Reference no: EM131535744
Assignment
Please remember that you must do your own work. Any plagiarism will result in a grade of zero for all students involved. Please use your own words even if you are using the textbook for answers. Always provide a citation when a reference is used.
1. Identify the basic parts of an insurance contract and list two components of each.
2. The principle of indemnity is critically important to the successful underwriting of the insurance. The following questions refer to the principle of indemnity:
a. Why is the principle of indemnity important in the insurance product?
b. List the four key ways that the principle of indemnity is enforced?
c. What is the purpose of a deductible in a property insurance policy?
d. What is meant by an insurable interest?
3. A drunk driver ran a red light and smashed into Kris's car. The cost to repair the car is $8000 dollars. She has collision insurance on her car with a $500 deductible.
a. Explain how the principle of subrogation would be relevant in this case.
b. Explain how subrogation supports the principle of indemnity.
4. Jerry owns a commercial office building that is insured under three property insurance contracts. He has $100,000 of insurance from Company A, $200,000 from Company B, and $200,000 from Company C.
a. Assume that the pro rata liability provision appears in each contract. If a $100,000 loss occurs, how much will Jerry collect from each insurer? Explain your answer.
b. What is the purpose of the other-insurance provisions that are frequently found in insurance contracts?
5. Joanna purchased a dining room set for $5000 and insured the furniture on an actual cash value basis. Three years later, the set was destroyed in a fire. At the time of loss, the property had depreciated in value by 50%. The replacement cost of a new dining room set at the time of loss was $6000 dollars. Ignoring any deductible, how much will Joanna collect from her insurer? Show any work and explain your answer.
6. Sherry owns a small warehouse that is insured for $200,000 under a commercial property insurance policy. The policy contains an 80% coinsurance clause. The warehouse sustained a $50,000 loss because of a fire in a storage area. The replacement cost of the warehouse at the time of loss is $500,000.
a. What is the insurer's liability, if any, for this loss? Show your work.
b. What is the purpose of the coinsurance clause?
7. Identify the basic parts of an insurance contract and list two components of each.