Property And Casualty Insurance License Property Insurance Basics 2 — Questions and Answers
Question 1: What is a 'named peril' policy?
- A policy that covers all perils except those named
- A policy that covers only the perils specifically listed (Correct answer)
- A policy named after the insured
- A policy covering natural disasters only
Correct answer: A policy that covers only the perils specifically listed
A named peril policy only covers losses caused by perils explicitly listed in the policy document.
Question 2: Replacement cost coverage for personal property pays:
- The original purchase price of the item
- The fair market value at time of loss
- The cost to replace the item with a new item of like kind and quality (Correct answer)
- The ACV minus the deductible
Correct answer: The cost to replace the item with a new item of like kind and quality
Replacement cost coverage pays the amount needed to replace the damaged or destroyed item with a new one of similar kind and quality, without deducting for depreciation.
Question 3: Which section of a homeowners policy covers the insured's personal property worldwide?
- Coverage A
- Coverage B
- Coverage C (Correct answer)
- Coverage D
Correct answer: Coverage C
Coverage C (Personal Property) protects the insured's personal belongings anywhere in the world, subject to policy limits and conditions.
Question 4: What does Coverage D (Loss of Use) provide in a homeowners policy?
- Additional coverage for outbuildings
- Reimbursement for additional living expenses when the home is uninhabitable (Correct answer)
- Coverage for business property in the home
- Protection for scheduled personal articles
Correct answer: Reimbursement for additional living expenses when the home is uninhabitable
Coverage D pays for additional living expenses the insured incurs when a covered loss makes the residence uninhabitable.
Question 5: What is a 'blanket' property policy?
- A policy with a single limit covering multiple properties or types of property (Correct answer)
- A policy that covers all weather-related perils
- A policy providing coverage in all 50 states
- A policy with no deductible
Correct answer: A policy with a single limit covering multiple properties or types of property
A blanket policy applies one overall limit to multiple locations or property types, providing flexibility in how coverage is allocated after a loss.
Question 6: An 'agreed value' clause in a property policy means:
- The insurer and insured agree to dispute resolution
- Coinsurance is suspended because value has been agreed upon in advance (Correct answer)
- The deductible amount is pre-set
- The premium is locked for the policy period
Correct answer: Coinsurance is suspended because value has been agreed upon in advance
An agreed value clause suspends the coinsurance requirement because both parties have already agreed on the insured value of the property.
Property And Casualty Insurance License Property Insurance Basics 2
What is a 'named peril' policy?