Question

Eric's property was damaged in an accident. He phoned his agent to see if the loss was covered under his property insurance policy. The agent said, "As long as the cause of loss is not specifically excluded in the policy, the loss is covered." Based on the agent's answer, what type of insuring agreement appears in the policy?

Answer 1

Eric's property insurance policy likely includes an open perils or all risks insuring agreement, covering losses unless specifically excluded. This contrasts with a named perils policy and may involve a coinsurance clause.

Step-by-step explanation:

Based on the agent's statement that as long as the cause of loss is not specifically excluded in the policy, the loss is covered, it appears that Eric's property insurance policy includes an open perils or all risks insuring agreement. This type of policy covers all causes of loss that are not specifically excluded in the policy terms. It is different from a named perils policy, which only covers the risks that are listed in the policy. Coinsurance, which is when an insurance policyholder pays a percentage of a loss, and the insurance company pays the remaining cost, may also apply depending on the policy provisions.

All insurance operates under the condition of imperfect information, meaning that the likelihood of future uncertain events cannot be predicted with absolute certainty. The cost of insurance is determined by assessing the risks, which can be influenced by an individual's characteristics and choices, as well as random events that may occur.