RMI 3011 Exam 2 Question and answers
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Basic parts of an insurance contract - correct answer ✔Declarations
Definitions
Insuring Agreement
Exclusions
Conditions
Miscellaneous Provisions
Declarations - correct answer ✔-Statements that provide information about
the particular property or activity to be insured
-Usually found on the first page of the policy
-Usually contains name of the insured, location of the property, period of
protection, amount of insurance, amount of premium, size of deductible, and
any other relevant information
Definitions - correct answer ✔- Key words or phrases that have quotation
marks around them
- Insurer is frequently called "we, "ours", or "us"
- Insured is frequently called "you" or "yours"
Insuring Agreement - correct answer ✔- Summarizes the major promises of
the insurer
- Two basic forms are the named-perils policy and open-perils policy
Named-perils policy - correct answer ✔Only those perils specifically named
in the policy are covered
,Open-perils policy (special coverage policy) - correct answer ✔- All losses
are covered except for those losses that are specifically excluded
- This policy is preferred over the named-perils policy
Exclusions - correct answer ✔Three major types:
- Excluded perils (flood, intentional act, etc.)
- Excluded losses (professional liability loss)
- Excluded property (pets)
Conditions - correct answer ✔Provisions in the policy that qualify or place
limitations on the insurer's promise to perform
- If the policy conditions are not met, the insurer can refuse to pay the claim
- Ex: notifying the insurer if a loss occurs, protecting the property after a loss,
etc.
Miscellaneous Provisions - correct answer ✔Ex: Cancellation, subrogation,
misstatement of age, grace period
Named Insured - correct answer ✔Person or persons whose name appears
in the declarations section of the policy
- Can be one or more persons
First named insured - correct answer ✔First name that appears on the
declarations section of a policy
- the first named insured has certain additional rights and responsibilities that
only apply to them
- Rights include the right to a premium refund and the receipt of a cancellation
notice
, - Responsibilities include payment of premiums and complying with notice-of-
loss requirements
Endorsement - correct answer ✔A written provision that adds to, deletes
from, or modifies the provisions of the original contract
- Ex: an earthquake endorsement to a homeowners policy
- Used in property and casualty insurance
Rider - correct answer ✔A provision that amends or changes the original
policy
- Ex: A waiver-of-premium rider on a life insurance policy
- Used in life and health insurance
Deductible - correct answer ✔A provision by which a specified amount is
subtracted from the total loss payment that would otherwise be payable
- Typically found in property, health, and auto insurance contracts
- Not used in life insurance because death is a total loss
Purposes of a deductible - correct answer ✔1) Eliminate small claims that
are expensive to handle and process
2) Reduce premiums paid by the insured
3) Reduce moral and attitudinal hazard
Straight deductible - correct answer ✔The insured must pay a certain
number of dollars of loss before the insurer is required to make a payment
- Common in property insurance
verified to pass
Basic parts of an insurance contract - correct answer ✔Declarations
Definitions
Insuring Agreement
Exclusions
Conditions
Miscellaneous Provisions
Declarations - correct answer ✔-Statements that provide information about
the particular property or activity to be insured
-Usually found on the first page of the policy
-Usually contains name of the insured, location of the property, period of
protection, amount of insurance, amount of premium, size of deductible, and
any other relevant information
Definitions - correct answer ✔- Key words or phrases that have quotation
marks around them
- Insurer is frequently called "we, "ours", or "us"
- Insured is frequently called "you" or "yours"
Insuring Agreement - correct answer ✔- Summarizes the major promises of
the insurer
- Two basic forms are the named-perils policy and open-perils policy
Named-perils policy - correct answer ✔Only those perils specifically named
in the policy are covered
,Open-perils policy (special coverage policy) - correct answer ✔- All losses
are covered except for those losses that are specifically excluded
- This policy is preferred over the named-perils policy
Exclusions - correct answer ✔Three major types:
- Excluded perils (flood, intentional act, etc.)
- Excluded losses (professional liability loss)
- Excluded property (pets)
Conditions - correct answer ✔Provisions in the policy that qualify or place
limitations on the insurer's promise to perform
- If the policy conditions are not met, the insurer can refuse to pay the claim
- Ex: notifying the insurer if a loss occurs, protecting the property after a loss,
etc.
Miscellaneous Provisions - correct answer ✔Ex: Cancellation, subrogation,
misstatement of age, grace period
Named Insured - correct answer ✔Person or persons whose name appears
in the declarations section of the policy
- Can be one or more persons
First named insured - correct answer ✔First name that appears on the
declarations section of a policy
- the first named insured has certain additional rights and responsibilities that
only apply to them
- Rights include the right to a premium refund and the receipt of a cancellation
notice
, - Responsibilities include payment of premiums and complying with notice-of-
loss requirements
Endorsement - correct answer ✔A written provision that adds to, deletes
from, or modifies the provisions of the original contract
- Ex: an earthquake endorsement to a homeowners policy
- Used in property and casualty insurance
Rider - correct answer ✔A provision that amends or changes the original
policy
- Ex: A waiver-of-premium rider on a life insurance policy
- Used in life and health insurance
Deductible - correct answer ✔A provision by which a specified amount is
subtracted from the total loss payment that would otherwise be payable
- Typically found in property, health, and auto insurance contracts
- Not used in life insurance because death is a total loss
Purposes of a deductible - correct answer ✔1) Eliminate small claims that
are expensive to handle and process
2) Reduce premiums paid by the insured
3) Reduce moral and attitudinal hazard
Straight deductible - correct answer ✔The insured must pay a certain
number of dollars of loss before the insurer is required to make a payment
- Common in property insurance
