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MS Property & Casualty practice questions

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Question 1Insurance Principles and Concepts

In insurance terminology, what is a hazard?

  1. The uncertainty about whether a loss will occur
  2. A condition that increases the chance or severity of a loss Correct answer.
  3. The portion of a loss that the insured keeps
  4. The actual event that produces the loss

Explanation

A hazard is a condition surrounding a risk that makes a loss more likely or more severe, such as oily rags in a storage room or a steep driveway. The event that produces the loss (fire, windstorm) is the peril, while uncertainty about loss is risk. The portion of loss the insured keeps is retention.

Question 2Insurance Principles and Concepts

Which type of risk is generally considered insurable by private insurers?

  1. Investment risk, because future returns can be forecast
  2. Speculative risk, because both gain and loss are possible
  3. Market risk, because it can be measured by actuaries
  4. Pure risk, because only loss or no loss is possible Correct answer.

Explanation

Private insurers write pure risk, where the only possible outcomes are loss or no loss, which allows loss frequency and severity to be predicted across a pool. Speculative risk involves the chance of gain as well as loss and is generally not insured. Investment and market risk are forms of speculative risk.

Question 3Insurance Principles and Concepts

The requirement of insurable interest means that the person applying for coverage must stand to suffer what if the insured event occurs?

  1. A higher premium at the next renewal
  2. A higher tax liability
  3. A financial loss Correct answer.
  4. A public relations problem in the local community

Explanation

Insurable interest requires that the applicant would suffer a genuine economic loss from the destruction or injury of the subject of insurance. It supports the principle of indemnity by preventing coverage of property in which the insured has no financial stake. The interest must exist at the time of loss for property coverage.

Question 4Insurance Principles and Concepts

The principle of utmost good faith requires each party to a policy to do what?

  1. Disclose material facts relevant to the risk Correct answer.
  2. Inspect the insured property before issuing the policy
  3. Pay every premium in advance of the effective date
  4. Honor every claim regardless of the policy language

Explanation

Utmost good faith obliges both the applicant and the insurer to deal honestly and to reveal facts that would affect the other party's decision. The applicant must not conceal or misrepresent material information, and the insurer must explain coverage fairly. Breach of this duty can give the injured party grounds to rescind or to avoid a claim.

Question 5Insurance Principles and Concepts

Actual cash value is commonly calculated by taking replacement cost and doing what?

  1. Adding salvage value
  2. Applying a coinsurance penalty
  3. Subtracting depreciation Correct answer.
  4. Subtracting the deductible

Explanation

Actual cash value reflects the value of property at the time of loss, commonly computed as replacement cost minus depreciation. Deductibles and coinsurance penalties are separate adjustments applied to the loss settlement. Salvage is property remaining after a loss and is handled separately from the ACV computation.

Question 6Insurance Principles and Concepts

The primary purpose of a deductible is to do what?

  1. Eliminate small claims and their handling costs Correct answer.
  2. Increase the policy limit available for larger losses
  3. Satisfy a property coinsurance requirement
  4. Shift the entire loss to the insured

Explanation

A deductible makes the insured responsible for a stated initial amount of each loss, which removes small claims from the insurer's workload and lowers premium. It does not change the policy limit and does not shift the whole loss. Coinsurance requirements are satisfied through adequate limits, not deductibles.

Question 7Insurance Principles and Concepts

Buying a homeowners or auto insurance policy is best described as which risk management technique?

  1. Avoidance
  2. Reduction
  3. Transfer Correct answer.
  4. Retention

Explanation

Insurance transfers the financial consequences of a covered loss to an insurer in exchange for a premium. Avoidance would mean eliminating the activity that creates the exposure, and reduction means lessening its frequency or severity. Retention means keeping the risk, which is what a deductible represents.

Question 8Insurance Principles and Concepts

The principle of indemnity holds that an insured should do what after a covered loss?

  1. Collect the full face amount of the policy for any covered loss
  2. Defer settlement until subrogation against a third party is complete
  3. Be restored to the same financial position as before the loss Correct answer.
  4. Profit from a covered loss if all premiums have been paid

Explanation

Indemnity means the insured is made whole, no better and no worse off, after a covered loss. This is why policies use actual cash value or replacement cost rather than face amounts. It is also the reason insurers pursue subrogation and prohibit profiting from a loss.

Question 9Insurance Principles and Concepts

After paying a covered loss caused by a negligent third party, an insurer may pursue subrogation in order to do what?

  1. Recover the paid amount from the party at fault Correct answer.
  2. Require the insured to pay a second deductible
  3. Reduce the limit for future losses
  4. Cancel the insured's policy without advance notice

Explanation

Subrogation gives the insurer the right to step into the insured's shoes and seek reimbursement from the party legally responsible for the loss. It holds the actual wrongdoer accountable and helps control premium costs. The insured may not recover the same loss twice.

Question 10Insurance Principles and Concepts

A property policy is a contract of adhesion, which means what?

  1. Both parties have equal bargaining power in setting the terms
  2. The insured may negotiate changes to any exclusion before the policy starts
  3. The courts must enforce every printed term exactly as written
  4. The insurer drafts the terms with little input from the insured Correct answer.

Explanation

In a contract of adhesion, one party drafts the document and the other accepts or rejects it, so insurance policies are prepared by the insurer. Because of this imbalance, ambiguities are generally construed against the drafter. The insured does not participate in writing the standard forms.

Question 11Insurance Principles and Concepts

An insurance contract is aleatory because of which characteristic?

  1. It must be offered to the public on identical terms
  2. The insurer may cancel it at any time without cause
  3. It becomes enforceable only after a loss occurs
  4. The amounts the parties exchange may be unequal Correct answer.

Explanation

An aleatory contract depends on chance, so the premium paid and the benefit received may be very unequal; a small premium can produce a large claim payment. The contract is enforceable from inception, not only after a loss. It is also a contract of adhesion rather than a public utility offering.

Question 12Insurance Principles and Concepts

An insurance policy is a unilateral contract because of which feature?

  1. Only the insurer makes a legally enforceable promise Correct answer.
  2. Either party may modify it at will
  3. Both parties must perform at exactly the same time
  4. It takes effect only after the first claim is filed

Explanation

In a unilateral contract, only one party, the insurer, makes an enforceable promise to pay covered claims. The insured makes no promise to pay future premiums; paying a premium is a condition of the insurer's continuing obligation. This differs from a bilateral contract, where both parties promise performance.

Question 13Insurance Principles and Concepts

The law of large numbers assists insurers because of which effect?

  1. Each additional policyholder pays a smaller premium than the previous one
  2. Losses stop occurring once the pool reaches a certain size
  3. It guarantees that no single insured will suffer a large loss
  4. A larger pool of similar exposures makes actual losses more predictable Correct answer.

Explanation

As the number of similar independent exposure units increases, actual loss experience tends to approach the expected or predicted level. This predictability allows insurers to set rates with confidence and to operate with smaller contingency margins. It does not reduce the chance that an individual insured will have a severe loss.

Question 14Insurance Principles and Concepts

Adverse selection occurs when which situation develops?

  1. Insureds become careless because insurance will pay for a loss
  2. Applicants most likely to have losses seek coverage most eagerly Correct answer.
  3. A policy is written to cover every possible cause of loss
  4. An insurer accepts only the lowest-risk applicants in a class

Explanation

Adverse selection is the tendency of poorer-than-average risks to buy or keep coverage in greater proportion than better risks. If unchecked, it raises loss costs and forces premiums up, driving good risks away. Underwriting and accurate rating are the primary controls.

Question 15Insurance Principles and Concepts

Which situation best illustrates a moral hazard?

  1. A driver completes a defensive driving course to lower premiums
  2. A business raises its deductible to save on premium
  3. An insured deliberately sets fire to a building to collect insurance money Correct answer.
  4. A homeowner installs a security system after a burglary

Explanation

Moral hazard involves dishonest or intentional conduct that is created or encouraged by the presence of insurance, such as arson for profit or faking a claim. Increased care or loss prevention measures reduce hazard rather than create it. Buying a larger deductible reduces the insurer's exposure and the insured's retention increases.

Question 16Insurance Principles and Concepts

A morale hazard is best illustrated by which situation?

  1. An insured burns down a building to collect the insurance money
  2. An insured is less careful because insurance will pay for a loss Correct answer.
  3. An applicant lies about prior losses on an application
  4. A property is left vacant and unattended for many months

Explanation

Morale hazard is indifference or carelessness arising from the mere existence of insurance, such as leaving a car unlocked because it is covered. It differs from moral hazard, which involves deliberate or dishonest acts. Vacancy is generally treated as a physical hazard that increases the chance of loss.

Question 17Insurance Principles and Concepts

Replacement cost coverage differs from actual cash value coverage in which way?

  1. It deducts depreciation from the amount that is paid for the damaged property
  2. It limits payment to the market value of the property at the time of loss
  3. It pays only the outstanding mortgage balance on the damaged property
  4. It pays the cost of new property without any deduction for depreciation Correct answer.

Explanation

Replacement cost pays what it costs today to replace the damaged property with new property of similar kind and quality, with no depreciation deduction. Actual cash value applies depreciation to that figure. Because replacement cost can exceed the property's pre-loss value, the insured is expected to actually repair or replace to collect the full amount.

Question 18Insurance Principles and Concepts

The main function of reinsurance is to do what?

  1. Let the original insurer avoid paying legitimate claims
  2. Provide coverage directly to the general public
  3. Spread a large exposure among several insurers Correct answer.
  4. Replace the need for an emergency reserve fund

Explanation

Reinsurance is insurance for insurers: it transfers part of a risk to another carrier so that a single large loss or a catastrophe does not impair the ceding company. It increases the insurer's capacity to write business and stabilizes results. It does not change the original insurer's obligation to its policyholder.

Question 19Insurance Principles and Concepts

Which element must be established for a claim of negligence to succeed?

  1. The plaintiff suffered emotional distress only
  2. The defendant carried no liability insurance at the time of the act
  3. The defendant intended to cause the harm that occurred
  4. The defendant breached a duty of care owed to the plaintiff Correct answer.

Explanation

Negligence requires a duty owed to the plaintiff, a breach of that duty, proximate cause, and actual damages. Intent is not required; negligence is unintentional conduct that falls below the standard of care. The presence or absence of insurance has no bearing on whether negligence occurred.

Question 20Insurance Principles and Concepts

In a liability claim, general damages are intended to compensate for what?

  1. Deterring similar conduct by others in the future
  2. Punishing the defendant for reckless conduct
  3. Pain, suffering, and other non-economic harm Correct answer.
  4. Medical bills and lost wages already incurred

Explanation

General damages compensate for harms that cannot be itemized precisely, such as pain and suffering, disfigurement, and loss of enjoyment of life. Special damages cover documented economic items such as medical expenses and lost earnings. Punitive damages are separate and are meant to punish and deter.

Question 21Insurance Principles and Concepts

Lightning strikes an insured's car, which rolls into a garage and starts a fire that destroys the building. The property policy covers damage by lightning but excludes fire. Which doctrine determines whether the building loss is covered?

  1. Assumption of risk, because the owner accepted the chance of a fire
  2. Remote cause, because an intervening event broke the chain from the lightning
  3. Proximate cause, because lightning set off an unbroken chain of events Correct answer.
  4. Concurrent causation, because two unrelated perils acted at the same time

Explanation

Proximate cause asks whether an unbroken chain of events links the covered peril to the loss without an independent intervening cause. If lightning is the dominant and efficient cause of the entire sequence, the resulting fire damage is treated as part of the lightning loss even where fire is excluded. A break in the chain would defeat coverage.

Question 22Insurance Principles and Concepts

A building with a replacement cost of $500,000 is insured for $300,000 under a policy with an 80% coinsurance clause and no deductible. A covered fire causes $100,000 of damage. What amount will the insurer pay?

  1. $60,000
  2. $100,000
  3. $75,000 Correct answer.
  4. $80,000

Explanation

The coinsurance requirement is 80% of $500,000, or $400,000, while only $300,000 was carried. The settlement is limited to the ratio of insurance carried to insurance required, applied to the loss: ($300,000 / $400,000) x $100,000 = $75,000. Because the limit exceeds the loss, the insured absorbs only the penalty portion.

Question 23Insurance Principles and Concepts

An insurer's agent tells an applicant that a particular exclusion will not be enforced, and the insurer later denies a claim based on that exclusion. The insured may rely on which doctrine?

  1. The parol evidence rule, to rewrite the policy
  2. Waiver and estoppel, to prevent the denial Correct answer.
  3. Rescission, to cancel the policy for misrepresentation
  4. Subrogation, to recover the denied amount from the agent

Explanation

Waiver is the voluntary relinquishment of a known right, and estoppel prevents a party from asserting a right after another party has relied on its conduct to their detriment. If an authorized agent clearly states that a term will not be enforced and the insured relies on that statement, the insurer may be barred from denying the claim. Authority of the person making the statement is essential.

Question 24Insurance Principles and Concepts

Which statement about representations in an insurance application is correct?

  1. A representation is a promise that the insured must perform exactly
  2. Representations are statements the applicant believes to be true Correct answer.
  3. Representations are statements made by the insurer about coverage
  4. Any inaccurate representation automatically voids the policy

Explanation

A representation is a statement of fact made by the applicant that is believed to be true to the best of the applicant's knowledge. A warranty is a promise or condition that must be met literally. Only a material misrepresentation that induced the insurer to issue the policy generally supports rescission.

Question 25Insurance Principles and Concepts

A claims-made liability policy differs from an occurrence policy in which respect?

  1. It responds to injuries that occurred before the retroactive date shown on the policy
  2. It responds only to injuries that both occur and are reported in the same policy year
  3. It responds to claims reported during the policy period even if the injury happened earlier Correct answer.
  4. It responds to injuries that occur during the policy period no matter when reported

Explanation

Claims-made coverage is triggered by the reporting of the claim during the policy period, subject to any retroactive date, so the injury date may be earlier. Occurrence coverage is triggered by the date the injury or damage takes place, regardless of when the claim is filed. An injury that predates the retroactive date is not covered.

Question 26Insurance Principles and Concepts

Which of the following situations involves a pure risk that is ordinarily insurable?

  1. An investor buying shares that may rise or fall in value
  2. A company launching a product that may succeed or fail
  3. A person wagering money on the outcome of a sporting event
  4. A fire damaging an insured warehouse Correct answer.

Explanation

A pure risk involves only the chance of loss or no loss, with no possibility of gain, which is the type of risk insurers are willing to assume. Speculative risks contain the possibility of profit and are generally treated as uninsurable.

Question 27Insurance Principles and Concepts

The part of an insurance policy that identifies the named insured, the policy period, the limits of liability, and the property or activity covered is called the:

  1. Conditions
  2. Exclusions
  3. Declarations Correct answer.
  4. Insuring agreement

Explanation

The declarations page supplies the identifying facts of the individual policy, including who is insured, for how long, and for how much. The remaining sections set out the promise to pay, the insured's duties, and the limitations on coverage.

Question 28Insurance Principles and Concepts

Which statement correctly distinguishes a peril from a hazard?

  1. A peril is a form of legal liability, while a hazard is a category of physical damage to property.
  2. A peril is an event excluded by the policy, while a hazard is an event the policy covers.
  3. A peril is the cause of a loss, while a hazard is a condition that increases the chance or severity of a loss. Correct answer.
  4. A peril is a condition that increases the likelihood or seriousness of a loss, while a hazard is the event that directly causes damage.

Explanation

A peril is the actual cause of loss, such as fire or windstorm, while a hazard is a condition that raises the likelihood or size of that loss, such as oily rags or faulty wiring. The two terms describe different parts of the loss picture.

Question 29Insurance Principles and Concepts

An insured buys an expensive camera and has the insurer attach a form to the existing homeowners policy so that the camera is now covered. This form is known as a(n):

  1. Binder
  2. Declarations page
  3. Endorsement Correct answer.
  4. Warranty

Explanation

An endorsement is a written form attached to the policy that changes its terms, such as adding property or broadening coverage. It becomes part of the policy and takes effect according to its own terms.

Question 30Insurance Principles and Concepts

Insurance depends on the applicant's honest disclosure of facts the insurer cannot readily verify, so the contract is described as one of:

  1. Utmost good faith Correct answer.
  2. A unilateral contract
  3. An aleatory contract
  4. A conditional contract

Explanation

Utmost good faith refers to the heightened duty on both parties, especially the applicant, to disclose material facts fairly and completely. The insurer relies on those disclosures when deciding whether and on what terms to issue coverage.

Question 31Insurance Principles and Concepts

A policy provision in which the insured promises to keep a sprinkler system in working order is best described as a:

  1. Waiver
  2. Representation
  3. Warranty Correct answer.
  4. Concealment

Explanation

A warranty is a promise by the insured that a stated condition of the risk exists or will be maintained. A breach of warranty may affect coverage depending on the policy language and applicable law.

Question 32Insurance Principles and Concepts

A policy requires the insured to file a sworn proof of loss within 60 days, and the insurer's duty to pay does not arise until that step is completed. This requirement is best described as a:

  1. Representation
  2. Condition subsequent
  3. Condition precedent Correct answer.
  4. Warranty

Explanation

A condition precedent is an act or event that must occur before the other party's duty to perform becomes enforceable. Here, the proof of loss must come first, and only then does the insurer owe payment.

Question 33Insurance Principles and Concepts

An applicant pays the first premium on Monday and is told coverage starts immediately, even though the policy has not yet been printed. The agent's written or oral evidence of temporary coverage is a(n):

  1. Binder Correct answer.
  2. Endorsement
  3. Policy jacket
  4. Certificate of insurance

Explanation

A binder is temporary evidence of coverage that bridges the gap between the application and the issuance of the policy. It is subject to the terms of the policy that will eventually be issued.

Question 34Insurance Principles and Concepts

An insurer gives a producer rate manuals, application forms, and business cards identifying the producer as its representative. A customer reasonably relies on those materials and deals with the producer as the insurer's agent. The producer's power in this situation is:

  1. Fiduciary authority
  2. Apparent authority Correct answer.
  3. Express authority
  4. Implied authority

Explanation

Apparent authority arises when the insurer's words or conduct lead a reasonable person to believe the producer has authority to act for the insurer. The insurer may be bound by acts taken within that reasonably perceived authority.

Question 35Insurance Principles and Concepts

In property insurance, insurable interest must exist at which point for a claim to be payable?

  1. Both at purchase and continuously throughout the entire policy term
  2. At the time of the loss Correct answer.
  3. Only when the policy is first purchased
  4. Only when the policy is renewed

Explanation

For property coverage, the insured must have an insurable interest in the property when the loss occurs. Life insurance differs, because insurable interest is tested at the time the policy is issued.

Question 36Insurance Principles and Concepts

An insurer pays a total loss for a damaged machine and then sells the remaining usable parts for scrap. The insurer's right to take possession of the damaged property after paying the loss rests on the principle of:

  1. Abandonment
  2. Contribution
  3. Subrogation
  4. Salvage Correct answer.

Explanation

Salvage is the insurer's right to take ownership of damaged property after paying a loss, which helps offset the cost of the claim. The insured may not force the insurer to accept unwanted property, which is why abandonment is limited.

Question 37Insurance Principles and Concepts

A state applies a pure comparative negligence rule. An injured party is found 30% at fault for an accident and suffers $100,000 in damages. What amount may the party recover from the negligent defendant?

  1. $0
  2. $100,000
  3. $70,000 Correct answer.
  4. $30,000

Explanation

Under pure comparative negligence, the claimant's recovery is reduced by the claimant's percentage of fault but is not barred. Here, the $100,000 award is reduced by the claimant's 30% share, leaving $70,000.

Question 38Insurance Principles and Concepts

A building is insured under Policy A for $60,000 and under Policy B for $40,000, and both policies contain pro rata other insurance clauses. A covered loss of $20,000 occurs. How much will Policy A pay?

  1. $12,000 Correct answer.
  2. $8,000
  3. $10,000
  4. $20,000

Explanation

Under a pro rata other insurance clause, each policy pays its proportion of the total insurance in force. Policy A carries $60,000 of the $100,000 total, or 60%, so it pays 60% of the $20,000 loss, which is $12,000.

Question 39Insurance Principles and Concepts

A policy exclusion is genuinely ambiguous, and the insured and the insurer offer different but reasonable readings. A court applying the rule of contra proferentem will most likely:

  1. Refer the dispute automatically to arbitration
  2. Resolve the ambiguity in favor of the insured Correct answer.
  3. Enforce the exclusion according to the insurer's stated intent
  4. Void the entire policy

Explanation

Contra proferentem means that ambiguous language is construed against the party that drafted it, which in insurance is the insurer. Because the insured had no role in drafting the exclusion, the reasonable reading favoring the insured prevails.

Question 40Insurance Principles and Concepts

A valued policy insures a rare violin for an agreed amount of $250,000. A total loss occurs, and the violin's actual cash value at the time of loss is $180,000. Absent fraud, the insurer must pay:

  1. $180,000
  2. $250,000 Correct answer.
  3. The policy limit reduced by depreciation
  4. Nothing, because the agreed value exceeds actual cash value

Explanation

A valued policy states in advance the agreed value of the insured property, and that amount is paid for a total loss without a later depreciation calculation. The agreed value controls absent fraud or a policy defense.

Question 41Property Insurance

Which homeowners policy form covers the dwelling and other structures on an open-peril basis while covering personal property on a named-peril basis?

  1. HO-3 Correct answer.
  2. HO-5
  3. HO-2
  4. HO-8

Explanation

The HO-3 special form insures the dwelling and other structures against risks of direct physical loss (open peril) while personal property is covered for broad named perils only. The HO-5 extends open-peril coverage to both the structure and the contents.

Question 42Property Insurance

Under the HO-3, which coverage part pays additional living expenses when a covered loss makes the residence premises uninhabitable?

  1. Coverage D Correct answer.
  2. Coverage C
  3. Coverage A
  4. Coverage E

Explanation

Coverage D, Loss of Use, pays the necessary increase in living expenses and fair rental value loss when a covered peril makes the residence premises unfit to live in. Coverage A and Coverage C address the structure and personal property respectively.

Question 43Property Insurance

Replacement cost is best described as:

  1. The resale value of the property before the loss
  2. The cost to replace with new property of like kind Correct answer.
  3. The original purchase price of the property
  4. The depreciated value of the damaged property

Explanation

Replacement cost is the amount needed to repair or replace damaged property with new property of like kind and quality, with no deduction for depreciation. Actual cash value applies depreciation to that figure.

Question 44Property Insurance

Which homeowners form is written for a tenant who rents an apartment and does not own the building?

  1. HO-8
  2. HO-3
  3. HO-4 Correct answer.
  4. HO-6

Explanation

The HO-4 contents broad form is designed for tenants; it insures personal property and liability without insuring the building itself. Dwelling coverage is the landlord's responsibility.

Question 45Property Insurance

A building valued at $1,000,000 is insured for $600,000 under a policy with an 80% coinsurance clause. A covered loss of $100,000 occurs and no deductible applies. How much does the insurer pay?

  1. $75,000 Correct answer.
  2. $60,000
  3. $100,000
  4. $80,000

Explanation

The required limit is 80% of $1,000,000, or $800,000. Because only $600,000 was carried, the insurer pays the loss times the ratio of carried to required insurance: $100,000 × (600,000 ÷ 800,000) = $75,000.

Question 46Property Insurance

Under the Business Income (and Extra Expense) Coverage Form, business income is defined as:

  1. Replacement cost of the stock damaged in the loss
  2. Net profit or loss plus continuing operating expenses Correct answer.
  3. Annual payroll for every employee on the premises
  4. Total gross sales for the previous twelve months

Explanation

Business income means the net profit or loss that would have been earned plus continuing normal operating expenses, including payroll. The coverage replaces that income during the period of restoration.

Question 47Property Insurance

A commercial building is destroyed by a covered fire, and the owner must rebuild to a stricter current building code at substantial extra cost. Which coverage responds to that added cost?

  1. Ordinance or law Correct answer.
  2. Debris removal
  3. Equipment breakdown
  4. Business income

Explanation

Ordinance or law coverage, typically added by endorsement, pays the extra cost of rebuilding to current code, including demolition of undamaged portions. The unendorsed policy excludes these costs.

Question 48Property Insurance

Equipment breakdown coverage is designed to pay for loss caused by:

  1. Failure caused by improper maintenance
  2. Gradual deterioration of a pressure vessel
  3. Sudden accidental breakdown of equipment Correct answer.
  4. Wear and tear on rotating machinery

Explanation

Equipment breakdown responds to sudden and accidental failure of covered equipment, such as electrical arcing, centrifugal force, or mechanical breakdown. Deterioration, wear and tear, and maintenance-related failures are excluded.

Question 49Property Insurance

Under the HO-6 condominium form, Coverage A (Building Property) typically covers:

  1. The entire building including all common elements
  2. Building items the unit-owner is responsible for Correct answer.
  3. Only the unit-owner's personal property
  4. The association's liability for common-area injuries

Explanation

HO-6 Coverage A insures building property within the unit that the unit-owner must insure under the condominium association agreement, such as fixtures, cabinets, and interior wall finishes. The association's master policy covers the common elements.

Question 50Property Insurance

A mortgage clause in a property policy provides that the mortgagee:

  1. Receives loss payment to the extent of its interest Correct answer.
  2. Assumes responsibility for paying the premium
  3. May cancel the policy only with the insured's consent
  4. Becomes the only named insured under the policy

Explanation

The mortgage clause protects the lender's financial interest by entitling it to loss payment to the extent of its interest, and it can pay premium and file proof of loss if the insured does not. The named insured remains the borrower.