RMIN4000 FINAL EXAM BROWN Questions And Answers Already Graded A+

Actual Cash Value - Replacement Cost minus Depreciation. Depreciation (%) = Age/Useful Life ACV = RC - Depreciation Highest depreciation is usually 80% In property insurance, indemnification is usually based on the actual cash value of the property at the time of the loss. EXAMPLE: Roof installed in 2012 for $5000 & has a useful life of 20 years. It will cost $6000 to replace based on current costs. After depreciation, the ACV is $3600. Depreciation is 40% (8 years old / 20 year useful life) EXAMPLE: What is the ACV? --> Cost $750 when purchased in 2016. Useful life is 10 years. Current Model is $450 Depreciation % = 40% ... $ = 450 * .4 = 180 ACV = $450 - $180 = $270.00 EXAMPLE: What is the ACV? --> Cost $250,000 when built in 2014. Useful life of 20 years. Fire completely destroys building in 2020. Current reconstruction cost is $300,000 Depreciation % = 6/20 = 0.3 ... $ = 300000 * .3 = 90000.0 ACV = $300000 - $90000 = $210000.00 acv - personal property covered at ____ additional coverages - Debris Removal (of damaged property) Up to 5% of Cov. A limit in addition to limit if needed. Up to $1,000 for the removal of fallen trees (due to wind/hail/ice/snow) from covered property. Reasonable Repairs - To protect property from further damage. Examples: Tarp over hole in roof, board up broken window. Trees, Shrubs, and Other Plants If loss caused by specific perils Up to $500 per tree/shrub/plantFire Department Service Charge (up to $500) Unauthorized Use of Credit Card (up to $500) Loss Assessment (up to $1,000) Collapse Landlord's Furnishings (up to $2,500) Ordinance or Law (up to 10% of Cov. A limit) advantages of captive insurer - Can help a firm when insurance is expensive or difficult to obtain lower costs, No agent or broker commissions, Interest earned on invested premium, Easier access to reinsurance market, Possible of lower tax rate, possibility of favorable regulatory environment. Adverse Selection - The tendency of persons with a higher-than-average chance of loss to seek insurance at average rates, which, if not controlled by underwriting, results in higher than expected loss levels. Those with the greatest probability of loss are most likely to buy insurance. EXAMPLE: Insurance agencies charging higher for drivers with more speeding tickets because they're riskier drivers ... that driver searching for an agency that will ignore those tickets and give a lower rate! Affordable Care Act - Guaranteed Issue- Insurers cannot deny coverage due to preexisting conditions - leads to adverse selection! Community Rating- Insurers may only rate on a few variables- leads to adverse selection! Minimum Standards for Health Insurance Cannot drop policyholders Dependents can remain on policy until age 26 No annual or lifetime limits Coverage for essential health benefits Individual Mandate- Buy health insurance or pay a penalty (since repealed) Health Insurance Exchanges Subsidies for low income individuals/families Employer Mandate- Firms with 50+ employees must provide health insurance or pay a fine Require health insurers to pay 85% of premiums in claimsAgent Michael Scarn sells insurance for the Federal Bureau of Insurance (FBI). He is quoting a property insurance policy for Samuel Chang, the owner of an office building. The office building is 15,000 square feet and FBI charges a gross rate of $25 per 100 square feet. What is the gross premium for the property policy covering the office building? - 3750 (15K feet/ 100 feet = 150ft * 25$ = 3750$) aggregate deductible - Amount the insured is responsible for in total (over all losses during the policy period) before the insurer pays anything Health insurance!!!!! EXAMPLE: $1000 deductible ... Dr. Appt on 1/31 costs $600, insured pays all $600, insurer pays $0 ... Dr. Appt on 2/17 costs $900, insured pays remaining $400 on deductible, insurer pays the remaining $500 for appt Aletory Contract - Values exchanged may not be equal but depend on an uncertain event EXAMPLE: Mia Wallace pays $1000 for homeowners insurance. Her house burns down and the insurance company pays her $200,000a EXAMPLE: Jules pays $1000 per year for 20 years for homeowners insurance. He's never filed a claim so his insurer has never paid him any money Alien Insurer - Chartered in a foreign country, but licensed to operate in the state All of the following are examples of operational risks EXCEPT: a) changing conditions in financial markets b) employment practices c) customer service d) supply chain - A