Question 1

The coinsurance provision requires that the insurance company will pay a portion of your financial losses in the event of a catastrophe.

Accepted Answer

The answer of The coinsurance provision requires that the insurance...

Question 2

One way to lower the premiums you pay on your insurance is to have a higher deductible.

Accepted Answer

A higher deductible means the insurance company will pay out less in the event of a claim, so they are able to offer lower premiums. However, keep in mind that you will have to pay more out of pocket before insurance kicks in if you do have a claim.

Question 3

Pretend you are an insurance agent. Explain the coinsurance and 80 percent rule to a client.

Accepted Answer

The answer of Pretend you are an insurance agent. Explain...

Question 4

Your home and property have a market value of $240,000. To meet the coinsurance provision, you would need at least ________ of insurance.

Accepted Answer

The coinsurance provision requires that the amount of insurance purchased is at least a certain percentage of the total value of the property being insured. Typically, this percentage is 80%. In this case, 80% of $240,000 is $192,000, so that is the minimum amount of insurance required to meet the coinsurance provision.

Question 5

The ________ is the amount that you agree to pay before insurance coverage kicks in.

Accepted Answer

The deductible is the amount you agree to pay before insurance coverage kicks in.

Question 6

Your home and property have a market value of $200,000. Since you want to make sure that you meet the coinsurance provisions, you should have at least ________ of insurance.

Accepted Answer

The answer of Your home and property have a market...

Question 7

Eric and Lisa Lambert are purchasing a home for the first time. Their insurance company wants them to insure at least ________ of the home's full replacement cost.

Accepted Answer

Insuring at least 80% of the home's full replacement cost is the industry standard recommended by most insurance companies. This is because it ensures that the policyholder will receive adequate coverage in the event of a loss, while also allowing for some flexibility in the event that the cost of rebuilding the home exceeds the estimated replacement cost. Choosing a lower percentage, such as 70% or 75%, may result in inadequate coverage in the event of a loss, while choosing a higher percentage, such as 85% or 90%, may result in paying for more coverage than necessary.

Question 8

Describe the difference between actual cash value and replacement value.

Accepted Answer

The answer of Describe the difference between actual cash value...

Question 9

Most companies allow six endorsements or supplemental coverages to meet their customers' needs. Name and describe the six. Which one is unique and stands apart from the others?

Accepted Answer

The answer of Most companies allow six endorsements or supplemental...

Question 10

Lisa and Eric want to keep the cost down on the homeowner's insurance they will need. After talking to their parents they developed a list of ways to do so. Identify the one mistake on it.

Accepted Answer

Paying insurance premiums quarterly often incurs additional fees or charges compared to paying annually, which can increase the overall cost of the insurance rather than keeping it down.

Question 11

A lower insurance credit score generally results in lower homeowner's insurance rates.

Accepted Answer

A lower insurance credit score typically results in higher homeowner's insurance rates because it suggests a higher risk of filing claims.

Question 12

Lisa and Eric were notified that replacement cost coverage is in effect on a home owner's policy only if the home is insured for at least 80% of its replacement cost. This provision is known as the ________.

Accepted Answer

The provision is commonly known as the 80 Percent Rule.

Question 13

Which of the following statements is true?

Accepted Answer

A lower insurance credit score indicates a higher risk profile, and insurance companies charge higher rates to policyholders who are perceived as high-risk. So, if your insurance credit score is low, your homeowner's insurance rate will be higher.

Question 14

Your insurance credit score depends on, among other things, your payment history and the types of credit used.

Accepted Answer

Your payment history and credit utilization are factors that are considered when calculating your insurance credit score.

Question 15

Suppose Lisa and Eric do not purchase an adequate amount of insurance on their home. In the event of a claim, they would pay a portion of it. This is the

Accepted Answer

The coinsurance provision requires policyholders to maintain insurance equal to a stated percentage of the value of their property. If they fail to do so and have a claim, they will be responsible for paying a portion of the loss themselves.

Question 16

Which of the following statements best describes the 80 percent rule?

Accepted Answer

The 80 percent rule means that your home must be insured for at least 80 percent of its replacement cost in order for replacement cost coverage to be effective. This is to ensure that you have adequate coverage to rebuild your home in the event of a total loss. If you are insured for less than 80 percent of the replacement cost, the insurance company may apply a coinsurance penalty, which means that they will only pay a percentage of the claim based on the amount of coverage you have relative to the required 80 percent.

Question 17

Since most homeowners' claims are for relatively small amounts, high deductibles will keep your insurance costs down.

Accepted Answer

High deductibles mean that the homeowner will have to pay more out of pocket before the insurance coverage kicks in. This reduces the amount of risk that the insurance company has to take on and therefore lowers the cost of the insurance policy. Since most claims are for small amounts, having a higher deductible makes sense for many homeowners as they are less likely to make a claim in the first place or will only need to make a claim for a small amount.

Question 18

What factors are considered when insurance companies decide what rates to charge you for homeowner's insurance?

Accepted Answer

All of the factors listed (whether you have an in-home sprinkler system, what type of building materials were used in the house, and your credit score) can be considered when insurance companies decide what rates to charge for homeowner's insurance.

Question 19

What determines the cost of your homeowner's insurance?

Accepted Answer

All of the above factors play a role in determining the cost of homeowner's insurance. The location of the home can influence the likelihood of natural disasters or crime, which affects the risk for the insurance company. The type of structure can also affect the cost as different materials or designs may be more susceptible to damage. Finally, the level of coverage and policy type chosen by the homeowner will directly impact the cost of the insurance.

Question 20

Barbara is over 55 so she qualifies for additional home owner's insurance discounts.

Accepted Answer

Many insurance companies offer discounts to homeowners over the age of 55, sometimes referred to as "senior discounts". These discounts are designed to reflect the reduced risk of damage or loss associated with older occupants who tend to have fewer active children and maintain their property more carefully.

Quiz 10: Property and Liability Insurance