Principles of Risk Management and Insurance, 13th Edition

Application Questions

1. Michael owns a small plane that he flies on weekends. His insurance agent informs him that aircraft are excluded as personal property under his homeowners policy. As an insured, he feels that his plane should be covered just like any other personal property he owns.

   1. Explain to Michael the rationale for excluding certain types of property, such as aircraft, under the homeowners policy.

   2. Explain some additional reasons why exclusions are present in insurance contracts.

2. 1. a. A manufacturing firm incurred the following insured losses, in the order given, during the current policy year.

      Loss	Amount of Loss
      A	$ 2,500
      B	3,500
      C	10,000

      How much would the company’s insurer pay for each loss if the policy contained the following ...