CALA Property & Casualty Insurance Coverage 3

Question 1

A homeowner suffers a kitchen fire. The policy has a $300,000 Coverage A limit with an 80% coinsurance requirement. The home's replacement cost is $400,000 and the insured carries $280,000 in coverage. What is the coinsurance penalty formula result for a $40,000 loss?

Accepted Answer

$35,000

Answer

Required insurance = $320,000 (80% × $400,000); penalty ratio = $280,000/$320,000 = 0.875; insurer pays 0.875 × $40,000 = $35,000.

Question 2

Which section of the commercial package policy (CPP) addresses loss of business income caused by a covered property loss that forces the insured to suspend operations?

Accepted Answer

Business income (and extra expense) coverage form

Answer

The Business Income (and Extra Expense) form covers lost net income and continuing expenses when a covered property loss causes a business interruption.

Question 3

Under the PAP, Uninsured Motorist (UM) coverage protects the insured from losses caused by:

Accepted Answer

A driver who carries no liability insurance or a hit-and-run driver

Answer

UM coverage responds when the at-fault driver has no liability coverage or flees the scene; underinsured motorist (UIM) fills gaps in coverage.

Question 4

A CGL policy's 'occurrence' trigger means a claim is covered based on:

Accepted Answer

When the injury or damage occurs during the policy period

Answer

An occurrence-based CGL policy covers bodily injury or property damage that occurs during the policy period, regardless of when the claim is made.

Question 5

Which of the following best describes the 'other insurance' pro-rata clause in property policies?

Accepted Answer

Each insurer pays its proportionate share based on its limit relative to total coverage

Answer

Under a pro-rata other insurance clause, each carrier pays its proportionate share based on the ratio of its limit to the combined limits of all policies.

(CALA) Certified All-Lines Adjuster Practice Test

(CALA) Certified All-Lines Adjuster Practice Test

CALA Property & Casualty Insurance Coverage 3