Chapter 5 - Insurance Transactions

The correct answer is Replacement Cost (RC). This is because the insurance company pays to have a new roof installed, which implies that they are covering the full cost of replacing the damaged roof. Actual Cash Value (ACV) would typically only cover the depreciated value of the roof, taking into account its age and condition, rather than the full cost of replacement.

The territory or body of water where a boat or yacht will be operated is an important factor for insurance underwriting. This is because different bodies of water may have different risks and hazards, such as rough seas or navigational challenges, which can affect the likelihood of accidents or damage to the vessel. Insurance companies consider these factors when determining the premium for the policy or even whether the vessel is eligible for coverage. Therefore, the statement is true.

The insurance company pays Derek $112 for his stolen car, which suggests that they are compensating him based on the actual cash value (ACV) of the car. ACV takes into account the depreciation of the car over time, so the amount Derek receives is likely a reduced value of what the car was worth six years ago when he bought it for $3,600. Replacement cost (RC) would typically provide a higher payout to cover the cost of replacing the stolen car with a similar one at current market prices.

The correct answer is ACV (Actual Cash Value). ACV is the value of an asset after depreciation. In this case, Hilda's insurance company paid her $1,000, which is less than the original cost of the roof ($2,400). This suggests that the insurance company paid her based on the current value of the roof, taking into account its depreciation over time.

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Subrogation refers to the process where an insurance company pays a claim to their insured and then seeks reimbursement from the responsible party. In this case, Sue's mink coat is destroyed by her neighbor's cat, and Sue's insurance company pays her for the coat. The insurance company then sues the neighbor to recover the cost of the coat. This scenario exemplifies subrogation as the insurance company is seeking reimbursement from the neighbor who is responsible for the damage caused to Sue's property.

The statement is true. The ISO Dwelling Fire program offers Rental Value coverage. This coverage provides compensation for the loss of rental income that a property owner may experience if their rental property becomes uninhabitable due to a covered loss, such as a fire. It helps to cover the lost rental income during the time it takes to repair or rebuild the property. This coverage is important for property owners who rely on rental income for their financial stability.

When Ann cancels her policy on March 15, she has already been covered for two months (January and February). Therefore, she has earned premium for those two months. The remaining months (March to December) are not yet covered, so they are considered non-earned premium. Thus, the correct answer is two months of earned premium.

The NYS Insurance Law requires insurance agents to provide a Compensation Disclosure Form to clients or prospects when discussing insurance quotes. This form is necessary to inform individuals about any potential compensation the agent may receive from the insurance company. By presenting this form, agents ensure transparency and help clients make informed decisions about their insurance policies. Therefore, the correct answer is true.

The insurance paying for replacing Jim's stolen TV with a comparable new set indicates that the policy is based on Replacement Cost (RC). Replacement Cost coverage provides reimbursement for the cost of replacing the item with a new one of similar kind and quality, without considering depreciation. ACV coverage, on the other hand, would take into account the depreciation of the TV over the 2 years and provide reimbursement based on its current market value.

Adding the individual as an Additional Insured is the correct answer because it provides coverage for the person who does not live on the premises. By adding them as an Additional Insured, they will be protected by the insurance policy in case of any damages or liability arising from the property. This ensures that both owners are properly insured and covered.

The coinsurance requirement states that the insured must have coverage equal to a certain percentage (in this case, 80%) of the value of the building. Since Ted's coverage is $40,000 and the value of the building is $50,000, he meets the coinsurance requirement. Therefore, the insurance company will pay the full amount of the loss, which is $30,000.

The statement is true. The ISO dwelling fire program offers the coverage of Inflation Guard. This coverage helps protect the insured property against the effects of inflation by automatically adjusting the policy limits to keep pace with rising construction costs. It ensures that the policy's coverage amount remains adequate over time, considering the increasing costs of labor and materials in the construction industry.

The ISO dwelling fire program does offer Comprehensive Personal Liability coverage. This coverage protects the insured against claims or lawsuits resulting from bodily injury or property damage caused by the insured or their family members. It provides financial protection in case of accidents or incidents that occur on the insured property. Therefore, the statement "Comprehensive Personal Liability" being available under the ISO dwelling fire program is true.

The HO3 Homeowners Policy does not cover motor vehicle coverages. It is specifically designed to provide coverage for the structure of the home, personal belongings, and liability protection. Motor vehicle coverage typically falls under auto insurance policies, which are separate from homeowners insurance. Therefore, the statement is false.

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The proper way to underwrite this risk would be to offer an alternative to add the landlord as an additional interest instead of an additional insured. This allows the landlord to be notified in the event of a policy cancellation or non-renewal, without extending coverage to them. This ensures that the landlord is aware of the insurance status of the tenant, but does not create any additional liability for the insurance company.

Under NY State No Fault Laws, DUI (Driving under the influence) and intentional actions are excluded. This means that if a person is involved in an accident while driving under the influence or intentionally causes the accident, they may not be eligible for certain benefits or compensation under the no-fault laws. However, driving without a license is not specifically mentioned as being excluded, so it is not excluded under NY State No Fault Laws.

The correct answer is Liability Coverage. When writing a Property Policy with NY Property Underwriting Association, it is important for the insured to be aware that Liability Coverage is not offered through this market. Liability Coverage protects the insured in case they are held legally responsible for bodily injury or property damage to others. It is essential for individuals and businesses to have this coverage to protect themselves from potential lawsuits and financial losses.

The properties eligible for insurance under the dwelling fire program are the duplex, non-owner occupied dwelling, and 4 family apartment building. These types of properties meet the criteria for coverage under the program.