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Quizzes > Quizzes for Business > Finance

Start the Insurance Coverage Knowledge Assessment Quiz

Gauge Your Policy Coverage Understanding Today

Difficulty: Moderate
Questions: 20
Learning OutcomesStudy Material
Colorful paper art depicting elements related to Insurance Coverage Knowledge Assessment Quiz

Ready to deepen your understanding of policy coverage and boost your coverage knowledge? This insurance coverage quiz is perfect for professionals, students, or anyone looking to sharpen their grasp of policy limits and exclusions. By taking this interactive Insurance Knowledge Assessment, you will gain clear insights into real-world scenarios and test your skills. Feel free to customize and adapt the questions in our intuitive quizzes editor to match your training needs. You can also explore advanced topics with our Company Client Coverage Quiz for deeper practice.

Which type of insurance primarily covers damage to a homeowner's dwelling?
Property insurance
Auto insurance
Liability insurance
Health insurance
Property insurance is designed to cover damage to a homeowner's dwelling. Liability insurance protects against third-party claims, while health and auto policies cover different risks.
What is the main purpose of liability insurance?
To protect the insured from legal claims and judgments
To pay for the insured's medical treatment
To cover damage to the insured's own property
To insure personal belongings against theft
Liability insurance provides legal defense and pays judgments if the insured is held responsible for third-party injury or property damage. It does not cover the insured's own property or medical expenses unrelated to third-party claims.
Collision coverage in an auto insurance policy pays for:
Theft of personal items from the vehicle
Damage to the insured vehicle from a collision with another object
Medical bills of the driver
Damage from a fallen tree or hail
Collision coverage specifically pays for damage to the insured's vehicle resulting from a collision. Other coverages handle medical payments, comprehensive perils, and personal property theft.
In an insurance policy, the deductible is:
The maximum amount the insurer will pay for a claim
The monthly premium paid by the insured
An optional coverage add-on
The amount the insured must pay before the insurer covers the rest
The deductible is the portion of a loss the insured agrees to pay before the insurer's payment begins. Coverage limits, premiums, and optional add-ons are distinct policy features.
An endorsement attached to an insurance policy is also known as a:
Binder
Rider
Actuarial table
Peril
A rider or endorsement modifies the terms of an insurance policy by adding or excluding coverage. A binder is a temporary agreement, perils are causes of loss, and actuarial tables are used for rate calculations.
Which peril is commonly excluded from standard homeowners insurance policies?
Theft
Flood
Fire
Lightning
Standard homeowners policies exclude flood damage, which requires separate flood insurance. Fire, theft, and lightning are typically covered perils.
If an auto policy has a $100,000 per-occurrence liability limit and the insured makes two separate covered claims of $80,000 each, how much will the insurer pay in total?
$160,000
$100,000
$200,000
$80,000
With a per-occurrence limit of $100,000, each $80,000 claim is fully covered. Two such claims total $160,000, which is within the per-occurrence limit each time.
Which endorsement automatically adjusts coverage limits on a property policy to account for inflation?
Earthquake endorsement
Named storm endorsement
Inflation guard endorsement
Ordinance or law endorsement
An inflation guard endorsement increases coverage limits periodically to keep pace with inflation. Other endorsements address specific perils or building code requirements.
An insured has a $500 deductible and sustains a $2,000 covered loss. How much will the insurer pay?
$1,500
$500
$2,500
$2,000
The insurer pays the loss amount minus the deductible. In this case, $2,000 minus $500 equals $1,500.
Which insurance product covers loss of business income resulting from direct physical damage to property?
Business interruption insurance
Umbrella liability insurance
Auto liability insurance
Product liability insurance
Business interruption insurance reimburses lost income and operating expenses when a covered peril causes physical damage. Other liability products handle lawsuits or third-party harm.
A professional liability policy typically excludes claims resulting from:
Negligence
Errors
Intentional wrongdoing
Omissions
Professional liability covers errors, omissions, and negligence. Intentional acts or wrongdoing are excluded because they are not insurable risks.
What does a coinsurance clause in a property policy encourage?
Selecting the highest deductible
Limiting coverage to named perils
Filing multiple small claims
Insuring property to a specified percentage of its value
A coinsurance clause requires the insured to maintain coverage at or above a certain percentage of the property's value. Failure to do so results in partial claim payments.
Under a liability insurance policy, which duty refers to the insurer's obligation to pay covered claims?
Duty to settle
Duty to report
Duty to defend
Duty to indemnify
The duty to indemnify is the insurer's obligation to pay covered losses up to policy limits. The duty to defend involves providing legal defense for covered claims.
How does choosing a higher deductible affect an insurance policy's premium?
It invalidates the policy
It has no effect on the premium
It lowers the premium
It raises the premium
A higher deductible means the insured assumes more risk, so insurers reduce the premium. Conversely, a lower deductible increases the insurer's potential payout and raises the premium.
Replacement cost coverage differs from actual cash value coverage because it:
Excludes liability coverage
Does not subtract depreciation when settling a claim
Includes a coinsurance requirement
Automatically lowers the deductible
Replacement cost coverage pays to replace damaged property at current market prices without deducting for depreciation. Actual cash value subtracts depreciation from the replacement cost.
A property insured at $240,000 with an 80% coinsurance requirement on a $300,000 building suffers a $150,000 covered loss. After a $1,000 deductible, how much will the insurer pay?
$149,000
$119,000
$141,000
$150,000
The insured meets the coinsurance requirement (80% of $300,000 equals $240,000). The insurer pays the full loss minus the $1,000 deductible, totaling $149,000.
For a homeowner with high-value jewelry, which coverage option ensures full protection for those items?
Blanket limit
Named-peril coverage
Coinsurance clause
Scheduled personal property endorsement
A scheduled personal property endorsement lists and values specific high-value items individually, ensuring they are fully covered. Blanket limits divide a single limit among property classes.
In a commercial auto policy, the term 'covered auto' includes:
Only leased vehicles
Any vehicle the insured operates
Only vehicles owned at policy inception
Vehicles listed in the declarations and newly acquired autos
Commercial auto policies define 'covered autos' to include those listed and any vehicles the insured acquires during the policy term. It does not automatically cover all vehicles operated by the insured.
A professional services firm wants protection against libel and slander claims. Which endorsement should they add?
Media liability endorsement
Cyber liability endorsement
Data breach endorsement
Employment practices liability endorsement
A media liability endorsement extends coverage to defamation claims such as libel or slander. Other endorsements cover cyber risks, employment claims, or data breaches.
Which mechanism in an insurance policy helps control moral hazard by requiring insureds to share in the cost of a claim?
Broader coverage options
Deductibles and policy limits
Annual aggregate limits
Premium discounts
Deductibles and policy limits ensure insureds bear part of the loss, discouraging careless behavior. Broader coverage or discounts do not directly require shared loss responsibility.
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Learning Outcomes

  1. Identify key types of insurance coverage and their purposes.
  2. Analyse policy terms to determine covered risks and exclusions.
  3. Evaluate the impact of coverage limits on claim scenarios.
  4. Apply knowledge to select appropriate policy options for clients.
  5. Demonstrate understanding of deductibles, premiums, and endorsements.

Cheat Sheet

  1. Understand the Main Types of Insurance Coverage - Ready to level up your insurance IQ? Dive into auto, life, health and homeowner's coverage to see how each one guards against different surprises life throws your way. Master these basics and you'll sail through policy talk like a champ. Dive into coverage types
    2. investopedia.com
  2. Analyze Policy Terms for Covered Risks and Exclusions - Remember, the devil's in the details! Scan your policy to spot exactly what you're protected from - and what's left out. Knowing exclusions helps you avoid claim-time headaches. Explore endorsements & exclusions
    3. fbfs.com
  3. Evaluate the Impact of Coverage Limits on Claims - Coverage limits are your policy's spending cap: hit it and you cover the rest out of your pocket. Crunch the numbers so you're never caught with an unexpected shortfall when making a claim. Understand limits & deductibles
    4. hiscox.com
  4. Apply Knowledge to Select Appropriate Policy Options - Time to play matchmaker! Pair your client's risk profile with a policy that aligns with their budget and goals. A tailor-made plan beats a one-size-fits-all approach every time. Browse insurance types
    5. britannica.com
  5. Understand Deductibles and Their Role in Insurance - Think of deductibles as your share of a claim - higher deductibles mean lower premiums, but more out-of-pocket when something happens. Balance savings now with risk later for the perfect fit. See how deductibles work
    6. hiscox.com
  6. Comprehend How Premiums Are Determined - Premiums are the price tag on your protection, shaped by coverage amount, risk factors and deductible choices. Crack the premium code to keep costs reasonable without skimping on safety nets. Deep dive on premiums
    7. investopedia.com
  7. Recognize the Purpose of Endorsements in Policies - Endorsements let you tweak a standard policy - add, remove or fine-tune coverage to suit specific needs. Think of them as policy power-ups! Customize with endorsements
    8. fbfs.com
  8. Differentiate Between Mandatory and Optional Insurance Types - Some coverages, like auto liability, are legally nonnegotiable, while others - think life or pet insurance - are your call. Weigh the must-haves against the nice-to-haves for a balanced portfolio. Mandatory vs optional guide
    9. britannica.com
  9. Assess the Role of Riders in Life Insurance Policies - Riders are bonus features in your life policy, from accidental death add-ons to premium waivers for disabilities. Pick riders that truly complement your coverage goals. Rider benefits explained
    10. fbfs.com
  10. Understand the Importance of Reviewing Policy Terms Regularly - Life changes, and so should your insurance. Schedule regular policy check-ups to confirm your coverage still matches your evolving needs and goals. Policy review tips
    11. toxigon.com
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