Risk Management & Insurance Planning Flashcards

Which homeowners policy form provides open-perils coverage on both the dwelling AND personal property?

Answer: HO-5 (Comprehensive Form)

The HO-5 comprehensive form is the broadest standard homeowners policy, providing open-perils (all-risk) coverage on both the structure and personal property.

The standard coinsurance requirement in commercial property insurance typically requires coverage equal to what percentage of replacement cost?

Answer: 80%

Most commercial property policies require the insured to carry coverage equal to at least 80% of replacement cost to avoid a coinsurance penalty at claim time.

A personal umbrella liability policy is best described as:

Answer: Excess coverage above underlying policy limits

An umbrella policy provides excess liability coverage that activates after the limits of underlying policies (homeowners, auto) are exhausted.

Replacement cost coverage differs from actual cash value coverage because replacement cost:

Answer: Does not deduct depreciation when settling claims

Replacement cost coverage pays to repair or replace damaged property at current costs without deducting for depreciation, while actual cash value subtracts accumulated depreciation.

Which automobile insurance coverage pays for damage to the insured's own vehicle resulting from a collision, regardless of fault?

Answer: Collision coverage

Collision coverage pays for damage to the insured's own vehicle from a collision with another vehicle or object, regardless of who caused the accident.

In property and casualty insurance, 'subrogation' gives the insurer the right to:

Answer: Recover a paid loss from the negligent third party responsible

After paying a covered claim, subrogation allows the insurer to step into the insured's legal shoes and pursue recovery from the third party whose negligence caused the loss.