
I) named insured
J) named peril
K) open-perils agreement
L) pro-rata clause
M) pure premium
N) replacement cost
O) Specific dollar limits 
A)  Actual cash value 
B)  Aggregate dollar limits 
C)  coinsurance 
D)  disappearing deductible 
E)  franchise deductible
F) insuring agreement
G) mortgagee
H) mortgagee clause
I) named insured
J) named peril
K) open-perils agreement
L) pro-rata clause
M) pure premium
N) replacement cost
O) Specific dollar limits

Question 14

Match the descriptions with their terms:
-The clause that states what the insurer agrees to do and the major conditions under which it agrees is called the _________________.

Accepted Answer

A)  Actual cash value 
B)  Aggregate dollar limits 
C)  coinsurance 
D)  disappearing deductible 
E)  franchise deductible
F) insuring agreement
G) mortgagee
H) mortgagee clause
I) named insured
J) named peril
K) open-perils agreement
L) pro-rata clause
M) pure premium
N) replacement cost
O) Specific dollar limits 
A)  Actual cash value 
B)  Aggregate dollar limits 
C)  coinsurance 
D)  disappearing deductible 
E)  franchise deductible
F) insuring agreement
G) mortgagee
H) mortgagee clause
I) named insured
J) named peril
K) open-perils agreement
L) pro-rata clause
M) pure premium
N) replacement cost
O) Specific dollar limits

Question 15

Under an appraisal clause, an impartial umpire may be used to help settle a claim.

Accepted Answer

A) True 
 B)False

Question 16

An insured is required to notify of loss, but not prove the amount of the loss because that is the job of the adjuster.

Accepted Answer

A) True 
 B)False

Question 17

Most policies of property-liability insurance cover property in any geographic location.

Accepted Answer

A) True 
 B)False

Question 18

Match the descriptions with their terms:
-A/An _________________ is a deductible expressed as a percentage of value or a dollar amount under which the insurer has no liability unless the loss exceeds the amount stated.

Accepted Answer

A)  Actual cash value 
B)  Aggregate dollar limits 
C)  coinsurance 
D)  disappearing deductible 
E)  franchise deductible
F) insuring agreement
G) mortgagee
H) mortgagee clause
I) named insured
J) named peril
K) open-perils agreement
L) pro-rata clause
M) pure premium
N) replacement cost
O) Specific dollar limits 
A)  Actual cash value 
B)  Aggregate dollar limits 
C)  coinsurance 
D)  disappearing deductible 
E)  franchise deductible
F) insuring agreement
G) mortgagee
H) mortgagee clause
I) named insured
J) named peril
K) open-perils agreement
L) pro-rata clause
M) pure premium
N) replacement cost
O) Specific dollar limits

Question 19

An open-perils policy means that the policy covers all sources of loss to the insured's property.

Accepted Answer

A) True 
 B)False

Question 20

Apportionment clauses preserve the principle of indemnity.

Accepted Answer

A) True 
 B)False

Exam 7: Insurance As a Risk Management Technique: Policy Provisions

An insured usually must provide a formal proof of loss within 60 to 90 days to receive payment.

In the case in the previous question, if it is determined that the loss is $80,000, the insured may recover

Match the descriptions with their terms: -The person whose name appears on the policy to receive the benefit of coverage is called the _________________.

Inflation could cause an insured to suffer coinsurance penalties.

Match the descriptions with their terms: -In property insurance, the _________________ states that the policy will only pay a portion of the loss if more than one policy applies.

Jane Smith insures her $30,000 house as follows: $10,000 in insurer A, $20,000 in insurer B, and $10,000 in insurer C. In the event of a loss of $10,000, each insurer must pay as follows:

Match the descriptions with their terms: -The _________________ protects the interest of the lending institution when a loan is made on a building.

Match the descriptions with their terms: -When a/an _________________ is used, the size of the deductible decreases as the size of the loss increases.

Insurance contracts exclude certain perils only because they are uninsurable.

Under the mortgagee clause the actions of the insured

Match the descriptions with their terms: -_________________ restrict payments to some maximum amount of any one group of items of property.

An insured has a building with an actual cash value of $100,000 insured for $60,000 under an 80 percent coinsurance clause. If there is a loss of $10,000, the insured may recover

Match the descriptions with their terms: -The part of the premium that is designed to cover the expected losses due to covered perils is the _____________________.

Match the descriptions with their terms: -The clause that states what the insurer agrees to do and the major conditions under which it agrees is called the _________________.

Under an appraisal clause, an impartial umpire may be used to help settle a claim.

An insured is required to notify of loss, but not prove the amount of the loss because that is the job of the adjuster.

Most policies of property-liability insurance cover property in any geographic location.

Match the descriptions with their terms: -A/An _________________ is a deductible expressed as a percentage of value or a dollar amount under which the insurer has no liability unless the loss exceeds the amount stated.

An open-perils policy means that the policy covers all sources of loss to the insured's property.

Apportionment clauses preserve the principle of indemnity.

Introduction to Risk

Risk Identification and Evaluation

Property and Liability Loss Exposures

Life, Health, and Loss of Income Exposures

Risk Management Techniques: Noninsurance Methods

Insurance As a Risk Management Technique: Principles

Selecting and Implementing Risk Management Techniques

Risk Management and Commercial Propertypart I

Risk Management and Commercial Propertypart II

Risk Management and Commercial Liability Risk

Workers Compensation and Alternative Risk Financing

Risk Management for Auto Ownerspart I

Risk Management for Auto Ownerspart II

Risk Management for Homeowners

Loss of Life

Loss of Health

Retirement Planning and Annuities

Employee Benefits: Life and Health Benefits

Employee Benefits: Retirement Plans

Financial and Estate Planning

Risk Management and the Insurance Industry

Functions and Organization of Insurers

Government Regulation of Risk Management and Insurance

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