Question 1

"Actual cash value" means "historical cost less depreciation."

Accepted Answer

A) True 
 B)False  False

Question 2

Which of the following is correct concerning when insurable interest must exist?

Accepted Answer

A) in property and liability insurance, it must exist at the inception of the contract 
B) it is seldom required in property insurance unless there are liens on the property 
C) it must exist at the time of death of the insured for the beneficiary to collect in life insurance 
D) in life insurance it must exist at the inception of the policy but it is not necessary at the time of the loss 
A) in property and liability insurance, it must exist at the inception of the contract 
B) it is seldom required in property insurance unless there are liens on the property 
C) it must exist at the time of death of the insured for the beneficiary to collect in life insurance 
D) in life insurance it must exist at the inception of the policy but it is not necessary at the time of the loss D

Question 3

The principle of utmost good faith

Accepted Answer

A) holds the insurer to a higher standard of honesty 
B) does not apply in life insurance 
C) holds the insured to a higher standard of honesty 
D) requires the insurer and insured to enter the contract with utmost good faith 
A) holds the insurer to a higher standard of honesty 
B) does not apply in life insurance 
C) holds the insured to a higher standard of honesty 
D) requires the insurer and insured to enter the contract with utmost good faith C

Question 4

Explain what a contract of adhesion is. How does the doctrine of reasonable expectations influence adhesion?

Accepted Answer

Insurance is a contract of adhesion whic

Question 5

An affirmative warranty states that:

Accepted Answer

A) something is true only at the present time 
B) something will be true in the future 
C) all information provided on the application for coverage is affirmed to be truthful 
D) none of the above 
A) something is true only at the present time 
B) something will be true in the future 
C) all information provided on the application for coverage is affirmed to be truthful 
D) none of the above

Question 6

Evan has his house insured for $200,000. He sells the house to Ann for $225,000. Three days after the sale is complete the house is destroyed by fire. Evan has not canceled his homeowner's insurance policy,so he decides to file a claim for losses caused by the fire. What will most likely happen?

Accepted Answer

A) Evan will collect $200,000 in insurance payments 
B) Evan will collect $200,000 in insurance payments ONLY IF Ann has not yet purchased a homeowner's policy of her own 
C) Evan will collect nothing because he has no insurable interest 
D) Ann will collect $200,000 from Evan's insurer 
A) Evan will collect $200,000 in insurance payments 
B) Evan will collect $200,000 in insurance payments ONLY IF Ann has not yet purchased a homeowner's policy of her own 
C) Evan will collect nothing because he has no insurable interest 
D) Ann will collect $200,000 from Evan's insurer

Question 7

If an insured has actual cash value coverage,how much would he collect given the following facts?
1) replacement cost of the building is $200,000,
2) replacement cost of the loss is $30,000,
3) estimated total useful life is 30 years,and,
4) building has been in use 15 years.

Accepted Answer

A) $70,000 
B) $45,000 
C) $30,000 
D) $15,000 
A) $70,000 
B) $45,000 
C) $30,000 
D) $15,000

Question 8

In most property insurance contracts assignment is:

Accepted Answer

A) specifically prohibited 
B) permitted, but requires additional premium 
C) not mentioned, but is not permitted because insurance contracts are personal contracts 
D) valid with the written consent of the insurer 
A) specifically prohibited 
B) permitted, but requires additional premium 
C) not mentioned, but is not permitted because insurance contracts are personal contracts 
D) valid with the written consent of the insurer

Question 9

Willy Dye goes applies for life insurance. The agent takes Willy's application and his first premium payment,and issues Willy a conditional receipt for the payment. The next day Willy is run over by a sewage truck and killed. An autopsy shows that Willy was in excellent physical condition,and would thus have been issued an insurance policy had he lived. What will the insurer do?

Accepted Answer

A) pay Willy's beneficiary the full death benefit because coverage existed from the date the receipt was issued 
B) not pay Willy's beneficiary because he died before the policy could actually be issued 
C) not pay Willy's beneficiary because a conditional receipt does not take effect until after the underwriting process is completed 
D) pay the beneficiary an amount equal to the premiums Willy paid for the policy 
A) pay Willy's beneficiary the full death benefit because coverage existed from the date the receipt was issued 
B) not pay Willy's beneficiary because he died before the policy could actually be issued 
C) not pay Willy's beneficiary because a conditional receipt does not take effect until after the underwriting process is completed 
D) pay the beneficiary an amount equal to the premiums Willy paid for the policy

Question 10

Joe has a dispute with his insurance company regarding how much he is entitled to recover on a claim. Joe believes he is entitled to get $8,000 based upon his interpretation of the policy wording. The insurer says the claim is not covered by the policy. Joe sues and a court of law decides that the policy wording is vague and ambiguous,and rules that the loss IS covered. What legal characteristic of insurance resulted in the court's decision?

Accepted Answer

A) insurance is aleatory 
B) insurance is a contract of indemnity 
C) insurance is a contract of adhesion 
D) insurance is personal 
A) insurance is aleatory 
B) insurance is a contract of indemnity 
C) insurance is a contract of adhesion 
D) insurance is personal

Question 11

Choose the best example of a promissory warranty:

Accepted Answer

A) the cargo is not flammable 
B) this vessel is seaworthy 
C) the building's fire sprinkler system works and will work 
D) the dumptruck is in good condition 
A) the cargo is not flammable 
B) this vessel is seaworthy 
C) the building's fire sprinkler system works and will work 
D) the dumptruck is in good condition

Question 12

Which of the following is false concerning concealment?

Accepted Answer

A) would be illustrated by a false answer to a question 
B) to make a contract avoidable must be material 
C) typically involves an element of deception 
D) the result is treated very much like material misrepresentations in insurance law 
A) would be illustrated by a false answer to a question 
B) to make a contract avoidable must be material 
C) typically involves an element of deception 
D) the result is treated very much like material misrepresentations in insurance law

Question 13

The parol evidence rule

Accepted Answer

A) allows statements made before the policy is sold to affect policy coverage 
B) benefits the insured more than the insurer 
C) makes written evidence more important than oral evidence 
D) makes oral evidence more important than written evidence 
A) allows statements made before the policy is sold to affect policy coverage 
B) benefits the insured more than the insurer 
C) makes written evidence more important than oral evidence 
D) makes oral evidence more important than written evidence

Question 14

Which one of the following is true concerning consideration in property insurance?

Accepted Answer

A) dollars must change hands from the insured to the insurer before a contract exists 
B) the only valid consideration is cash payment of all premiums in full 
C) abiding by the contractual language and paying the premium is the consideration the insured provides 
D) if the premium is not paid at the time of a loss, the insured is given a 30 day grace period to pay 
A) dollars must change hands from the insured to the insurer before a contract exists 
B) the only valid consideration is cash payment of all premiums in full 
C) abiding by the contractual language and paying the premium is the consideration the insured provides 
D) if the premium is not paid at the time of a loss, the insured is given a 30 day grace period to pay

Question 15

Shicara owns a jewelry store. In exchange for a discount on her burglary insurance premium,she promises the insurer that her trained guard dog will be on the premises at all times,even when the store is closed. One evening she takes the dog home with her instead of leaving him at the store,and a burgler breaks in and steals everything. The insurance company finds out the dog wasn't in the store when the burglary happened,and denies the claim. WHY does the insurer do this?

Accepted Answer

A) Because Shicara committed a material misrepresentation 
B) Because Shicara breached a warranty 
C) Because Shicara committed a concealment 
D) Because Shicara violated the principle of adhesion 
A) Because Shicara committed a material misrepresentation 
B) Because Shicara breached a warranty 
C) Because Shicara committed a concealment 
D) Because Shicara violated the principle of adhesion

Question 16

Under a contract of adhesion:

Accepted Answer

A) subrogation is not allowed 
B) ambiguous features are interpreted against the writer of the contract 
C) ambiguous features are interpreted always against the insurer 
D) ambiguous features are decided based upon the intent of the parties when the contract was entered 
A) subrogation is not allowed 
B) ambiguous features are interpreted against the writer of the contract 
C) ambiguous features are interpreted always against the insurer 
D) ambiguous features are decided based upon the intent of the parties when the contract was entered

Question 17

While driving home from work,Bailey's car is struck from behind by a van full of drunken college students. Asimov is the driver of the van. The resulting damage to Bailey's car totals $7,000. Bailey files a claim under his own auto insurance policy to have his car repaired,but his insurance policy only covers $6,000 of the $7,000 loss. Bailey pays the remaining $1,000 of the loss out of his pocket. Which of the following is a true statement?

Accepted Answer

A) Bailey has no legal right of subrogation against Asimov for the $1,000 that he had to pay out of his pocket 
B) Bailey's insurer has no legal right of subrogation against Asimov for the $6,000 of damages it had to pay to Bailey 
C) Both Bailey and his insurer have subrogation RIGHTS against Asimov for the damages he (Asimov)caused 
D) Bailey has the right under the principle of indemnity to now sue Asimov personally for the $7,000 damages to his car 
A) Bailey has no legal right of subrogation against Asimov for the $1,000 that he had to pay out of his pocket 
B) Bailey's insurer has no legal right of subrogation against Asimov for the $6,000 of damages it had to pay to Bailey 
C) Both Bailey and his insurer have subrogation RIGHTS against Asimov for the damages he (Asimov)caused 
D) Bailey has the right under the principle of indemnity to now sue Asimov personally for the $7,000 damages to his car

Question 18

What is the doctrine of utmost good faith? What situations arise out of its application? Explain.

Accepted Answer

The doctrine of utmost good faith raises

Question 19

Jerry has a property insurance policy on a building that would cost $200,000 to replace. His insurance policy is written on an actual cash value basis. His building suffers fire damage that has a replacement cost of $50,000. The building is 2 years old,with an estimate useful life of 20 years. How much will he collect for the fire damage?

Accepted Answer

A) $5,000 
B) $10,000 
C) $25,000 
D) $45,000 
A) $5,000 
B) $10,000 
C) $25,000 
D) $45,000

Question 20

Luis arrives home from work one day to discover that his apartment building is on fire. He drives directly to an insurance agency to buy renters insurance,since he realized he didn't have coverage for this loss.
Luis does not tell his agent that the building is on fire. There is also not a question on the application for coverage that asks if Luis's apartment is currently on fire. Luis pays the first premium,and the agent issues a coverage binder. Which of the following statements is/are true?
I. Luis committed a misrepresentation,so coverage may be voided at the option of the insurer
II.Luis breached a warranty,but the insurer will have to prove he did so fraudulently in order to deny coverage
III.Luis committed a concealment that was material to the risk,thus his coverage can be voided by the insurer as long as the insurer can prove that he concealed the fact with fraudulent intentions

Accepted Answer

A) I 
B) I and III 
C) III 
D) II and III 
A) I 
B) I and III 
C) III 
D) II and III

"Actual cash value" means "historical cost less depreciation."

Which of the following is correct concerning when insurable interest must exist?

The principle of utmost good faith

Explain what a contract of adhesion is. How does the doctrine of reasonable expectations influence adhesion?

An affirmative warranty states that:

Evan has his house insured for $200,000. He sells the house to Ann for $225,000. Three days after the sale is complete the house is destroyed by fire. Evan has not canceled his homeowner's insurance policy,so he decides to file a claim for losses caused by the fire. What will most likely happen?

If an insured has actual cash value coverage,how much would he collect given the following facts? 1) replacement cost of the building is $200,000, 2) replacement cost of the loss is $30,000, 3) estimated total useful life is 30 years,and, 4) building has been in use 15 years.

In most property insurance contracts assignment is:

Choose the best example of a promissory warranty:

Which of the following is false concerning concealment?

The parol evidence rule

Which one of the following is true concerning consideration in property insurance?

Under a contract of adhesion:

What is the doctrine of utmost good faith? What situations arise out of its application? Explain.

Fundamentals and Terminology

Defining the Insurable Event

Risk Management

Financial Services Companies

Insurance Occupations

the Insurance Market: the Economic Problem

Insurance Regulation

Basic Property and Liability Insurance Contracts

Homeowners Insurance

the Personal Auto Policy

Professional Financial Planning

Life Insurance Policies

Standard Life Insurance Contract Provisions And Options

Annuities

Medical Expense and Disability Insurance

Advanced Topics in Risk Management

Commercial Property Insurance

Commercial Liability Insurance

Bonding,Crime Insurance and Reinsurance

Employee Benefits

Social Security

Unemployment and Workers Compensation Insurance

Filters

Exam 8: Insurance Contracts

"Actual cash value" means "historical cost less depreciation."

Which of the following is correct concerning when insurable interest must exist?

The principle of utmost good faith

Explain what a contract of adhesion is. How does the doctrine of reasonable expectations influence adhesion?

An affirmative warranty states that:

Evan has his house insured for $200,000. He sells the house to Ann for $225,000. Three days after the sale is complete the house is destroyed by fire. Evan has not canceled his homeowner's insurance policy,so he decides to file a claim for losses caused by the fire. What will most likely happen?

If an insured has actual cash value coverage,how much would he collect given the following facts? 1) replacement cost of the building is $200,000, 2) replacement cost of the loss is $30,000, 3) estimated total useful life is 30 years,and, 4) building has been in use 15 years.

In most property insurance contracts assignment is:

Choose the best example of a promissory warranty:

Which of the following is false concerning concealment?

The parol evidence rule

Which one of the following is true concerning consideration in property insurance?

Under a contract of adhesion:

What is the doctrine of utmost good faith? What situations arise out of its application? Explain.

Fundamentals and Terminology

Defining the Insurable Event

Risk Management

Financial Services Companies

Insurance Occupations

the Insurance Market: the Economic Problem

Insurance Regulation

Basic Property and Liability Insurance Contracts

Homeowners Insurance

the Personal Auto Policy

Professional Financial Planning

Life Insurance Policies

Standard Life Insurance Contract Provisions And Options

Annuities

Medical Expense and Disability Insurance

Advanced Topics in Risk Management

Commercial Property Insurance

Commercial Liability Insurance

Bonding,Crime Insurance and Reinsurance

Employee Benefits

Social Security

Unemployment and Workers Compensation Insurance

Filters