1
Property and Casualty Insurance Questions
with Answers (100% Correct Answers)
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?
A. $20,000
B. $25,000
C. $50,000
D. $100,000 Answer: 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 Answer: A. Subrogation
,2
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 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
C. to increase the insured's caution
D. to eliminate nuisance claims Answer: B. to eliminate small losses
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
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D. hazards Answer: 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?
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 Answer: 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 and PD liability.
All of the following are perils covered by a basic fire insurance policy EXCEPT
A. fire
B. explosion
C. lightning
D. removal Answer: B. explosion
, 4
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 Answer: C. subrogation
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.
A condition creating or increasing the chance for loss is known as a
A. peril
B. hazard
C. loss
Property and Casualty Insurance Questions
with Answers (100% Correct Answers)
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?
A. $20,000
B. $25,000
C. $50,000
D. $100,000 Answer: 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 Answer: A. Subrogation
,2
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 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
C. to increase the insured's caution
D. to eliminate nuisance claims Answer: B. to eliminate small losses
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
,3
D. hazards Answer: 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?
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 Answer: 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 and PD liability.
All of the following are perils covered by a basic fire insurance policy EXCEPT
A. fire
B. explosion
C. lightning
D. removal Answer: B. explosion
, 4
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 Answer: C. subrogation
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.
A condition creating or increasing the chance for loss is known as a
A. peril
B. hazard
C. loss
