Chapter 5 - Insurance Transactions
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A number of steps must be taken before an insurance transaction can be completed.
Questions and Answers
- 1.
Type response below
- 2.
Which of the following is an example of Subrogation?
- A.
Bob pays his neighbor $40 for backing over his hedge.
- B.
Sue's mink coat is destroyed by her neighbor's cat. Sue's insurance company pays her for the coat, then sues the neighbor to recover the cost.
- C.
Al is sued by his paperboy, who tripped on Al's front step. Al's liability insurance must pay the paperboy $5,000.
Correct Answer
B. Sue's mink coat is destroyed by her neighbor's cat. Sue's insurance company pays her for the coat, then sues the neighbor to recover the cost.Explanation
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.Rate this question:
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- 3.
Actual Cash Value (ACV) or Replacement Cost (RC)? Jim's 2 year old TV was stolen from his apartment and his insurance pays for replacing it with a comparable new set.
- A.
ACV
- B.
RC
Correct Answer
B. RCExplanation
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.Rate this question:
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- 4.
Actual Cash Value (ACV) or Replacement Cost (RC)? Derek's car cost him $3,600 six years ago. When it is stolen, his insurance company pays him $112.
- A.
ACV
- B.
RC
Correct Answer
A. ACVExplanation
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.Rate this question:
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- 5.
Actual Cash Value (ACV) or Replacement Cost (RC)? Mark paid $1,900 for his roof. When it is damaged by a storm, his insurance company pays to have the new roof installed.
- A.
ACV
- B.
RC
Correct Answer
B. RCExplanation
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.Rate this question:
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- 6.
Actual Cash Value (ACV) or Replacement Cost (RC)? Hilda’s roof cost her $2,400. When It is damaged by a storm, her insurance company pays $1,000.
- A.
ACV
- B.
RC
Correct Answer
A. ACVExplanation
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.Rate this question:
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- 7.
A building is valued at $50,000. Ted has coverage to $40,000 to meet the 80% coinsurance requirement. The building suffers a $30,000 loss. The insurance company will pay:
- A.
$24,000
- B.
$30,000
- C.
$40,000
Correct Answer
B. $30,000Explanation
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.Rate this question:
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- 8.
The Cheyenne Insurance Company issues a policy to Ann on January 15. Ann decides that on March 15 of the same year that she no longer requires coverage and wishes to cancel the policy. There will be approximately:
- A.
Two months of earned premium
- B.
Ten months of earned premium
- C.
Twelve months of earned premium
- D.
Two months of non-earned premium
Correct Answer
A. Two months of earned premiumExplanation
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.Rate this question:
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- 9.
Sam has a General Liability Policy with the XYZ Company. It has per occurrence limits of $10,000 and an aggregate limit of $100,000. This past year, Sam has had to pay the following amount of liability suits:
- A.
Click here - no answer see below
- B.
Do not click - no answer see below
Correct Answer
A. Click here - no answer see below -
- 10.
The following coverages are available under the ISO Dwelling Fire program True or False? Rental Value
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
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.Rate this question:
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- 11.
The following coverages are available under the ISO dwelling fire program True or False? Inflation Guard
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
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.Rate this question:
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- 12.
The following coverages are available under the ISO dwelling fire program True or False? Comprehensive Personal Liability
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
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.Rate this question:
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- 13.
The following properties are eligible for insurance under the dwelling fire program: Mark the correct answers.
- A.
Duplex
- B.
Non-owner occupied dwelling
- C.
6 family apartment building
- D.
4 family apartment building
- E.
Mobile home
- F.
Contents only in 1 unit of a 20 family apartment building
Correct Answer(s)
A. Duplex
B. Non-owner occupied dwelling
D. 4 family apartment buildingExplanation
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.Rate this question:
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- 14.
Which are excluded under NY State No Fault Laws
- A.
D U I (Driving under the influence)
- B.
Intentional Actions
- C.
Driving without a license.
Correct Answer(s)
A. D U I (Driving under the influence)
B. Intentional ActionsExplanation
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.Rate this question:
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- 15.
The HO3 Homeowners Policy covers some motor vehicle coverages
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
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.Rate this question:
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- 16.
When insuring a boat or a yacht, the territory or body of water the vessel will be operated in is one of the underwriting factors which determines the premium or even eligibility.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
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.Rate this question:
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- 17.
NYS Insurance Law mandates that you must present a Compensation Disclosure Form with every insurance quote you discuss with a prospect or client.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
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.Rate this question:
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- 18.
A 1 family home is titled to 2 non related people. One of the owners will live in the Home while the other will not. How do you properly insure the owner that does not live on the premise.
- A.
Add this individual as Named Insured
- B.
Provide a Separate Policy for this individual
- C.
Add this individual as Additional Insured
- D.
Add this individual as Mortgagee
Correct Answer
C. Add this individual as Additional InsuredExplanation
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.Rate this question:
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- 19.
A client is renting an apartment and the landlord requires to be added as Additional Insured. What is the proper way to underwrite this risk.
- A.
Is not eligible for any markets
- B.
Write an HO4 adding Landlord as Additional Insured
- C.
A and D
- D.
Offer Alternative to add Landlord as Additional Interest instead
Correct Answer
C. A and DExplanation
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.Rate this question:
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- 20.
When writing a Property Policy with NY Property Underwriting Association, what is the coverage that is very important yet not offered through this market that the insured needs to be aware of.
- A.
Loss of Use
- B.
Liability Coverage
- C.
Contents Coverage
- D.
All of the Above
Correct Answer
B. Liability CoverageExplanation
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.Rate this question:
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- 21.
Please fill answer below_______
Correct Answer
N/A
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Current Version
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Oct 16, 2023Quiz Edited by
ProProfs Editorial Team -
Jun 09, 2015Quiz Created by
Betsy1515
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