Insurance MCQ

The insured is looking for the amount of coverage in a property and casualty policy. This information would be found in the A) conditions. B) liberalization clause. C) declarations. D) endorsements. Answer: C

A policy may be amended only with a(n): A) warranty. B) condition. C) endorsement. D) declaration. Answer: C

The insuring agreement section of a policy describes: A) losses excluded. B) duties of the insured after a loss. C) perils insured against. D) description of the property insured. Answer: C

The limits of liability are found in which of the following sections of a casualty policy? A) Definitions. B) Declarations. C) Conditions. D) Insuring agreement. Answer: B

The procedure for resolving a disagreement between an insured and an insurance company about a loss is described in which of the following parts of an insurance policy? A) Exclusions. B) Conditions. C) Declaration. D) Insuring agreement. Answer: B

All of the following are basic parts of an insurance policy EXCEPT: A) exclusions. B) conditions. C) binders. D) declarations. Answer: C

Which one of the following components of an insurance contract contains information about the risk, the effective date of coverage, deductible, premium amounts, coinsurance percentage, and location of the insured property? A) Definitions. B) Declarations page. C) Insuring agreement. D) Conditions. Answer: B

Jennifer and David signed a homeowners insurance application for coverage on their home. They did not divulge that last year their garage burned down after their 16-year-old son left a cigarette burning. The agent sent in the application and a policy was issued. When another fire occurred 2 months after the policy was issued, the company voided the policy because the agent would not have sent in the application if he had known of the prior loss. Which contract principle does this situation describe? A) Waiver and estoppel. B) Reasonable expectations. C) Utmost good faith. D) Contract of adhesion. Answer: C

Both parties rely on statements made to each other when writing a contract. This contract is known as a: A) speculative contract. B) contract of utmost good faith. C) conditional contract. D) unilateral contract. Answer: B

An insurance company issued a homeowners policy that included ambiguous language regarding how a loss was settled. The insured sued the insurance company and won. The judge stated that due to the ambiguous language in the contract the decision must be made in favor of the insured. The judge was basing this decision on which of the following types of insurance contract? A) Aleatory contract. B) Conditional contract. C) Contract of adhesion. D) Unilateral contract. Answer: C

Which of the following describes a personal contract? A) The contract is a promise made only by one party. B) The contract is subject to numerous conditions. C) The persons involved may void the contract. D) The contract protects the individual who owns the property. Answer: D

The principle that restores someone to the condition he enjoyed before a loss is A) insurance. B) indemnity. C) risk transfer. D) risk reduction. Answer: B

Bryce owns a $50,000 lake cabin that he has insured for $40,000. He sustains a $5,000 covered loss. According to the principle of indemnity, how much will his insurer pay? A) $4,000.00 B) $50,000.00 C) $40,000.00 D) $5,000.00 Answer: D

The attempt to restore an insured to his preloss condition is known as: A) indemnification. B) subrogation. C) coinsurance. D) self-insurance. Answer: A

Ann and her agent meet to discuss automobile insurance. The agent completes an application for coverage, takes Ann's check for $200, and mails the application to the insurance company. Two weeks later Ann receives the policy in the mail. When did the consideration take place? A) When the company mailed the application. B) When Ann wrote the premium check. C) When the agent submitted the application. D) When the agent quoted the premium. Answer: B

Which one of the following is NOT an element of a valid contract? A) Legal purpose. B) Consideration. C) Intent. D) Competent parties. Answer: C