Question 1

Suppose in March you bought a $160,000 policy for a building with an actual cash value of $200,000, and the policy has an 80 percent coinsurance clause, which requires at least 80 percent of the value to be covered in order to receive the actual loss.In November, the actual cash value of the building has increased to $240,000.If the building suffers a $240,000 loss, what amount will the insurer pay?
A)$ 200,000
B)$ 240,000
C)$ 160,000
D)$ 192,000
E)$ 180,000

Accepted Answer

The answer of Suppose in March you bought a $160,000...

Question 2

Identify the type of deductible that requires payment for all losses less than a specified dollar amount.
A)Vanishing deductible
B)Straight deductible
C)Disappearing deductible
D)Waived deductible
E)Franchise deductible

Accepted Answer

A straight deductible is a type of insurance deductible that requires the policyholder to pay for all losses up to a specified dollar amount.

Question 3

Potential terrorists are usually classified as _____ because their objective is to hit specific companies in order to bring systems down, steal data, or modify data to destroy its integrity.
A)carders
B)insiders
C)hackers
D)crackers
E)phreakers

Accepted Answer

Crackers are individuals who hack into computer systems with malicious intent, such as stealing data or disrupting operations. They are often motivated by financial gain or political activism.

Question 4

This element in insurance policies requires the insured to bear some portion of a loss before the insurer is obligated to make any payment.The purpose is to reduce costs for the insurer, thus making lower premiums possible.Identify this element.
A)Deductible
B)Waiver
C)Estoppel
D)Coinsurance
E)Carryover

Accepted Answer

A deductible is the amount the insured must pay out-of-pocket before the insurance company pays a claim, helping to lower premiums by reducing the insurer's costs.

Question 5

Because of moral hazard issues, an insurer may prefer to value personal property at _____ value, which considers depreciation of the property before valuation.
A)fair market
B)actual cash
C)real cost
D)intrinsic
E)replacement cost new

Accepted Answer

Actual cash value takes into account depreciation, which means it reflects the current value of an item considering its age and wear, aligning with the insurer's preference to mitigate moral hazard by not overvaluing the property.

Question 6

Which of the following is a deductible whose amount decreases as the amount of the loss increases?
A)Demutualized deductible
B)Waived deductible
C)Disappearing deductible
D)Straight deductible
E)Franchise deductible

Accepted Answer

A disappearing deductible is a type of deductible that decreases in amount as the size of the loss increases, eventually disappearing for very large losses. This incentivizes the insured to prevent small losses while still providing coverage for significant losses.

Question 7

Identify the vandals who want to break in to a company's security network and steal proprietary information for personal gain.
A)Hackers
B)Crackers
C)Insiders
D)Phreakers
E)Carders

Accepted Answer

Crackers are individuals who break into computer systems with the intent of stealing, destroying, or otherwise compromising data for personal gain.

Question 8

When property insurers offer coverage on this basis, they do not deduct depreciation in valuing the loss.This is the value of the lost or destroyed property if it were bought new or rebuilt on the day of the loss.Identify this basis for valuation for property coverage.
A)Fair market value
B)Actual cash value
C)Real cost value
D)Intrinsic value
E)Replacement cost new

Accepted Answer

Replacement cost new is the basis for valuation where insurers provide coverage without deducting depreciation, meaning the value of the lost or destroyed property is based on its cost if it were bought new or rebuilt on the day of the loss.

Question 9

This clause has two provisions.First, it requires you to carry an amount of insurance equal to a specified percentage of the value of the property if you wish to be paid the amount of loss you incur in full, and second, it stipulates a proportional payment of loss for failure to carry sufficient insurance.Identify this clause.
A)Coinsurance
B)Waiver
C)Deductible
D)Duress
E)Estoppel

Accepted Answer

The correct answer is A) Coinsurance. This clause is common in property insurance policies and requires the policyholder to insure their property for a specified percentage of its value to receive full compensation for a loss. If the property is underinsured, any claim payment is reduced proportionally.

Question 10

In risk management, the distinction between real and personal property is relevant because:
A)when compared to real property, personal property is highly valued.
B)real property is a non-depreciating property, whereas, personal property depreciates.
C)dissimilar properties are exposed to perils with dissimilar likelihoods.
D)insureds would be more concerned about loosing, or being compensated for, personal property than real property.
E)risks exposures associated with personal property are not insured.

Accepted Answer

Dissimilar properties, such as real and personal property, are exposed to different types of perils with varying likelihoods, which affects how they are managed in risk management.

Question 11

Motorized vehicles, furniture, business inventory, clothing, and similar items are properties that are not permanently attached to something else, and therefore are movable.Identify this category of physical property.
A)Personal property
B)Virtual property
C)Non-depreciating property
D)Real property
E)Non-movable property

Accepted Answer

Personal property refers to items that are movable and not permanently attached to or part of real estate. This includes motorized vehicles, furniture, business inventory, clothing, and similar items, distinguishing it from real property, which is immovable.

Question 12

If you have a $500 deductible on the collision coverage part of your auto policy, you pay the total amount of any loss that does not exceed $500.In addition, you pay $500 of every loss in excess of that amount.If you have a loss of $1,500, therefore, you pay $500 and the insurer pays $1,000.Identify this type of deductible.
A)Vanishing deductible
B)Franchise deductible
C)Waived deductible
D)Straight deductible
E)Disappearing deductible

Accepted Answer

This is a description of a straight deductible, where the insured pays a fixed amount before the insurance coverage begins to pay. In this case, the insured pays the first $500 of any loss.

Question 13

Suppose in January you bought a $160,000 policy for a building with an actual cash value of $200,000, and the policy has an 80 percent coinsurance clause, which requires at least 80 percent of the value to be covered in order to receive the actual loss.By the time the building suffers a $20,000 loss in November, its actual cash value has increased to $240,000.What amount will the insurer pay?
A)$ 24,000
B)$ 20,000
C)$ 16,000
D)$ 22,222.22
E)$ 16,666.67

Accepted Answer

The insurer will pay based on the coinsurance formula: (Amount of Insurance / (Coinsurance percentage * Actual Cash Value at the time of loss)) * Amount of loss. Here, it's ($160,000 / (0.80 * $240,000)) * $20,000 = 0.8333 * $20,000 = $16,666.67.

Question 14

Nathan has a $400 deductible on the collision coverage part of his auto policy.He recently had a minor accident with damages to his automobile costing $380 dollars.To take advantage of his deductible, Nathan inflated his costs and argued with his insurer that the total damage incurred was $400.Identify the type of deductible in Nathan's policy.
A)Vanishing deductible
B)Waived deductible
C)Disappearing deductible
D)Straight deductible
E)Franchise deductible

Accepted Answer

The answer of Nathan has a $400 deductible on the...

Question 15

Suppose in June you bought an $80,000 policy for a building with an actual cash value of $100,000, and the policy has an 80 percent coinsurance clause, which requires at least 80 percent of the value to be covered in order to receive the actual loss.In December, the actual cash value of the building has increased to $120,000.If the building suffers a $120,000 loss, what amount will the insurer pay?
A)$ 100,000
B)$ 120,000
C)$ 80,000
D)$ 96,000
E)$ 90,000

Accepted Answer

The answer of Suppose in June you bought an $80,000...

Question 16

Which of the following represents permanent structures that if removed would alter the functioning of the property?
A)Personal property
B)Non-depreciating property
C)Mobile property
D)Real property
E)Virtual property

Accepted Answer

Real property includes land and anything permanently attached to it, such as buildings or structures, that would alter the property's functioning if removed.

Question 17

Some private insurers also provide political risk insurance.Private insurers do not have the same restrictions as OPIC, and provide coverage in all countries if the insured is willing to pay the premium.

Accepted Answer

The answer of Some private insurers also provide political risk...

Question 18

If you have a $300 deductible on the collision coverage part of your auto policy, you pay the total amount of any loss that does not exceed $300.However, if you have a loss of $1,000, the insurer pays the entire amount, $1,000.Identify this type of deductible.
A)Vanishing deductible
B)Franchise deductible
C)Waived deductible
D)Straight deductible
E)Disappearing deductible

Accepted Answer

A franchise deductible means that if the loss exceeds a certain amount (in this case, $300), the insurer pays the entire loss. If the loss is under that amount, the insured pays for the entire loss themselves.

Question 19

Overseas Private Investment Corporation insurance is available in limited amounts and only in certain developing countries that have signed bilateral trade agreements with the United States for projects intended to aid development.

Accepted Answer

The Overseas Private Investment Corporation (OPIC), now part of the U.S. International Development Finance Corporation (DFC), provides political risk insurance and other financial services, including in limited amounts and primarily in certain developing countries that have agreements with the United States, aiming to support development projects.

Question 20

Identify the correct statement about deductibles and its types.
A)It requires you to carry an amount of insurance equal to a specified percentage of the value of the property if you wish to be paid the amount of loss you incur in full.
B)The low frequency and high severity nature of most direct property losses makes deductibles particularly important.
C)The straight deductible is a modification of the disappearing deductible.
D)Deductibles help maintain reasonable premiums because they eliminate administrative expenses of the low-value, common losses.
E)Because it invites moral hazard, a franchise deductible is appropriate only when the insured is able to influence or control the amount of loss.

Accepted Answer

The answer of Identify the correct statement about deductibles and...

Quiz 11: Property Risk Management

Identify the type of deductible that requires payment for all losses less than a specified dollar amount.

Potential terrorists are usually classified as _____ because their objective is to hit specific companies in order to bring systems down, steal data, or modify data to destroy its integrity.

This element in insurance policies requires the insured to bear some portion of a loss before the insurer is obligated to make any payment.The purpose is to reduce costs for the insurer, thus making lower premiums possible.Identify this element.

Because of moral hazard issues, an insurer may prefer to value personal property at _____ value, which considers depreciation of the property before valuation.

Which of the following is a deductible whose amount decreases as the amount of the loss increases?

Identify the vandals who want to break in to a company's security network and steal proprietary information for personal gain.

When property insurers offer coverage on this basis, they do not deduct depreciation in valuing the loss.This is the value of the lost or destroyed property if it were bought new or rebuilt on the day of the loss.Identify this basis for valuation for property coverage.

In risk management, the distinction between real and personal property is relevant because:

Motorized vehicles, furniture, business inventory, clothing, and similar items are properties that are not permanently attached to something else, and therefore are movable.Identify this category of physical property.

Which of the following represents permanent structures that if removed would alter the functioning of the property?

Some private insurers also provide political risk insurance.Private insurers do not have the same restrictions as OPIC, and provide coverage in all countries if the insured is willing to pay the premium.

If you have a $300 deductible on the collision coverage part of your auto policy, you pay the total amount of any loss that does not exceed $300.However, if you have a loss of $1,000, the insurer pays the entire amount, $1,000.Identify this type of deductible.

Overseas Private Investment Corporation insurance is available in limited amounts and only in certain developing countries that have signed bilateral trade agreements with the United States for projects intended to aid development.

Identify the correct statement about deductibles and its types.