Question 1

In the case in the previous question, if it is determined that the loss is $80,000, the insured may recover

Accepted Answer

The answer of In the case in the previous question,...

Question 2

Jane Smith insures her $30,000 house as follows: $10,000 in insurer A, $20,000 in insurer B, and $10,000 in insurer C. In the event of a loss of $10,000, each insurer must pay as follows:

Accepted Answer

Jane Smith has insured her house for a total of $40,000 across three insurers, which is more than the value of the house. However, in the event of a $10,000 loss, the payment by each insurer is proportional to the amount insured with them. Insurer A has covered 1/4 of the total insurance ($10,000 out of $40,000), insurer B has covered 1/2 ($20,000 out of $40,000), and insurer C has also covered 1/4 ($10,000 out of $40,000). Therefore, in the event of a $10,000 loss, they pay in proportion to their share of the total insurance on the house.

Question 3

Under the mortgagee clause the actions of the insured

Accepted Answer

The answer of Under the mortgagee clause the actions of...

Question 4

Among the common conditions in an insurance policy, which of the following is really unnecessary?

Accepted Answer

Fraud is not a condition in an insurance policy but rather an illegal act that voids the policy. Conditions like notice of loss, proof of loss, and preservation of property are standard requirements for policyholders to follow in the event of a claim.

Question 5

Of the following types of insurance, the one that is normally a third party contract is

Accepted Answer

Workers' compensation is typically a third-party contract because it involves an agreement between the employer, the insurance company, and the employee, where the insurance company agrees to compensate the employee for injuries sustained on the job, without the employee having to sue the employer.

Question 6

If Vazques has a $50 straight deductible on his property insurance policy and has a $200 loss, he will receive

Accepted Answer

Vazques will receive $150 because the $50 straight deductible will be subtracted from the $200 loss, leaving him with $150.

Question 7

If Davis has a 2 percent franchise deductible on goods worth $100,000 and has a $3,000 loss, he will receive

Accepted Answer

The answer of If Davis has a 2 percent franchise...

Question 8

Stoller has a building worth $100,000 and has $70,000 in property insurance with an 80 percent coinsurance clause. If she suffers a $10,000 loss, she will receive from her insurer

Accepted Answer

The correct calculation involves the coinsurance formula: (Amount of Insurance / (Coinsurance Percentage * Value of Property)) * Loss = Claim Payment. Here, it's ($70,000 / (0.80 * $100,000)) * $10,000 = $8,750. Stoller did not meet the coinsurance requirement, so the claim payment is less than the actual loss.

Question 9

Dr. Fleming owns a building worth $200,000 and has property insurance for $100,000 with a 90 percent coinsurance clause. If he suffers a loss of $150,000, he will receive

Accepted Answer

The correct compensation is calculated based on the coinsurance formula: (Amount of Insurance / (Coinsurance percentage * Value of Property)) * Amount of Loss. Here, it's ($100,000 / (0.90 * $200,000)) * $150,000 = 0.5555 * $150,000 = $83,333.

Question 10

If Claudia has a $500 disappearing deductible with a 5 percent recapture factor on her property policy and has a $1,000 covered loss, she will receive from her insurer

Accepted Answer

The disappearing deductible reduces the deductible amount by 5% of the loss. So, $500 - (5% of $1,000) = $500 - $50 = $450. The insurer pays $1,000 - $450 = $550. However, since the deductible cannot be less than $0, the insurer pays $1,000 - $500 = $500.

Question 11

Black has three policies from three companies as follows: Company X = $1,000, Company Y = $3,000, and Company Z = $6,000. If he has a $3,000 loss, he will receive from each policy on an equal shares basis

Accepted Answer

On an equal shares basis, the $3,000 loss would be divided equally among the three policies, regardless of their individual coverage amounts, resulting in each company paying $1,000.

Question 12

If Company Z in the previous question became insolvent, Black would receive from each policy

Accepted Answer

The answer of If Company Z in the previous question...

Quiz 7: Insurance As a Risk Management Technique: Policy Provisions