Question 1

Explain subrogation.

Accepted Answer

In insurance, subrogation is the right of the insurer under certain circumstances to assume the legal rights of, or to "step into the shoes" of, the insured. Subrogation particularly applies to some types of automobile insurance. If the insurer pays a claim to the insured, under the law of subrogation the insurer has a right to any claims that the insured had because of the loss.

Question 2

Which of the following best defines insurance?

Accepted Answer

A)  It is a contract whereby a party transfers his right to receive interest to a third-party such as an agent. 
B)  It is a contract whereby a party transfers a risk of physical injury to the risk bearer for a fee. 
C)  It is a contract whereby a party transfers his right to a claim for a particular fee. 
D)  It is a contract whereby a party transfers a risk of financial loss to a risk bearer for a fee. 
A)  It is a contract whereby a party transfers his right to receive interest to a third-party such as an agent. 
B)  It is a contract whereby a party transfers a risk of physical injury to the risk bearer for a fee. 
C)  It is a contract whereby a party transfers his right to a claim for a particular fee. 
D)  It is a contract whereby a party transfers a risk of financial loss to a risk bearer for a fee. D

Question 3

A bailee has an insurable interest in the property bailed to the extent of possible loss.

Accepted Answer

A) True 
 B)False  True

Question 4

The maximum amount that the insurer agrees to pay in case of a loss is known as the face of the policy.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following best defines concealment?

Accepted Answer

A)  It is a willful failure to disclose any information pertinent to the insurance contract by the insured. 
B)  It is an unintentional failure to disclose any information pertinent to the insurance contract by the insurer. 
C)  It is an unintentional failure to disclose any information pertinent to the insurance contract by the underwriter. 
D)  It is a willful failure to disclose any information irrelevant to the insurance contract by the insurer. 
A)  It is a willful failure to disclose any information pertinent to the insurance contract by the insured. 
B)  It is an unintentional failure to disclose any information pertinent to the insurance contract by the insurer. 
C)  It is an unintentional failure to disclose any information pertinent to the insurance contract by the underwriter. 
D)  It is a willful failure to disclose any information irrelevant to the insurance contract by the insurer.

Question 6

A partner does not have an insurable interest to the extent of the possible loss in the property owned by a firm.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following best defines subrogation?

Accepted Answer

A)  It is the right of an insurer to claim warranty in case of breach of contract. 
B)  It is the right of an insurer to assume the legal rights of the insured. 
C)  It is the right of an insured to conceal certain facts from the insurer. 
D)  It is the right of an insurer to deny life insurance claims in the case of suicide. 
A)  It is the right of an insurer to claim warranty in case of breach of contract. 
B)  It is the right of an insurer to assume the legal rights of the insured. 
C)  It is the right of an insured to conceal certain facts from the insurer. 
D)  It is the right of an insurer to deny life insurance claims in the case of suicide.

Question 8

A creditor has insurable interest in the life of the debtor beyond the extent of the debt.

Accepted Answer

A) True 
 B)False

Question 9

A "binder" on an insurance policy is a clause added to another contract to limit the base contract.

Accepted Answer

A) True 
 B)False

Question 10

James mortgaged his house and received a certain amount of money in return as a loan. However, he repaid half the loan in six months. Which of the following is likely to be true in this scenario, at the present moment?

Accepted Answer

A)  The mortgagee has an insurable interest towards 25 percent of the loan amount. 
B)  The mortgagee does not have an insurable interest in the loan amount. 
C)  The mortgagee has an insurable interest towards the entire loan amount. 
D)  The mortgagee has an insurable interest towards half the loan amount. 
A)  The mortgagee has an insurable interest towards 25 percent of the loan amount. 
B)  The mortgagee does not have an insurable interest in the loan amount. 
C)  The mortgagee has an insurable interest towards the entire loan amount. 
D)  The mortgagee has an insurable interest towards half the loan amount.

Question 11

An oral or written misstatement of a material fact by the insured prior to the finalization of a contract is called a _____.

Accepted Answer

A)  repudiation 
B)  false representation 
C)  subrogation 
D)  concealment 
A)  repudiation 
B)  false representation 
C)  subrogation 
D)  concealment

Question 12

Either party to an insurance contract may claim the benefit of a violation of the contract by the other party.

Accepted Answer

A) True 
 B)False

Question 13

A minor who wishes to disaffirm is bound on insurance contracts.

Accepted Answer

A) True 
 B)False

Question 14

Untrue statements or unfulfilled promises by the insured permit the insurer to declare the policy void.

Accepted Answer

A) True 
 B)False

Question 15

The party agreeing to compensate a person for a certain loss is known as the _____.

Accepted Answer

A)  policyholder 
B)  beneficiary 
C)  insurer 
D)  insured 
A)  policyholder 
B)  beneficiary 
C)  insurer 
D)  insured

Question 16

A company in which policyholders are the members and owners and correspond to the stockholders in a stock company is known as a(n) ______.

Accepted Answer

A)  mutual insurance company 
B)  premium insurance company 
C)  assessment insurance company 
D)  stock insurance company 
A)  mutual insurance company 
B)  premium insurance company 
C)  assessment insurance company 
D)  stock insurance company

Question 17

A stock insurance company is a corporation for which the original investment was made by stockholders.

Accepted Answer

A) True 
 B)False

Question 18

A willful failure to disclose pertinent information by the insured is known as subrogation.

Accepted Answer

A) True 
 B)False

Question 19

The danger of a loss of, or injury to, property, life, or anything else, is called a _____.

Accepted Answer

A)  rider 
B)  face 
C)  peril 
D)  hazard 
A)  rider 
B)  face 
C)  peril 
D)  hazard

Question 20

Insurance contracts must specify the particular risks being transferred from one party to another.

Accepted Answer

A) True 
 B)False

Exam 37: Principles of Insurance

Explain subrogation.

Which of the following best defines insurance?

A bailee has an insurable interest in the property bailed to the extent of possible loss.

The maximum amount that the insurer agrees to pay in case of a loss is known as the face of the policy.

Which of the following best defines concealment?

A partner does not have an insurable interest to the extent of the possible loss in the property owned by a firm.

Which of the following best defines subrogation?

A creditor has insurable interest in the life of the debtor beyond the extent of the debt.

A "binder" on an insurance policy is a clause added to another contract to limit the base contract.

James mortgaged his house and received a certain amount of money in return as a loan. However, he repaid half the loan in six months. Which of the following is likely to be true in this scenario, at the present moment?

An oral or written misstatement of a material fact by the insured prior to the finalization of a contract is called a _____.

Either party to an insurance contract may claim the benefit of a violation of the contract by the other party.

A minor who wishes to disaffirm is bound on insurance contracts.

Untrue statements or unfulfilled promises by the insured permit the insurer to declare the policy void.

The party agreeing to compensate a person for a certain loss is known as the _____.

A company in which policyholders are the members and owners and correspond to the stockholders in a stock company is known as a(n) ______.

A stock insurance company is a corporation for which the original investment was made by stockholders.

A willful failure to disclose pertinent information by the insured is known as subrogation.

The danger of a loss of, or injury to, property, life, or anything else, is called a _____.

Insurance contracts must specify the particular risks being transferred from one party to another.

Introduction to Law

Courts and Court Procedure

Business Torts and Crimes

Government Regulation of Business

Nature and Classes of Contracts

Offer and Acceptance

Capacity to Contract

Consideration

Defective Agreements

Illegal Agreements

Written Contracts

Third Parties and Contracts

Termination of Contracts

Nature of Personal Property

Special Bailments

Sales of Personal Property

Formalities of a Sale

Transfer of Title and Risk in Sales Con

Warranties, Product Liability, and Cons

Nature of Negotiable Instruments

Essentials of Negotiability

Promissory Notes and Drafts

Negotiation and Discharge

Liabilities of Parties and Holders in Due Course

Defenses

Nature and Creation of an Agency

Operation and Termination of an Agency

Employer and Employee Relations

Employees Rights

Labor Legislation

Introduction to Business Organization

Creation and Operation of a Partnership

Dissolution of a Partnership

Nature of a Corporation

Ownership of a Corporation

Management and Dissolution of a Corpora

Types of Insurance

Security Devices

Bankruptcy

Nature of Real Property

Transfer of Real Property

Real Estate Mortgages

Landlord and Tenant

Wills, Inheritances, and Trusts

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