CPCU 500, Questions Set, Chapters 1 – 8 with accurate || || || || || || || || || ||
detailed solutions ||
Key questions in determining insurable interest - correct answer✔✔1. What is insurable
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interest
2. When must insurable interest exist
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3. Why require insurable interest
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4. What is the legal basis of insurable interest
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5. What happens when insurable interest overlap
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Problems associated with maintain insurance to value - correct answer✔✔1. The amount of
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insurance required to maintain insurance to value is based on the property's value at the
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time of loss, but the limit is chosen at the time of policy inception
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2. The insured often selects the policy limits based on his best guess, not on a valid
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appraisal.
3. Even with an appraisal, the true insurable value at the time of loss cannot be measured
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exactly until the property is actually repaired or replaced
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4. Values fluctuate over time
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Insurance buyers can minimize those four problems by - correct answer✔✔1. Using a
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professional appraiser to determine the current replacement cost value and then
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reappraising the property every few years || || || || ||
2. Adjusting the appraisal annually using indexes and/or a record of additions and deletions
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3. Reviewing and revising limits periodically
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4. Using appropriate coverage options such as
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|| Agreed value optional coverage || || ||
|| Inflation guard protection || ||
,|| Peak season endorsement
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Approaches used in property insurance to value property - correct answer✔✔1. actual cash
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value
2. replacement cost
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3. agreed value approach
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4. functional value
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Valuation of Liability Losses are typically based on - correct answer✔✔1. The relevant
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policy provisions and || || ||
2. The extent of the bodily injury and/or property damage to others
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The most the insurer will pay is the lesser of - correct answer✔✔1. The applicable policy
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limit
2. The compensable amount of the loss
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Purposes of deductibles - correct answer✔✔1. To reduce the insurer's cost by eliminating
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the inefficiencies of dollar trading and eliminating insurer loss settlement and other
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administrative expense for loss under the deductable. || || || || || ||
2. To encourage risk control
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3. To reduce the morale and moral hazard incentive
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How deductibles are handled in liability insurance: the insurer - correct answer✔✔1.
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Defends the claim on a first - dollar basis
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2. Pays all covered losses
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3. Bills the insured for the amount of losses up to the deductible.
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, Limited use of liability deductibles - correct answer✔✔1. The insurer wants the insured to
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report every claim and not play adjuster and attorney. Simply, the insurer wants to control
|| || || || || || || || || || || || || || ||
the claim settlement.
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2. The premium credit would be small
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3. Few people sue for small amounts
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4. The insurer must try to collect the deductible amount from the insured.
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Other sources of recovery that affect amounts payable - correct answer✔✔1. Noninsurance
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agreements, warranties, guarantees, lease agreements, service agreements etc.
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2. Third parties
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3. Other insurance in the same policy
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4. Other insurance in a similar policy
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5. Other insurance in a dissimilar policy
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Courts Take Three Approaches to ACV - correct answer✔✔1. Replacement cost minus
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depreciation
2. market value
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3. the braod evidence rule
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Distinguishing Characteristics of Insurance Contracts - correct answer✔✔1. The principle
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of indemnity
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2. Utmost good faith
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3. Fortuitous losses
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4. Contract of adhesion
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5. Exchange of unequal amounts
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6. Conditional
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7. Nontransferable
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detailed solutions ||
Key questions in determining insurable interest - correct answer✔✔1. What is insurable
|| || || || || || || || || || || ||
interest
2. When must insurable interest exist
|| || || || ||
3. Why require insurable interest
|| || || ||
4. What is the legal basis of insurable interest
|| || || || || || || ||
5. What happens when insurable interest overlap
|| || || || || ||
Problems associated with maintain insurance to value - correct answer✔✔1. The amount of
|| || || || || || || || || || || || ||
insurance required to maintain insurance to value is based on the property's value at the
|| || || || || || || || || || || || || || ||
time of loss, but the limit is chosen at the time of policy inception
|| || || || || || || || || || || || ||
2. The insured often selects the policy limits based on his best guess, not on a valid
|| || || || || || || || || || || || || || || || ||
appraisal.
3. Even with an appraisal, the true insurable value at the time of loss cannot be measured
|| || || || || || || || || || || || || || || || ||
exactly until the property is actually repaired or replaced
|| || || || || || || ||
4. Values fluctuate over time
|| || || ||
Insurance buyers can minimize those four problems by - correct answer✔✔1. Using a
|| || || || || || || || || || || || ||
professional appraiser to determine the current replacement cost value and then
|| || || || || || || || || || ||
reappraising the property every few years || || || || ||
2. Adjusting the appraisal annually using indexes and/or a record of additions and deletions
|| || || || || || || || || || || || ||
3. Reviewing and revising limits periodically
|| || || || ||
4. Using appropriate coverage options such as
|| || || || || || ||
|| Agreed value optional coverage || || ||
|| Inflation guard protection || ||
,|| Peak season endorsement
|| ||
Approaches used in property insurance to value property - correct answer✔✔1. actual cash
|| || || || || || || || || || || || ||
value
2. replacement cost
|| ||
3. agreed value approach
|| || ||
4. functional value
|| ||
Valuation of Liability Losses are typically based on - correct answer✔✔1. The relevant
|| || || || || || || || || || || || ||
policy provisions and || || ||
2. The extent of the bodily injury and/or property damage to others
|| || || || || || || || || || ||
The most the insurer will pay is the lesser of - correct answer✔✔1. The applicable policy
|| || || || || || || || || || || || || || || ||
limit
2. The compensable amount of the loss
|| || || || || ||
Purposes of deductibles - correct answer✔✔1. To reduce the insurer's cost by eliminating
|| || || || || || || || || || || || ||
the inefficiencies of dollar trading and eliminating insurer loss settlement and other
|| || || || || || || || || || || ||
administrative expense for loss under the deductable. || || || || || ||
2. To encourage risk control
|| || || ||
3. To reduce the morale and moral hazard incentive
|| || || || || || || ||
How deductibles are handled in liability insurance: the insurer - correct answer✔✔1.
|| || || || || || || || || || || ||
Defends the claim on a first - dollar basis
|| || || || || || || ||
2. Pays all covered losses
|| || || ||
3. Bills the insured for the amount of losses up to the deductible.
|| || || || || || || || || || || ||
, Limited use of liability deductibles - correct answer✔✔1. The insurer wants the insured to
|| || || || || || || || || || || || || ||
report every claim and not play adjuster and attorney. Simply, the insurer wants to control
|| || || || || || || || || || || || || || ||
the claim settlement.
|| ||
2. The premium credit would be small
|| || || || || ||
3. Few people sue for small amounts
|| || || || || ||
4. The insurer must try to collect the deductible amount from the insured.
|| || || || || || || || || || || ||
Other sources of recovery that affect amounts payable - correct answer✔✔1. Noninsurance
|| || || || || || || || || || || ||
agreements, warranties, guarantees, lease agreements, service agreements etc.
|| || || || || || ||
2. Third parties
|| ||
3. Other insurance in the same policy
|| || || || || ||
4. Other insurance in a similar policy
|| || || || || ||
5. Other insurance in a dissimilar policy
|| || || || || ||
Courts Take Three Approaches to ACV - correct answer✔✔1. Replacement cost minus
|| || || || || || || || || || || ||
depreciation
2. market value
|| ||
3. the braod evidence rule
|| || || ||
Distinguishing Characteristics of Insurance Contracts - correct answer✔✔1. The principle
|| || || || || || || || || ||
of indemnity
||
2. Utmost good faith
|| || ||
3. Fortuitous losses
|| ||
4. Contract of adhesion
|| || ||
5. Exchange of unequal amounts
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6. Conditional
|| ||
7. Nontransferable
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