RMIN 4000 Edmunds Test 3 Questions and Answers 100% Pass

RMIN 4000 Edmunds Test 3 Questions and Answers 100% Pass Basic Parts of an Insurance Contract 1. Declarations 2. Definitions 3. Insuring agreement 4. Exclusions 5. Conditions 6. Miscellaneous provisions Declarations statements that provide information about the particular property or activity to be insured definitions statements that provide information about the particular property or activity to be insured Insuring Agreement Summary of the major promises of the insurer (what the policy covers) named perils only those perils specifically named in the policy are covered open perils all perils are covered except for those that are specifically excluded exclusions perils or property that are not covered under the policy ex. flood/earthquake, war, intentional loss, certain types of property Why are exclusions necessary? -Some perils are not commercially insurable e.g., catastrophic losses due to war -Extraordinary hazards are present e.g., using the automobile for a taxi -Coverage is provided by other contracts e.g., use of auto excluded on homeowners policy -Moral hazard problems e.g., coverage of money limited to $200 in homeowners policy -Attitudinal hazard problems e.g., individuals are forced to bear losses that result from their own carelessness -Coverage not needed by typical insureds e.g., homeowners policy does not cover aircraft conditions provisions in the policy that qualify or place limitations on the insurer's promise to perform Miscellaneous Provisions - States have mandatory provisions (added by endorsements) - Notice of Cancellation - Notice of Nonrenewal - Notice of Loss - Mortgagee Clause named insured the person or persons named in the declarations section of the policy First Named Insured has certain additional rights and responsibilities that do not apply to other named insureds other insureds persons or parties who are insured under the policy even though they are not specifically named additional insureds person or party added to the policy by an endorsement Endorsements and Riders provisions that add to, delete from, or modify the original/main policy Deductible a provision by which a specified amount is subtracted from the total loss payment that otherwise would be payable Why have deductibles? -eliminate small claims -reduce premiums -reduce moral and morale hazard straight deductible the amount the insured is responsible for per loss before the insurer pays anything aggregate deductible the amount the insured is responsible for in total (over all losses during the policy period) before the insurer pays anything elimination (waiting) period a stated period of time at the beginning of a loss during which no insurance benefits are paid Coinsurance in Property Insurance encourages the insured to insure the property to a stated percentage of its insurable value. If coinsurance requirement is not met at the time of the loss, the insured must share the loss (as a coinsurer) Coinsurance in Health Insurance a provision that requires the insured to pay a specified percentage of covered medical expenses after the deductible is met - reduces premiums and prevents overutilization of policy benefits pro rata liability each insurer's share of the loss is based on the proportion that its insurance bears to the total amount of insurance on the property Contribution of Equal Shares each insurer shares equally in the loss until the share paid by each insurer equals the lowest limit of liability under any policy, or until the full amount of the loss is paid primary and excess insurance the primary insurer pays first, and the excess insurer pays only after the policy limits under the primary policy are exhausted Bryan Tedford - UGA BBA in risk management - Chartered Property Casualty Underwriter (CPCU) - Associate in Risk Management (ARM) - Insurance Company Tenure at ACE premature death the death of a family head with outstanding unfulfilled financial obligations Costs of Premature Death - future earnings are lost forever. - additional expenses incurred: funeral expenses, uninsured medical bills, higher childcare costs, estate settlement expenses, and outstanding debts. - possible reduction of standard living. Who needs life insurance? - individuals with dependents - those with debt co-signed by others - businesses that depend on key people - individuals who would benefit from estate planning using life insurance How much life insurance is needed? depends on family size, income levels, existing financial assets, and financial goals Approaches to estimate amount of life insurance needed 1. Human Life Value Approach 2. Needs Approach Human Life Value Approach - the present value of the family's share of the deceased breadwinner's future earnings - Estimate the individual's average annual earnings over his/her productive lifetime - Deduct taxes and self-maintenance costs - Using a discount rate, determine the present value of the family's share of earnings for the number of years until retirement Disadvantages of human life value approach -Ignores assets and other sources of income (Social Security, retirement plans) -Earnings & expenses assumed to be constant (most people get a raise each year) -Based on income rather than need -Effects of inflation on earnings and expenses are ignored. Needs Approach the amount needed depends on the financial needs that must be met if the family head should die Disadvantages of needs approach • Difficult to estimate the