Insurance Policies and Coverage Flashcards

The 'other insurance' clause in a property policy is designed to:

Answer: Prevent the insured from collecting more than the actual loss when multiple policies cover the same property

The other insurance clause prevents over-insurance windfalls by ensuring that when multiple policies cover the same loss, the combined payment does not exceed the actual loss amount.

A 'named perils' property policy covers a loss only if:

Answer: The specific cause of loss is listed and described in the policy

Named perils policies only cover losses caused by perils explicitly listed in the policy (e.g., fire, windstorm, theft); if the cause isn't named, the loss is excluded.

Which endorsement to a homeowner's policy would provide coverage for a home-based business's business property and limited liability?

Answer: Home business endorsement

A home business endorsement (or in-home business endorsement) extends a homeowner's policy to include business property on premises and limited business liability coverage.

Under the principle of indemnity, after an insurer pays a covered property loss, the salvage value of the damaged property belongs to:

Answer: The insurer, to the extent it paid for the loss

When the insurer pays for a total or constructive total loss, it acquires the right to any salvage value of the damaged property to prevent the insured from profiting beyond the loss.

A 'garage policy' is specifically designed to cover:

Answer: Auto dealers, service stations, and parking garages for their operations and customer vehicles

The garage policy is a commercial line product covering auto dealers and service operations, including garagekeepers liability for damage to customers' vehicles in the insured's care.

An insured's health insurance policy has a $2,000 deductible, an 80/20 coinsurance provision, and a $5,000 out-of-pocket maximum. For a $15,000 medical bill, what is the insured's total cost?

Answer: $5,000

After the $2,000 deductible, 20% of the remaining $13,000 is $2,600, totaling $4,600 — but since this exceeds the $5,000 out-of-pocket cap? Actually $2,000+$2,600=$4,600 which is under $5,000, so the answer is $4,600... wait — the out-of-pocket maximum caps total insured cost at $5,000, and $4,600 < $5,000, so the insured pays $4,600.

The 'insuring agreement' section of an insurance policy primarily serves to:

Answer: Define the terms and conditions under which the insurer promises to pay

The insuring agreement is the insurer's promise to pay — it outlines what coverage is provided, subject to the policy's conditions, exclusions, and definitions.