Insurance Case Studies & Practical Application 2

Question 1

A homeowner's roof is damaged in a hailstorm. The insurance company sends an adjuster who estimates repairs at $8,000. The homeowner gets a contractor estimate of $12,000. What is the most appropriate next step?

Accepted Answer

Invoke the appraisal clause to resolve the dispute

Answer

Most homeowners policies include an appraisal clause that provides a formal dispute resolution process when the insured and insurer disagree on the loss amount.

Question 2

Maria, a nurse, is sued for $500,000 after a patient claims she administered the wrong medication. Her employer's liability policy has a $250,000 per-occurrence limit. What should Maria have to protect herself fully?

Accepted Answer

Her own professional liability (malpractice) policy

Answer

Professional liability (malpractice) insurance covers individual professionals for claims arising from their professional services, filling gaps when an employer's policy is insufficient.

Question 3

A business owner discovers that an employee has been embezzling funds for two years, totaling $80,000. Which policy would cover this loss?

Accepted Answer

Employee dishonesty (crime) coverage

Answer

Employee dishonesty coverage, part of a commercial crime policy, specifically covers losses resulting from fraudulent or dishonest acts committed by employees.

Question 4

A driver rear-ends another vehicle, causing $15,000 in property damage and $40,000 in bodily injury. The at-fault driver has 25/50/25 auto liability limits. How much will the insurer pay for bodily injury?

Accepted Answer

$25,000

Answer

In a 25/50/25 policy, the first number ($25,000) is the per-person bodily injury limit, so the insurer pays only $25,000 of the $40,000 claim.

Question 5

A commercial building is insured for $600,000, but its actual replacement cost is $1,000,000. The policy has an 80% coinsurance clause. A fire causes $200,000 in damage. How much will the insurer pay?

Accepted Answer

$150,000

Answer

Using the coinsurance formula: ($600,000 / $800,000 required) × $200,000 loss = $150,000 paid by the insurer.

Insurance Practice Test

Insurance Practice Test

Insurance Case Studies & Practical Application 2