ND PROPERTY INSURANCE EXAM |
QUESTIONS & 100% CORRECT ANSWERS
(VERIFIED) | LATEST UPDATE | GRADEA+
Insurance
Correct Answer: the transfer of financial responsibility associated with a potential of a
loss (risk) to an insurance company, which in turn spreads the cost of unexpected
losses ...
1 ND PROPERTY INSURANC E EXAM | QUESTIONS & 100% CORRECT ANSWERS (VERIFIED) | LATEST UPDATE | GRAD E A+ Insurance Correct Answer: the transfer of financial responsibility associated with a potential of a loss (risk) to an insurance company, which in turn spreads the cost of unexpected losses to many individuals. Law of Large Numbers Correct Answer: Principal stating that the larger the number of similar exposure units considered, the more closely the losses reported will equal the underlying probability of loss. This law forms the basis for statistical prediction of loss upon which rates for insurance are calculated. Insurable Inte rest Correct Answer: the insured must have an insurable interest in the person or property covered by an insurance policy. This means the insured would incur a financial loss if the insured property was damaged Risk 2 Correct Answer: the uncertainty or ch ance of a loss occurring Pure Risk Correct Answer: Refers to situations that can only result in a loss or no change, no opportunity for financial gain Speculative Risk Correct Answer: involves the opportunity for either loss or gain. Hazard Correct An swer: condition or situation which creates or increases the probability of or extend of a probable loss from a peril Moral Hazard Correct Answer: dishonest predisposition on the part of an insured which increases the change of loss Morale Hazard Correct Answer: applicants who demonstrate a careless attitude that could increase the change of loss that would be greater than would otherwise be the case Physical Hazard 3 Correct Answer: condition of the subject of insurance which creates or increases the change of loss, such as: structural defects, occupancy, poor housekeeping, or location Peril Correct Answer: a specific cause of loss, insured against in standard property policies include fire, wind, hail, explosions, etc Direct Loss Correct Answe r: direct, physical damage to buildings and/or personal property EX: building that catches fire Indirect Loss Correct Answer: or consequential losses are considered losses as a result of direct loss. Usually result from the time it takes to repair or replace damaged property. Most Common Indirect Losses Correct Answer: homeowners facing extra living expenses while the home is being repaired commercial loss of profits while a business is closed for repairs Actual Cash Value (ACV) 4 Correct Answer: method of valuation reinforces the principle of indemnity because it recognizes the reduction of value of property as it ages and becomes subject to wear and tear and obsolescence. = current replacement cost - depreciation Replacement COst Correct Answer: the cost to replace damaged property with like kind and quality at today's price, without any deduction for depreciation Market Value Correct Answer: method of calculating a loss based upon the amount a willing buyer would pay to a willing seller for the property prior to the loss. Stated Value Correct Answer: amount of insurance scheduled in a property policy which is not subject to any coinsurance requirements in the event of a covered loss Salvage Value Correct Answer: the estimated value an asset will realize upon its sale at the end of its useful life. Proximate Cause
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