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1Copyright©2011PearsonEducation,Inc.PrinciplesofRiskManagementandInsurance,11e(Rejda)Chapter10AnalysisofInsuranceContracts1)TheportionofapropertyandliabilityinsurancecontractthatcontainsinformationaboutthepropertyoractivitytobeinsurediscalledtheA)declarations.B)insuringagreement.C)exclusions.D)conditions.Answer:AQuestionStatus:PreviousEdition2)Whatinformationiscontainedintheinsuringagreementofaninsurancepolicy?A)adescriptionofthepropertyorlifetobeinsuredB)asummaryofthemajorpromisesoftheinsurerC)asummaryoftheobligationsoftheinsuredD)alistoftheproperty,losses,andperilsthatarenotcoveredAnswer:BQuestionStatus:PreviousEdition3)Whichofthefollowingstatementsaboutall-riskscoverageis(are)true?I.Alllossesarecoveredexceptthoselossesspecificallyexcluded.II.Theburdenofproofisontheinsuredtoprovethatalossiscovered.A)IonlyB)IIonlyC)bothIandIID)neitherInorIIAnswer:AQuestionStatus:PreviousEdition4)TheexclusionoffloodinahomeownerspolicyisanexampleofanA)excludedactivity.B)excludedcondition.C)excludedproperty.D)excludedperil.Answer:DQuestionStatus:PreviousEdition5)ExclusionsareusedininsurancepoliciesforallofthefollowingreasonsEXCEPTA)toreducemoralhazard.B)towaivepolicyconditions.C)toeliminatecoverageforuninsurableperils.D)toeliminatecoveragenotneededbytypicalinsureds.Answer:BQuestionStatus:PreviousEdition2Copyright©2011PearsonEducation,Inc.6)Reasonswhyaperilmaybeconsidereduninsurableandthereforeexcludedfrominsurancecontractsincludewhichofthefollowing?I.Thelossesfromtheoccurrenceoftheperilmaybeduetoapredictabledeclineinvalue.II.Thelossesfromtheoccurrenceoftheperilmaybeincalculableandcatastrophic.A)IonlyB)IIonlyC)bothIandIID)neitherInorIIAnswer:CQuestionStatus:PreviousEdition7)Thepolicyprovisionrequiringthefilingofproofoflosswiththeinsurerisanexampleofa(n)A)declaration.B)condition.C)insuringagreement.D)miscellaneousprovision.Answer:BQuestionStatus:PreviousEdition8)Whichofthefollowingstatementsaboutthedefinitionoftheinsuredis(are)true?I.Insomecases,apersonwhoisnotspecificallynamedmaybeclassifiedasaninsured.II.Undernocircumstancescanmorethanonepersonbenamedasaninsured.A)IonlyB)IIonlyC)bothIandIID)neitherInorIIAnswer:AQuestionStatus:PreviousEdition9)AllofthefollowingstatementsaboutendorsementsandridersaretrueEXCEPTA)Theyareusuallywritten.B)Theycanbeusedtoaddordeletepolicyprovisions.C)Theynormallytakeprecedenceoverotherconflictingpolicyprovisions.D)Theyareprimarilyusedtocircumventlegislationrequiringspecificpolicyprovisions.Answer:DQuestionStatus:PreviousEdition10)DeductiblesareusedinallofthefollowingtypesofinsuranceEXCEPTA)lifeinsurance.B)healthinsurance.C)propertyinsurance.D)automobileinsurance.Answer:AQuestionStatus:PreviousEdition3Copyright©2011PearsonEducation,Inc.11)AllofthefollowingarepurposesofdeductiblesEXCEPTA)toeliminatesmallclaims.B)toreducepremiums.C)toreduceattitudinalhazard.D)toexcludeuninsurableperils.Answer:DQuestionStatus:Revised12)Thedeductibleusedforautomobilecollisionlossesisanexampleofa(n)A)corridordeductible.B)eliminationperiod.C)straightdeductible.D)aggregatedeductible.Answer:CQuestionStatus:PreviousEdition13)Whichofthefollowingstatementsaboutacalendar-yeardeductibleis(are)true?I.Itrequirestheinsuredtopayaspecifiedamountofeachclaimregardlessofwhentheclaimoccursduringtheyearandregardlessofanypreviousclaimsduringtheyear.II.Itisusedonlyinpolicieswhichcoverdirectpropertylosses.A)IonlyB)IIonlyC)bothIandIID)neitherInorIIAnswer:DQuestionStatus:PreviousEdition14)Aprovisioninadisabilityincomeinsurancepolicythatrequiresapersontobedisabledfor60daysbeforereceivingbenefitsisanexampleofa(n)A)corridordeductible.B)graceperiod.C)eliminationperiod.D)probationaryperiod.Answer:CQuestionStatus:Revised15)Atwhatpointintimemustaninsuredmeetthecoinsurancerequirementinapropertyinsurancepolicyinordertoavoidhavingtopayaportionoftheloss?A)onlyatthetimeoflossB)onlyatthetimewhenthepolicyisissuedC)onlyatthetimeofpolicyapplicationD)bothatthetimewhenthepolicyisissuedandatthetimeoflossAnswer:AQuestionStatus:Revised4Copyright©2011PearsonEducation,Inc.16)Davidownsacommercialbuildingwithareplacementcostof$4million.Thebuildingisinsuredonareplacementcostbasisfor$3millionunderafireinsurancepolicythathasan80percentcoinsuranceclause.HowmuchwillDavidcollectifthebuildingsustainsacoveredfirelosswithareplacementcostof$320,000?A)$266,667B)$275,000C)$300,000D)$320,000Answer:CQuestionStatus:PreviousEdition17)TheprimarypurposeofcoinsuranceinpropertyinsuranceistoA)reducemoralhazard.B)achieveequityinrating.C)minimizeproblemsinsettlingclaims.D)eliminatesmalllosses.Answer:BQuestionStatus:PreviousEdition18)Whichofthefollowingstatementsaboutproblemsarisingfromtheuseofacoinsuranceclauseis(are)true?I.Theamountofinsuranceshouldbeperiodicallyevaluatedtoavoidacoinsurancepenaltybecauseofinflation.II.Anagreedvaluecoverageoptionisonemethodusedtosolvetheproblemofvaluesthatfluctuatethroughoutthepolicyterm.A)IonlyB)IIonlyC)bothIandIID)neitherInorIIAnswer:CQuestionStatus:PreviousEdition19)Conniehasamajormedicalpolicywitha$200deductibleanda75-25coinsuranceclause.Ifshehaseligible