Fundamentals of Insurance Chapter 5 Exam Questions and Correct Answers Latest Update 2024 (Graded A+)

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. When settling an insurance claim, what is the main purpose of the adjuster? - Answers To provide the insureds with complete indemnity, that is to ensure they receive the actual amount of loss, no more, no less. How is indemnity determined when loss or damage to only one item of a pair set? - Answers Loss or damage to one item of a pair or set does not constitute loss or damage to entire pair or set. The item lost continues to have value and this amount will be deducted from amount of claim payment. How is indemnity determined when loss or damage to only one part of property consisting of several parts? - Answers The basis of settlement shall be the value of the lost or damaged part, including the cost of installation. What factors are considered in determining ACV? - Answers 1. The Actual Cash Value (ACV) of property at the time of loss or damage. 2. The interest of the Insured in the property. 3. The amount of insurance specified on the "Declarations Page" in respect of the property lost or damaged. Which provisions apply to insureds in order to qualify for settlement on replacement cost basis for personal property? - Answers Insureds must show that the property was unusable for its original purpose at time of loss and that the property was repaired or replaced promptly. Which provisions apply to insureds in order to qualify for settlement on replacement cost basis for buildings? - Answers 1. Replacement shall be effected by the insureds with due diligence and