Term

Question: 3 An insured owns several buildings, each at a different location and insured on a separate policy. What type of coverage does the insured have? 1 Blanket 2 Specific 3 Schedule 4 Special

Definition

Specific Reasoning Specific insurance provides a specific amount of coverage for each property. A blanket insurance policy provides coverage for more than one property with a single limit of coverage.

Term

Question: 4 Which method of loss valuation is contrary to the basic concept of indemnity? 1 Replacement cost 2 Functional replacement cost 3 Market value 4 Agreed value

Definition

Replacement Cost Reasoning The replacement cost method of loss valuation is contrary to the basic concept of indemnity because following a loss it may provide the insured with a settlement in excess of the property’s actual cash value.

Term

Question: 5 An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated? 1 Adhesion 2 Consideration 3 Representation 4 Good faith

Definition

Consideration Reasoning The binding force in any contract is consideration. Consideration on the part of the insured is the payment of premiums and the health representations made in the application. Consideration on the part of the insurer is the promise to pay in the event of loss.