Overview Of Property And Casualty Insurance

1.

Exclusions in an insurance contract are utilized for all of the following purposes EXCEPT
- A.
  
  Eliminate duplicate coverage
- B.
  
  Help manage physical and moral hazards
- C.
  
  Minimize claims expenses
- D.
  
  Eliminate duplicate coverage
Correct Answer
C. Minimize claims expenses

Explanation
Exclusions in an insurance contract are utilized for all of the following purposes except minimizing claims expenses. Exclusions are provisions in an insurance policy that specify what risks or losses are not covered by the policy. They are used to eliminate duplicate coverage, help manage physical and moral hazards, and minimize the likelihood of claims being made. However, minimizing claims expenses is not a purpose of exclusions. Instead, it is a goal of the insurance company to minimize claims expenses by carefully underwriting policies and managing risk.

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2.

An insured and insurer will use which of the following when they are unable to agree on the amount of a claim to be paid?
- A.
  
  Arbitration
- B.
  
  Assignment
- C.
  
  Appraisal
- D.
  
  Recession
Correct Answer
C. Appraisal

Explanation
When an insured and insurer are unable to agree on the amount of a claim to be paid, they will use appraisal. Appraisal is a process in which a neutral third party is brought in to assess the value of the claim and determine the appropriate amount to be paid. This helps resolve disputes between the insured and insurer and ensures a fair settlement.

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3.

An insured decides to stop paying premiums on his fire insurance policy and returns the contract to the insurer mid-term. This insured would recieve which of the following premium refunds?
- A.
  
  Pro rata
- B.
  
  Short-rate
- C.
  
  Actual cash value
- D.
  
  Specified peril
Correct Answer
B. Short-rate

Explanation
When an insured decides to stop paying premiums on his fire insurance policy and returns the contract to the insurer mid-term, he would receive a short-rate premium refund. A short-rate premium refund is calculated based on the number of days the policy was in force, with a penalty deducted for early cancellation. This means that the insured will receive a refund, but it will be less than the pro rata amount that would have been refunded if the policy had been canceled at the end of the term.

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4.

A theater company that travels across the country would cover its equipment with which of the following fire forms?
- A.
  
  Blanket form
- B.
  
  Specific form
- C.
  
  Reporting form
- D.
  
  Floater form
Correct Answer
D. Floater form

Explanation
A theater company that travels across the country would cover its equipment with a floater form. A floater form is a type of insurance policy that provides coverage for movable or specialized equipment, such as cameras, musical instruments, or theater equipment. Since the theater company is constantly on the move, it is essential for them to have insurance coverage that protects their equipment wherever they go. A floater form ensures that their equipment is protected against loss or damage, whether it is in transit or at a temporary location.

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5.

Which of the following statements is accurate with regard to a specific form?
- A.
  
  It covers the same kind of property in different locations
- B.
  
  It provides coverage for specific goods in different locations
- C.
  
  It is designed to provide coverage for contents that fluctuate in value
- D.
  
  It provides coverage for one kind of property at one location
Correct Answer
D. It provides coverage for one kind of property at one location

Explanation
The correct answer states that a specific form provides coverage for one kind of property at one location. This means that the form is designed to protect a particular type of property, such as a building or a vehicle, at a specific location. It does not cover different types of properties or multiple locations.

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6.

Replacement cost less depreciation best defines
- A.
  
  A valued policy
- B.
  
  Actual appraised value
- C.
  
  Actual cash value
- D.
  
  Market value
Correct Answer
C. Actual cash value

Explanation
Actual cash value is the correct answer because it refers to the cost of replacing an item with a similar one in the current market, considering its depreciation. This means that the value takes into account the item's age, wear and tear, and any other factors that may decrease its worth over time. It is different from the actual appraised value, which is the estimated value of an item determined by a professional appraiser, and the market value, which is the price at which an item can be bought or sold in the current market. A valued policy, on the other hand, is a type of insurance policy that pays a predetermined amount in the event of a covered loss, regardless of the item's actual cash value.

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7.

An insured purchases a fire policy for $150,000. The contract includes an 80% coinsurance clause, and the building is valued at $250,000. After suffering a $30,000 fire loss, the insurer will pay
- A.
  
  $18,000
- B.
  
  $22,500
- C.
  
  $28,125
- D.
  
  $30,000
Correct Answer
B. $22,500

Explanation
The insured purchased a fire policy for $150,000, which is less than the 80% coinsurance requirement of $200,000 (80% of $250,000, the value of the building). Therefore, the insured is underinsured. To calculate the claim payment, we divide the amount of insurance purchased ($150,000) by the amount required ($200,000) and multiply it by the loss ($30,000). This gives us $22,500, which is the amount the insurer will pay.

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8.

Negligence has all of the following as essential elements EXCEPT
- A.
  
  Legal duty
- B.
  
  Criminal act
- C.
  
  Proximate cause
- D.
  
  Actual injury
Correct Answer
B. Criminal act

Explanation
Negligence is a legal concept that refers to the failure to exercise reasonable care, resulting in harm or injury to another person. The essential elements of negligence include a legal duty owed to the plaintiff, a breach of that duty, proximate cause linking the breach to the injury, and actual injury or harm suffered by the plaintiff. However, a criminal act is not an essential element of negligence. While a criminal act may be considered negligent behavior, it is not required for a claim of negligence to be established.

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9.

The definition of bodily injury includes all of the following EXCEPT
- A.
  
  Slander
- B.
  
  Death
- C.
  
  Sickness
- D.
  
  Loss of income
Correct Answer
A. Slander

Explanation
The definition of bodily injury includes death, sickness, and loss of income, but it does not include slander. Bodily injury refers to physical harm or damage to a person's body, whereas slander refers to making false spoken statements that harm a person's reputation. Therefore, slander is not considered a form of bodily injury.

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10.

A civil wrong can best be described as
- A.
  
  Bodily injury
- B.
  
  Personal injury
- C.
  
  Criminal act
- D.
  
  A tort
Correct Answer
D. A tort

Explanation
A civil wrong can best be described as a tort. A tort refers to a wrongful act or omission that causes harm or injury to another person, their property, or their reputation. It is a legal concept that allows individuals to seek compensation for the damages they have suffered due to someone else's negligence or intentional wrongdoing. Unlike criminal acts, which are prosecuted by the state, torts are resolved through civil lawsuits where the injured party seeks monetary damages or other forms of relief from the responsible party. Therefore, a tort is the most appropriate term to describe a civil wrong.

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Overview Of Property And Casualty Insurance

Exclusions in an insurance contract are utilized for all of the following purposes EXCEPT

An insured and insurer will use which of the following when they are unable to agree on the amount of a claim to be paid?

An insured decides to stop paying premiums on his fire insurance policy and returns the contract to the insurer mid-term. This insured would recieve which of the following premium refunds?

A theater company that travels across the country would cover its equipment with which of the following fire forms?

Which of the following statements is accurate with regard to a specific form?

Replacement cost less depreciation best defines

An insured purchases a fire policy for $150,000. The contract includes an 80% coinsurance clause, and the building is valued at $250,000. After suffering a $30,000 fire loss, the insurer will pay

Negligence has all of the following as essential elements EXCEPT

The definition of bodily injury includes all of the following EXCEPT

A civil wrong can best be described as