Fundamentals of Insurance Chapter 5 Exam Questions and Correct Answers Latest Update 2024
(Graded A+)
Name the types of property insured by Homeowners Forms. - Answers Dwelling Building
Detached Private Structures
Personal Property
Name the types of property insured by commercial property insurance policies. - Answers Building
Stock
Equipment
What is the coverage on the types of Commercial Property Insurance? - Answers Coverage is provided
only for those items for which an amount of insurance is indicated on policy.
What is the meaning of direct damage? - Answers When object of insurance is damaged or destroyed by
an insured peril, the loss to that object is a direct loss. Only direct damage is insurable.
Give an example of Direct Damage. - Answers A tornado strikes, takes roof off of building, direct loss
would be damage to the structure, equipment, furniture and inventory. Fire and smoke damage counts
as well.
What is the meaning of Indirect Damage? - Answers Consequential losses, not inflicted by the peril itself
but describe losses suffered as a result of the direct loss.
Give an example of Indirect Damage. - Answers A tornado destroys a roof, left over are rebuilding costs.
Insurance does not cover income lost while rebuilding.
Define Warranty? - Answers A warranty is a promise by insureds that certain facts are truly as they are
represented to be and will remain so. The warranty requires exact compliance.
What is the effect when a warranty is breached? - Answers Should insureds breach warranty, the
contract is nullified and there is no coverage. A breach entitles insurer to deny coverage regardless of
whether the breach was directly linked to cause of loss.
Define Effect - Answers A change which is a result or consequence of an action or other cause.
Name 2 types of exclusions contained in property insurance policies. - Answers 1. Property
2. Perils
Name the Property Exclusions in Property Insurance Policies. - Answers *Evidence of debt or title
*Securities
, *Automobile
*Water Craft
*Aircraft
*Money
*Other Motor Vehicles
*Books of Account
*Vacant Property (more than 30 consecutive days)
Name the Peril Exclusions in Property Insurance Policies. - Answers *Earthquake
*Flood
*Smoke due to Agricultural Smudging or Industrial Operations
*Wear or Tear
*Gradual Deterioration
*Rust
*Corrosion
*War
*Nuclear Incident
*Increased costs of repair or Construction due to enforcement of any by-law
*Sewer Back-Up
No policy covers all losses, policies insure named perils stated on policy only.
What is Agricultural Smudging? - Answers The use of outdoor devices to maintain a smoldering fire.
Produces dense smoke to keep away insects and stop freezing.
Define Deductible? - Answers A deductible represents the amount the insured is required to pay for
each loss before receiving any payment from the insurer.
What do deductibles accomplish? - Answers The higher the deductible, the lower the premium paid.
Insurers encouraged to select a deductible which they can realistically afford.
(Graded A+)
Name the types of property insured by Homeowners Forms. - Answers Dwelling Building
Detached Private Structures
Personal Property
Name the types of property insured by commercial property insurance policies. - Answers Building
Stock
Equipment
What is the coverage on the types of Commercial Property Insurance? - Answers Coverage is provided
only for those items for which an amount of insurance is indicated on policy.
What is the meaning of direct damage? - Answers When object of insurance is damaged or destroyed by
an insured peril, the loss to that object is a direct loss. Only direct damage is insurable.
Give an example of Direct Damage. - Answers A tornado strikes, takes roof off of building, direct loss
would be damage to the structure, equipment, furniture and inventory. Fire and smoke damage counts
as well.
What is the meaning of Indirect Damage? - Answers Consequential losses, not inflicted by the peril itself
but describe losses suffered as a result of the direct loss.
Give an example of Indirect Damage. - Answers A tornado destroys a roof, left over are rebuilding costs.
Insurance does not cover income lost while rebuilding.
Define Warranty? - Answers A warranty is a promise by insureds that certain facts are truly as they are
represented to be and will remain so. The warranty requires exact compliance.
What is the effect when a warranty is breached? - Answers Should insureds breach warranty, the
contract is nullified and there is no coverage. A breach entitles insurer to deny coverage regardless of
whether the breach was directly linked to cause of loss.
Define Effect - Answers A change which is a result or consequence of an action or other cause.
Name 2 types of exclusions contained in property insurance policies. - Answers 1. Property
2. Perils
Name the Property Exclusions in Property Insurance Policies. - Answers *Evidence of debt or title
*Securities
, *Automobile
*Water Craft
*Aircraft
*Money
*Other Motor Vehicles
*Books of Account
*Vacant Property (more than 30 consecutive days)
Name the Peril Exclusions in Property Insurance Policies. - Answers *Earthquake
*Flood
*Smoke due to Agricultural Smudging or Industrial Operations
*Wear or Tear
*Gradual Deterioration
*Rust
*Corrosion
*War
*Nuclear Incident
*Increased costs of repair or Construction due to enforcement of any by-law
*Sewer Back-Up
No policy covers all losses, policies insure named perils stated on policy only.
What is Agricultural Smudging? - Answers The use of outdoor devices to maintain a smoldering fire.
Produces dense smoke to keep away insects and stop freezing.
Define Deductible? - Answers A deductible represents the amount the insured is required to pay for
each loss before receiving any payment from the insurer.
What do deductibles accomplish? - Answers The higher the deductible, the lower the premium paid.
Insurers encouraged to select a deductible which they can realistically afford.
