Chapter 2

Question 1

The cause of a loss is called a

Answer 1

Peril

Question 2

Special form is also referred to by other names. These names are?

Answer 2

All-risk
Open Perils,
Comprehensive
Extended coverage

Question 3

Transfer of a policy to a new policy owner is called _____________?

Answer 3

Assignment

Question 4

Which form policies provide named peril coverage?

Answer 4

Both basic and broad

Question 5

_____________ form covers 11 perils.

Answer 5

Basic

Question 6

_______________ refers to termination of a policy during the policy period.

Answer 6

Cancellation

Question 7

The cause of lass form allow the insured to choose between 3 different degrees of peril. What are these three causes of loss forms referred to?

Answer 7

Basic
Broad
All Risk (Special)

Question 8

What provides both proof of coverage and a summary of the policy holder’s coverage?

Answer 8

Certificate of insurance

Question 9

This clause encourages insureds to insure property to full value or at least, close to full value.

Answer 9

Coinsurance

Question 10

True/false

Regardless of the coinsurance clause, the insurer will always pay up to the limit of liability for a total loss?

Answer 10

True

Question 11

Coinsurance requires the insured to insure up to what percentage of the property value?

Answer 11

80

Question 12

The specific percentage of the property’s value that must be covered to avoid a penalty

Answer 12

Coinsurance percentage

Question 13

The portion of the loss that the Insured must absorb before the insurance company begins to pay.

Answer 13

Deductible

Question 14

An addition to a policy is referred to as what?

Answer 14

Endorsement, rider or extension

Question 15

A _____________ is a peril or item that is not covered by a policy.

Answer 15

Exclusion

Question 16

First named insured refers to what?

Answer 16

The first person listed on a policy of more than one person is listed.

Question 17

Does the insurer have to get consent not from all listed policy holders to make changes?

Answer 17

No, the insured only has to get consent from the first named insured — the first name listed on the insurance policy.

Question 18

Natural deterioration is referred to as __________________?

Answer 18

Inherent vice

Question 19

What is the exclusion which refers to natural deterioration?

Answer 19

Inherent vice

Question 20

A financial interest in the coveted property is referred to as what?

Answer 20

Insurable interest

Question 21

What is a factor that increases the chance of loss occurring?

Answer 21

Hazard

Question 22

What is the selection. And classification of risks?

Answer 22

Underwriting

Question 23

This automatically updates a policy, providing better coverage.

Answer 23

Liberalization clause

Question 24

The maximum a policy will pay for a loss is referred to as?

Answer 24

Limit of liability

Question 25

The maximum a policy will pay for a loss is called:

Answer 25

The Limit of Liability

Question 26

A hazard that results from the insureds intentional act of dishonesty or disregard is called:

Answer 26

Moral hazard

Question 27

A hazard that results from carelessness or sloppiness is called a:

Answer 27

Morale Hazard

Question 28

When a peril is specifically listed in a policy it is called:

Answer 28

A named peril

Question 29

When the insured has more than one policy, this clause is used by the insurer to prevent the insured from recovering more than the property value.

Answer 29

Other Insurance Clause

Question 30

The cause of a loss is referred to as:

Answer 30

Peril

Question 31

A tangible condition that makes the occurrence of a peril more likely. As an example: worn tires, slippery roads, loose handrails.

Answer 31

Physical hazard

Question 32

If a policy is cancelled by the insurer, the insured is entitled to a refund. If the policy is one-third of the way through the period, the refund would be for two-thirds (the unused portion of time) to the insured. This type of refund is called:

Answer 32

A proportional or pro rate refund.

Question 33

An addition to a policy is called:

Answer 33

A Rider

Question 34

If the insured cancels a policy, he or she will receive a refund. This refund is often less than proportional and includes administrative costs or even penalty charges. This type of refund is referred to as:

Answer 34

A Short-rate refund

Question 35

This type of form policy does not list the perils covered, but rather lists the perils excluded from coverage. This type of coverage is referred to as:

Answer 35

Special form coverage Also can be referred to as All-Risk, Open Perils, Comprehensive or Extended coverage.

Question 36

The selection and classification of risks is referred to as:

Answer 36

Underwriting

Question 37

We insure against ______________. These are a cause of loss, such as fire, wind, or hail.

Answer 37

Perils

Question 38

When an agent makes preliminary decisions about how to insure, this is referred to as:

Answer 38

Field underwriting

Question 39

When a person would suffer financially if the covered loss occurs, this is referred to as ______________ _________________. This is required at the time of the loss.

Answer 39

Insurable Interest

Question 40

The maximum amount the policy will pay for a loss is called:

Answer 40

Limit of liability

Question 41

Insurance typically covers what type of hazards:

Answer 41

Morale, moral and physical.

Question 42

What is the clause that applies if the Insurer sells a similar policy with more benefits at the same price?

Answer 42

Liberalization clause

Question 43

Will insurance policies cover inherent vice?

Answer 43

No

Question 44

What is the likelihood of a peril occurring referred to as:

Answer 44

Hazard

Question 45

Does insurable interest need to exist at the time of the loss, or when the policy is issued?

Answer 45

Insurable interest is required at the time of the loss, not when the policy is issued.

Question 46

Does the deductible uphold the principle of indemnification?

Answer 46

No

Question 47

Does the Other Insurance Clause uphold the principle of idemnification?

Answer 47

Yes, with other insurance clause, the insured may collect from multiple policies to receive full value of property. The insured may have to pay deductible on each policy.

Question 48

Which party has to provide a reason for nonrenewal of a policy?

Answer 48

Neither party — not the insured or insurer. However, the insurer must provide advanced notice of nonrenewal.

Question 49

If a policy is cancelled by the insurer, the insurance “pro”, what type of refund will the insured receive?

Answer 49

Pro Rata refund

Question 50

Which types of form policies provide named-peril coverage?

Answer 50

Basic and Broad

Question 51

An exclusion that refers to natural deterioration is called:

Answer 51

Inherent vice

Question 52

If a coinsurance clause is in effect, will the insurer pay up to the limit of liability for a total loss.

Answer 52

Yes, regardless of the coinsurance clause, the insurer pays up to the limit of liability for total loss.

Question 53

Coinsurance percentage is set by what — the policy requirements or state law?

Answer 53

Policy