BUSFIN 3300 Midterm 2 questions with correct answer1

BUSFIN 3300 Midterm 2 questions with correct
answers
Declarations Correct Answer-Statements that provide information about
the particular property or activity to be insured


In property insurance, it contains name of the insured, location of
property, period of protection, amount of insurance, premium and
deductible amount


Definitions Correct Answer-Part of an insurance contract


Insuring Agreement Correct Answer-summarizes the major promises of
the insurer
2 basic forms of an insuring agreement in property insurance:
- Named perils coverage - only those perils specifically named in the
policy are covered
- Open-perils or Special Perils - all losses are covered except those
losses specifically excluded


Exclusions Correct Answer-Basic part of an insurance contract


Insurance contracts contain 3 major types of exclusions:
1. Excluded perils (flood, intentional act)
2. Excluded Losses (a professional liability loss is excluded in the
homeowners policy)

,3. Excluded property (pets are not covered as personal property in the
homeowners policy)


Some perils are not commercially insurable (catastrophic losses due to
war)
Extraordinary hazards are present (using the automobile for a taxi)
Coverage is provided by other contracts (use of auto excluded on
homeowners policy)


Conditions Correct Answer-A basic part of the insurance contract


Provisions in the policy that qualify or place limitations on the insurer's
promise to perform


Miscellaneous Provisions Correct Answer-Cancellation
Subrogation
Grace Period
Misstatement of age


Named Insured Correct Answer-The person or persons named in the
declarations section of the policy


First Named Insured Correct Answer-Has certain additional rights and
responsibilities that do not apply to other named insureds

,Endorsement Correct Answer-In property and liability insurance, an
endorsement is a written provision that adds, deletes, or modifies the
provisions in the original contract


Ex.) An earthquake endorsement to a homeowners policy


Rider Correct Answer-In life and health insurance, a rider is a provision
that amends or changes the original policy


Ex.) A waiver-of-premium rider on a life insurance policy


Deductible Correct Answer-A provision by which a specified amount is
subtracted from the total loss payment that otherwise would be payable


The purpose of deductibles are to:
- Eliminate small claims that are expensive to handle and process
- Reduce premiums paid by the insured
- Reduce moral hazard and attitudinal (morale) 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


Ex.) Auto insurance deductible

, Aggregate Deductible Correct Answer-All losses that occur during a
specified time period, usually a year, are accumulated to satisfy the
deductible amount


Calendar-Year Deductible Correct Answer-A type of aggregate
deductible that is found in basic medical expense and major medical
insurance contracts


Elimination (Waiting) Period Correct Answer-A stated period of time at
the beginning of a loss during which no insurance benefits are paid


Coinsurance Clause Correct Answer-in a property insurance contract
encourages the insured to insure the property to a stated percentage of its
insurable value


If the coinsurance requirement is not met at the time of the loss, the
insured must share in the loss as a coinsurer


Amount of Recovery = Loss*(amount of insurance carried / Amount of
insurance required)


The fundamental purpose of coinsurance is to achieve equity in rating
(fairness)


Coinsurance in Health Insurance: