Insurance Insurance Contracts & Policy Interpretation 2

Question 1

What is an 'exclusion' in an insurance policy?

Accepted Answer

A specific condition, peril, or circumstance not covered by the policy

Answer

A provision that extends coverage to additional insureds

Answer

A premium discount applied for a good claims history

Answer

A mandatory government-required coverage add-on

Question 2

What information is typically found on the 'declarations page' of an insurance policy?

Accepted Answer

Named insured, policy period, coverage limits, and premium amount

Answer

Detailed exclusions and conditions of coverage

Answer

Legal definitions of all terms used in the policy

Answer

Step-by-step claims filing procedures

Question 3

In property insurance, a coinsurance clause requires the policyholder to:

Accepted Answer

Insure the property for at least a specified percentage of its value to receive full reimbursement

Answer

Share claims costs equally with the insurer on every loss

Answer

Purchase coverage from two separate insurers simultaneously

Answer

Pay 20% of every claim out of pocket regardless of coverage

Question 4

Which statement best describes a policy 'deductible'?

Accepted Answer

The amount the insured must pay out of pocket before the insurer pays a claim

Answer

The maximum amount the insurer will pay for any single loss

Answer

The annual premium the insured pays for coverage

Answer

A penalty charged when the insured files too many claims

Question 5

What is the key difference between a 'claims-made' policy and an 'occurrence' policy?

Accepted Answer

Claims-made policies require the claim to be reported while the policy is active; occurrence policies cover incidents that happen during the policy period regardless of when reported

Answer

Claims-made policies are always less expensive than occurrence policies

Answer

Occurrence policies exclude professional liability claims entirely

Answer

Claims-made policies pay higher benefit amounts than occurrence policies

Question 6

A 'named perils' property insurance policy:

Accepted Answer

Only covers losses caused by perils explicitly listed in the policy

Answer

Covers all risks of loss except those specifically excluded

Answer

Provides broader coverage than an open-perils (all-risk) policy

Answer

Names the insured on a supplemental endorsement form

Question 7

'Actual Cash Value' (ACV) in property insurance is calculated as:

Accepted Answer

Replacement cost minus accumulated depreciation

Answer

The original purchase price of the damaged property

Answer

The cost to replace the property with a brand-new item of like kind and quality

Answer

The appraised fair market value at the time of the loss