Deck 32: Insurance

Question 1

Circle true or false:
T F Once an insurance company issues a binder, the policy is irrevocable.

Answer 1

A binder is the insurance policy papers issued to the insured for a specific time being; till the completion of the final paperwork of the policy is made. It is temporary in nature and expires at the end of a specific period or when the permanent policy is written. It provides insurance to the person for the time being.
Irrevocable Policy is the one where the beneficiary name cannot be changed by the owner, without the consent of the named beneficiary. The owner cannot name more or new beneficiary without the consent of the first named beneficiary. Thus, the issue of binder is only to provide insurance to the insured for the time being the final paperwork of the policy are completed. It does not make the policy irrevocable.
Therefore, the given statement is
.

Question 2

ETHICS Most people who rent cars do not need to buy the extra coverage that the rental agencies offer because credit cards already provide this type of insurance. However, this coverage is very profitable for the rental companies. If you were the manager of a car rental agency, how aggressive would you be in encouraging your agents to sell these policies Would you pay them a commission or base their salaries on the number of policies they sold Train them to remind customers that their credit card company might provide coverage

Answer 2

The car rental agencies do not need to pay extra coverage which they offer as an extra service to lessee in lieu of extra consideration. These services are very profitable for the agency as credit cards provide already provide the same without any charge.
As the manager of the car rental companies and also being aware about the fact that the extra coverage policy are very profitable, I would still train my employees in a way that they provide the true picture to customers about the same.
I will be aggressive in encouraging my agents to sell these policies as it would be a beneficial strategy for my car rental agency. I will pursue my agents to do the needful efforts to sell the maximum of these policies as they are very profitable. Meanwhile I would encourage my employees to follow ethical approach, providing transparency and true picture about the cover policy to the customers.
From business point of view i would not base their salaries on the number of policies sold by them rather pay commission for their extra efforts done by them to sell extra policies meanwhile for ethical purpose I will encourage and motivate them to sell it as a true product i.e. providing transparency and awareness to the customers.
I would train my agents so that they become enough capable of selling the extra insurance services and complying with the ethical requirements simultaneously. Agents must reveal the customers about the benefits agency receiving from the Credit cards agency in relation to these insurance policies.

Question 3

Dannie Harvey sued her employer, O. R. Whitaker, for sexual harassment, discrimination, and defamation. Whitaker counterclaimed for libel and slander, requesting $1 million in punitive damages. Both Whitaker and Harvey were insured by Allstate under identical homeowner's policies. This policy explicitly promised to defend Harvey against the exact claim Whitaker had made against her. Harvey's Allstate agent, however, told her that she was not covered. Because the agent kept all copies of Harvey's insurance policies in his office, she took him at his word. She had no choice but to defend against the claim on her own. Whitaker mounted an exceedingly hostile litigation attack, taking 80 depositions. After a year, Allstate agreed to defend Harvey. However, instead of hiring the lawyer who had been representing her, it chose another lawyer who had no expertise in this type of case and was a close friend of Whitaker's attorney. Harvey's new lawyer refused to meet her or to attend any depositions. Harvey and Whitaker finally settled. Whitaker had spent $1 million in legal fees, Harvey $169,000, and Allstate $2,513. Does Harvey have a claim against Allstate

Answer 3

In this case, person H can sue her company because of the improper manner in which the company failed to meet its obligation of covering her against the legal charges made against her.
In this case, person H was insured by company A, an insurance company for covering her against these charges made by her employer. However the insurance company did not hire the right lawyer. The lawyer did not make the right efforts to fight her case and as a result she has to spend $169, 000, which is a great amount of money despite the fact she is covered.
She can sue the insurance company because she had taken the insurance policy to cover against these charges and also the company is liable to cover her because it agreed to fight her case.

Question 4

If you are a smart consumer, you will:
I) Insure against as many different kinds of risks as you can so that no matter what happens, you will be protected
II) Select as low a deductible as possible so that no matter what happens, you will not have to pay large sums out of pocket
III) Buy flight insurance when you take long airplane flights so that your family will be protected if your plane crashes
(a) I, II, and III
(b) Neither I, II, nor III
(c) I and II
(d) Just I
(e) Just II

Question 5

Circle true or false:
T F Although whole life insurance is more expensive than term, it is the best choice because it forces the customer to save money.

Question 6

ETHICS After your car was injured in an accident, your insurance agency told you to get a repair estimate. Would it be ethical for you to obtain an estimate from the most expensive body shop in town, knowing that you plan to have the car fixed at a much cheaper place What if you do not plan to have the car repaired at all-is it ethical to take money from the insurance company

Question 7

Clyde received a letter from his automobile insurance company notifying him that it would not renew his policy that was set to expire on February 28. Clyde did not obtain another policy, and, in a burst of astonishingly bad luck, on March 1, at 2:30 a.m., he struck another vehicle, killing two men. Later that day, Clyde applied for insurance coverage. As part of this application, he indicated that he had not been involved in any accident in the last three years. The new policy was effective as of 12:01 a.m. on March 1. Will the estates of the two dead men be able to recover under this policy

Question 8

Hamish owned an office building with a fair market value of $250,000. He insured it for $300,000. When it burned down, he was entitled to:
(a) Nothing
(b) $250,000 and a return of the excess premiums he paid on the $300,000 policy
(c) $250,000
(d) $300,000

Question 9

Circle true or false:
T F You are more likely to die before 65 than to become disabled before 65.

Question 10

Suzy Tomlinson, 74, met a tragic end-she drowned, fully clothed, in her bathtub after a night out partying with 36-year-old JB Carlson. He had taken her home at 1 a.m. and was the last person to see her alive. The two were not only party buddies-Suzy was on the board of directors of a company JB had started. Her family was stunned to find out that she had a $15 million life insurance policy, with the proceeds payable to a company JB controlled. He said it was a key person policy. He wanted to protect the company if Suzy died because she had frequently introduced him to potential investors. Is the life insurance policy valid

Question 11

Jason applied for a homeowners policy through CPM Insurance Services, Inc. An employee of CPM filled out the application form using information provided by Jason's housemate, Tricia. The two-page form asked: "Does applicant or any tenant have any animals or exotic pets " The CPM employee checked an adjacent box stating that the answer was "No." At the time, Jason owned two dogs, a Doberman and a German shepherd. Although Jason had not read this part of the form, he nonetheless signed the application attesting that he had read it and that the answers were true. When Jason was sued by someone who claimed to have been bitten by one of his dogs, CPM rescinded his policy for material misrepresentation. In his defense, Jason said that the question about pets was confusing. He thought it applied only to exotic animals, not dogs. Also, he had not filled out the form, a CPM employee had. Is Jason's policy with CPM valid

Question 12

Linda and Eddie had two children before they were divorced. Under the terms of their divorce, Eddie became the owner of their house. When he died suddenly, their children inherited the property. Linda moved into the house with the children and began paying the mortgage, which was in Eddie's name alone. She also took out fire insurance. When the house burned down, the insurance company refused to pay the policy because she did not have an insurable interest. Do you agree

Question 13

Jason lived in an apartment with Miri, to whom he was not married. When he applied for homeowners insurance, the form asked their marital status. He checked the box that said "married." Later, the apartment was robbed, and Jason filed a claim with his insurance company. When the company discovered that Jason and Miri were not married, it refused to pay the claim on the grounds that he had made a material misrepresentation. Jason argued that the misrepresentation was not material because the insurance company would have issued the policy no matter how he answered that question. Is Jason's policy valid

Question 14

Lucas has bought the following insurance this week:
I) A life insurance policy on his brother
II) A life insurance policy on the partner in his accounting practice
III)A fire insurance policy on the fitness club he belongs to, so that if it burns down,
He will receive a large enough payment to enable him to join a different club In which of these policies does he have an insurable interest
(a) I, II, and III
(b) Neither I, II, nor III
(c) I and II
(d) I and III
(e) II and III

Question 15

Which of the following policies are you likely to need in your lifetime
I) Service plan on an appliance
II) Whole life insurance
III) Disability insurance
IV) Health insurance
(a) All of the above
(b) None of the above
(c) II, III, and IV
(d) III and IV
(e) IV

Question 16

Circle true or false:
T F If the insured makes any false statement in the application process, the insurance policy is voidable.

Question 17

Circle true or false:
T F An annuity is simply a type of life insurance.

Question 18

Tomlinson's family sued the insurance company, claiming that the policy was valid, but that they were the beneficiaries, not JB. Is the family entitled to the proceeds of the policy Should they be

Question 19

Match the following terms with their definitions:

Question 20

Armeen ran a stop sign and hit the Smiths' car, killing their child. He had $1.5 million in insurance. The Smiths offered to settle the case for that amount, but Liberty State, Armeen's insurance company, refused and proposed $300,000 instead. At trial, the jury awarded the Smith's $1.9 million, which meant that Armeen was liable for $400,000 rather than the zero dollars he would have had to pay if Liberty had accepted the Smiths' offer. What is Liberty's liability Under what theory

Question 21

An insurance company does not violate its covenant of good faith and fair dealing if it:
(a) Charges elderly customers higher premiums than it charges younger customers
(b) Tells potential customers that their premiums will decline when that is not true
(c) Tells potential customers that their returns on a whole life policy are certain to be higher than an equivalent amount invested in the stock market
(d) Refuses to pay a valid claim until after four years of litigation
(e) Refuses to accept a settlement offer on behalf of an insured that was reasonable, but not in the company's best interest