1
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Property and Casualty Insurance
Questions and Answers (100% Correct
Answers) Already Graded A+
If an HO-3 policy has a coverage limit of $100,000 on the dwelling,
how much coverage would automatically apply to cover the
insured's personal property under Coverage C?
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A. $20,000
B. $25,000
C. $50,000
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D. $100,000—Ans: C. $50,000
The limit of liability for personal property is 50% of the limit of liability
for Coverage A
Which of the following insurance principles permits a policyholder
to be reimbursed for losses experienced?
A. Subrogation
B. Insurable interest
C. Direct loss
D. Indemnification—Ans: A. Subrogation
Indemnity means placing an insured in the same financial position
following a loss that existed before the loss occurred. This is the
principle that allows reimbursement for loss. Subrogation is the
principle allowing an insurance company to use the insured's legal
, 2
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right of recovery against an at-fault party for the purpose of
recovering the amount it has paid out for the loss. Insurable
interest is a relationship between a person and a property such
that if a loss occurs, the person is harmed financially. A direct loss
means that property was damaged or destroyed by the peril
insured against without any intervening cause. All of these
principles rely on the principle of indemnity to allow recovery.
Deductibles are used in all of the following purposes EXCEPT
A. to reduce the cost of insurance
B. to eliminate small losses
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C. to increase the insured's caution
D. to eliminate nuisance claims—Ans: B. to eliminate small losses
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The deductible is intended in part to reduce small claims, since
the insured has a reduced incentive to file. However the loss is still
suffered by the insured. The deductible does not do anything to
reduce the insured's risk.
Uncertainty concerning financial loss best describes the concept
of
A. indemnity
B. insurance
C. risk
D. hazards—Ans: C. risk
The definition of risk is uncertainty regarding financial loss.
Insurance and indemnity are concepts that mitigate risk. Hazards
may contribute to risk but do not describe the uncertainty itself.
Collision insurance covers which of the following perils?
, 3
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A. All damage to an auto struck by the insured, if the insured is
legally liable
B. Upset of the auto without a deductible applying
C. Direct loss to the auto caused by collision with another object
D. Collision of the covered vehicle with a large animal—Ans: C.
Direct loss to the auto caused by collision with another object
Collision coverage pays for direct and accidental loss due to
upset or collision of the vehicle with another object. Losses are
subject to a deductible. Animals are a peril covered by other than
collision (comprehensive) coverage. Collision does not cover BI
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and PD liability.
All of the following are perils covered by a basic fire insurance
policy EXCEPT
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A. fire
B. explosion
C. lightning
D. removal—Ans: B. explosion
The SFP perils include only fire, lightning, and removal. Explosion is
an extended coverage.
By entering into an insurance contract, a policyholder transfers the
right of legal action against a responsible third party to the insurer.
This process is known as
A. insurable interest
B. coinsurance
C. subrogation
D. abandonment—Ans: C. subrogation
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Insureds are required to assign their right of recovery against a
negligent third party that caused the loss for the amount the
insurer paid the insured for the loss to the insurer. This is called
subrogation. Insurable interest is a condition in which an individual
or entity may suffer economic loss if property is damaged or
destroyed. Coinsurance clauses stipulate that if an insured does
not carry a specified percentage of coverage in relation to the
value of the property, the insured will not collect the entire
amount of a partial loss. Abandonment is a condition imposed
upon the insured stating that he may not abandon damaged
property to the insurance company.
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A condition creating or increasing the chance for loss is known as
a
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A. peril
B. hazard
C. loss
D. risk—Ans: B. hazard
A hazard is a condition that increases the chance of a loss
occurring. Perils are the happenings or events that cause a loss.
Risk is the uncertainty we face that perils will occur and cause us
to suffer losses. Loss is unintended, unforeseen damage to
property, including injury. For example, if a fire caused by oily rags
stored in the basement causes $10,000 damage to a home, the
hazard is the storage of the oily rags, the peril is the fire, the loss is
the $10,000 damage, and the risk is the uncertainty that the house
might be subject to burning by fire.
Aviation hull insurance provides an aircraft with protection while
A. in the air only
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Property and Casualty Insurance
Questions and Answers (100% Correct
Answers) Already Graded A+
If an HO-3 policy has a coverage limit of $100,000 on the dwelling,
how much coverage would automatically apply to cover the
insured's personal property under Coverage C?
© 2025 Assignment Expert
A. $20,000
B. $25,000
C. $50,000
Guru01 - Stuvia
D. $100,000—Ans: C. $50,000
The limit of liability for personal property is 50% of the limit of liability
for Coverage A
Which of the following insurance principles permits a policyholder
to be reimbursed for losses experienced?
A. Subrogation
B. Insurable interest
C. Direct loss
D. Indemnification—Ans: A. Subrogation
Indemnity means placing an insured in the same financial position
following a loss that existed before the loss occurred. This is the
principle that allows reimbursement for loss. Subrogation is the
principle allowing an insurance company to use the insured's legal
, 2
For Expert help and assignment solutions, +254707240657
right of recovery against an at-fault party for the purpose of
recovering the amount it has paid out for the loss. Insurable
interest is a relationship between a person and a property such
that if a loss occurs, the person is harmed financially. A direct loss
means that property was damaged or destroyed by the peril
insured against without any intervening cause. All of these
principles rely on the principle of indemnity to allow recovery.
Deductibles are used in all of the following purposes EXCEPT
A. to reduce the cost of insurance
B. to eliminate small losses
© 2025 Assignment Expert
C. to increase the insured's caution
D. to eliminate nuisance claims—Ans: B. to eliminate small losses
Guru01 - Stuvia
The deductible is intended in part to reduce small claims, since
the insured has a reduced incentive to file. However the loss is still
suffered by the insured. The deductible does not do anything to
reduce the insured's risk.
Uncertainty concerning financial loss best describes the concept
of
A. indemnity
B. insurance
C. risk
D. hazards—Ans: C. risk
The definition of risk is uncertainty regarding financial loss.
Insurance and indemnity are concepts that mitigate risk. Hazards
may contribute to risk but do not describe the uncertainty itself.
Collision insurance covers which of the following perils?
, 3
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A. All damage to an auto struck by the insured, if the insured is
legally liable
B. Upset of the auto without a deductible applying
C. Direct loss to the auto caused by collision with another object
D. Collision of the covered vehicle with a large animal—Ans: C.
Direct loss to the auto caused by collision with another object
Collision coverage pays for direct and accidental loss due to
upset or collision of the vehicle with another object. Losses are
subject to a deductible. Animals are a peril covered by other than
collision (comprehensive) coverage. Collision does not cover BI
© 2025 Assignment Expert
and PD liability.
All of the following are perils covered by a basic fire insurance
policy EXCEPT
Guru01 - Stuvia
A. fire
B. explosion
C. lightning
D. removal—Ans: B. explosion
The SFP perils include only fire, lightning, and removal. Explosion is
an extended coverage.
By entering into an insurance contract, a policyholder transfers the
right of legal action against a responsible third party to the insurer.
This process is known as
A. insurable interest
B. coinsurance
C. subrogation
D. abandonment—Ans: C. subrogation
, 4
For Expert help and assignment solutions, +254707240657
Insureds are required to assign their right of recovery against a
negligent third party that caused the loss for the amount the
insurer paid the insured for the loss to the insurer. This is called
subrogation. Insurable interest is a condition in which an individual
or entity may suffer economic loss if property is damaged or
destroyed. Coinsurance clauses stipulate that if an insured does
not carry a specified percentage of coverage in relation to the
value of the property, the insured will not collect the entire
amount of a partial loss. Abandonment is a condition imposed
upon the insured stating that he may not abandon damaged
property to the insurance company.
© 2025 Assignment Expert
A condition creating or increasing the chance for loss is known as
a
Guru01 - Stuvia
A. peril
B. hazard
C. loss
D. risk—Ans: B. hazard
A hazard is a condition that increases the chance of a loss
occurring. Perils are the happenings or events that cause a loss.
Risk is the uncertainty we face that perils will occur and cause us
to suffer losses. Loss is unintended, unforeseen damage to
property, including injury. For example, if a fire caused by oily rags
stored in the basement causes $10,000 damage to a home, the
hazard is the storage of the oily rags, the peril is the fire, the loss is
the $10,000 damage, and the risk is the uncertainty that the house
might be subject to burning by fire.
Aviation hull insurance provides an aircraft with protection while
A. in the air only
