According to the text, what is the main purpose of a coinsurance clause in a fire insurance policy?
Explanation
This question explains the rationale behind the coinsurance clause. By rewarding policyholders who insure their property to a high percentage of its value (usually 80 percent) and penalizing those who do not, the clause helps insurers collect adequate premiums for the risks they cover.
Other questions
In insurance terminology, what is the consideration paid to the insurer for an insurance policy called?
For a life insurance policy to be valid, an insurable interest must exist. At what point in time must this insurable interest exist?
Under the Truth-in-Lending Act (TILA), what is the maximum liability of a credit cardholder for unauthorized charges made before the creditor is notified of the card's loss?
A clause in a life or health insurance policy states that the insurer cannot contest statements made in the application after the policy has been in force for two or three years. What is this clause called?
An owner of a property valued at $200,000 takes out a fire insurance policy for $100,000. The policy includes an 80 percent coinsurance clause. If the owner suffers a partial loss of $80,000, what is the maximum amount the owner can recover?
What is key-person life insurance designed to protect?
If a provision in an insurance policy is ambiguous, how will a court generally interpret it?
In the context of automobile liability insurance with limits described as 100/300/50, what does the number '300' represent?
Which type of life insurance provides coverage for a specified period and typically has no cash surrender value?
An insurer can raise several defenses against payment on a policy. Which of the following is an absolute defense, rendering the policy void from the beginning?
Under a standard fire insurance policy, what is the difference between a 'hostile fire' and a 'friendly fire'?
What type of insurance policy covers a class of property that is expected to shift or vary in nature, such as the inventory of a business?
In the case of Zurich American Insurance Co. v. ABM Industries, Inc., the court had to determine if ABM had an insurable interest in the World Trade Center common areas. What was the court's final reasoning?
Which type of life insurance provides protection with a cumulated cash surrender value and requires the insured to pay premiums for their entire lifetime?
Under what circumstances can an insurer cancel a life or health insurance policy due to false statements in the application?
What type of insurance protects professionals such as physicians and lawyers against claims brought against them by their patients or clients?
In the case of Woo v. Fireman's Fund Insurance Co., what was the nature of the practical joke played by Dr. Woo on his dental assistant, Tina Alberts?
What does a pro rata clause in a fire insurance policy require when an insured has multiple policies covering the same property?
Which type of automobile insurance coverage insures the driver and passengers against injury caused by a driver without insurance or a hit-and-run driver?
An antilapse clause in a life insurance policy provides the insured with a grace period to pay an overdue premium before the policy is canceled. What is the typical duration of this grace period?
In the case Cary v. United of Omaha Life Insurance Co., the court found the insurance policy to be ambiguous. How did the court resolve this ambiguity?
What type of insurance policy would a business acquire to protect itself from losses caused by the dishonesty of its employees?
When an insurance company's agent fails to procure a policy for an applicant, and the applicant is subsequently harmed as a result, who is generally liable for the applicant's loss?
What type of life insurance represents both term insurance and a form of annuity, with a fixed amount paid to the insured at the end of a definite term or to a beneficiary upon death during the term?
What is the primary function of an omnibus clause in an automobile insurance policy?
What is the legal status of an insurance policy purchased by a person on a property in which they have no insurable interest?
A standard homeowners' insurance policy provides both property and liability coverage. Which of the following events would typically be covered under the liability portion of the policy?
When does the insurable interest in property need to exist for a property insurance policy to be valid?
Which of the following is NOT one of the three basic duties of the insured under an insurance contract, once the policy is issued?
What type of life insurance policy is paid up after a stated number of years, but remains fully effective for the insured's entire life?
What is the primary difference between an insurance agent and an insurance broker?
If a person has a homeowner's insurance policy, which of the following losses would typically be excluded from standard property coverage?
What is the primary legal theory under which an insurer can be held liable for more than the policy's coverage limits if it denies a claim without a reasonable basis?
A fire insurance policy with an open policy design has a maximum liability limit of $200,000. If a fire causes a total loss to the property, which has a fair market value of $180,000 at the time of the loss, how much will the insurer pay?
What does 'double indemnity' typically refer to in the context of an insurance policy?
If a person with an ordinary life insurance policy, which includes a cash surrender value, decides to stop paying premiums, which of the following is NOT an alternative to cancellation according to the text?
Which type of insurance coverage would protect a business from liability for injuries arising from on-premises events like company social functions?
In the context of a fire insurance policy, when must the assignment of the policy receive the consent of the insurer to be valid?
If a person leaves a life insurance policy to their spouse and they later divorce, what is the typical status of the policy?
Which type of insurance is a form of liability insurance specifically designed to protect against claims of negligence from patients or clients?
What type of insurance policy has a decreasing face value over its term but requires uniform premium payments?
A standard homeowners' liability policy typically excludes coverage for which of the following?
If a person has a life insurance policy where the beneficiary's right is vested, what is the consequence for assigning the policy?
Which type of insurance covers movable property, such as ships, freight, and cargo, against certain perils or navigation risks?
When an insured person misstates their age on a life insurance application, what is the usual remedy for the insurer upon discovering the error?
What type of insurance policy is defined by a provision for uniform payments over the term, but with a decreasing face value?
What is the general rule regarding an insurer's right to cancel an insurance policy?
Under an automobile liability insurance policy with limits of 100/300/50, what is the maximum amount the insurer will pay for property damage in a single accident?
What is the primary purpose of a 'floater' policy in property insurance?