Deck 51: A: Insurance

Question 1

A pro rata clause in a fire insurance policy requires that any loss be shared proportionately by all insurers covering the same risk.

Answer 1

True

Question 2

Misstatements or misrepresentations in an application for insurance can void a policy.

Answer 2

True

Question 3

In defense against payment,an insurance company can raise any of the de?fenses that would be valid in an ordinary action on a contract.

Answer 3

True

Question 4

Comprehensive general liability insurance can encompass as many risks as the insurer agrees to cover.

Question 5

Credit insurance pays to a debtor the balance of a debt on his or her disability,death,insolvency,or bankruptcy.

Question 6

An incorrect statement as to the age of the insured provides an insurance company with an excuse to avoid payment on the insured's death.

Question 7

If a provision in an insurance policy is ambiguous,the provision will be interpreted against the insurance company.

Question 8

An insurable interest in property must exist when a policy is purchased.

Question 9

Under a life insurance policy,in the absence of contractual exclusion,any cause of death is one of the insurer's risks.

Question 10

A fire insurance policy is assignable without the insurer's consent because the policy "runs" with the insured property.

Question 11

An insurance company may cancel an insured's policy if the insured ap?pears as a witness in a case against the company.

Question 12

An incontestability clause prohibits an insured from entering a contest during the term of a policy.

Question 13

Under a coinsur?ance clause,a homeowner who insures a home for 80 percent of its value can recover only 80 percent of the cost for damage to it.

Question 14

The words used in an insurance contract are given special meaning.

Question 15

A person can insure anything in which he or she has an insurable interest.

Question 16

Insurance coverage is never effective until a formal written policy is issued.

Question 17

Insurance is classified according to the amount of the payment on a claim.

Question 18

A business firm may have an insurable interest in the life of any of its employees,except a key employee.

Question 19

An insurer has a duty to avoid paying a claim even if it means acting in bad faith.

Question 20

A broker is an agent of the insurance company.

Question 21

Peg obtains from QT Insurance Company a policy that provides that af?ter it has been in force for a certain time,QT cannot question state?ments made in the application.This is

A)an antilapse clause.
B)an arbitration clause.
C)an appraisal clause.
D)an incontestability clause.

Question 22

Erte applies for,and obtains,casualty insurance coverage from Friendly Insurance Company for his business,Golf Club,Inc.The effective date of the policy is the date

A)Erte submits the application.
B)Friendly Insurance accepts the first premium.
C)Friendly Insurance issues the policy.
D)the application specifies as the effective date.

Question 23

Cathy obtains from Depend Insurance Company a policy that pro?vides if a dispute arises between the parties concerning the settle?ment of a claim,the dispute must be submitted to an impartial third party,not a court,for resolution.This is

A)an antilapse clause.
B)an arbitration clause.
C)an appraisal clause.
D)an incontestability clause.

Question 24

Trustworthy Insurance,Inc. ,has a valid reason to cancel a policy issued to USA Sales Company.In most states,Trustworthy could cancel the policy on

A)advance oral notice.
B)oral or written notice,advance or contemporaneous.
C)without notice.
D)advance written notice.

Question 25

Isabel obtains a fire insurance policy on her home from Justice Insurance Company.The home is lost in a fire,but the parties dispute the amount of Justice's liability under an ambiguous clause in the policy.A court would most likely

A)interpret the clause against Isabel.
B)interpret the clause against Justice.
C)rewrite the clause and apply it as rewritten.
D)strike the clause from the policy.

Question 26

Feta is a partner in the game design firm GR8 Games,Inc. ,which ob?tains key-person life in?surance on Feta in the amount of $1 million from Halo Insurance Company.Feta quits GR8 Games to join Icy Applications,Inc.Feta dies.Under the principle of insurable interest,Halo must pay the $1 million to

A)Feta's spouse Jo.
B)GR8 Games.
C)Icy Applications.
D)no one.

Question 27

Trina pays a premium to Unity Insurance Corporation for fire insurance against the loss of her Viewpoint Office Building.After Trina sells the building to Wade,it burns down.Under the policy,Unity must pay

A)neither Trina nor Wade.
B)Trina and Wade.
C)Trina only.
D)Wade only.

Question 28

Donald applies for a life insurance policy with Equity Insurance Company through Fletch,an agent who works for Equity.Donald pays the initial premium.Fletch writes a binder,which

A)acknowledges the application and promises to consider it.
B)attests to the truth of each statement in the application
C)evidences receipt of the payment of the initial premium.
D)indicates that a policy is pending and states its essential terms.

Question 29

Mila,who captains a commercial fishing boat,obtains a policy from North Coast Insurance Company,which agrees to pay $500,000 to Mila's beneficiary on Mila's death.This is

A)floater insurance.
B)life insurance.
C)major medical insurance.
D)marine insurance.

Question 30

Haya obtains an insurance policy from Inviolable Insurance Corporation (IIC).IIC may cancel,or refuse to renew,the policy because of

A)Haya's appearance as a witness against IIC.
B)Haya's gender.
C)Haya's national origin.
D)none of the choices.

Question 31

Felicity Cookware Company makes and sells kitchen products.To cover injuries to consumers if the products prove de?fective,Felicity should obtain

A)group insurance.
B)health insurance.
C)liability insurance.
D)life insurance.

Question 32

Regular Business,Inc.(RBI),obtains a fire insurance policy from Statistical Insurance Company on a $400,000 warehouse.The policy includes an 80-percent coinsurance clause.RBI insures the property for $320,000.In a fire,the warehouse suffers $200,000 in damage.RBI can recover

A)$400,000.
B)$320,000.
C)$200,000.
D)$80,000.

Question 33

Doctors Medical Associates obtains an insurance policy that protects its members against negligence claims by their pa?tients.This is

A)casualty insurance.
B)fidelity or guaranty insurance.
C)malpractice insurance.
D)workers' compensation insurance.

Question 34

Mena applies for a homeowners' insurance policy on her house with Neighbors Insurance Company through Obie,an agent who works for Neighbors.In this transaction,Obie is

A)an agent for both parties.
B)Mena's agent,and not Neighbors's agent.
C)Neighbors's agent,and not Mena's agent.
D)not an agent.

Question 35

Beth obtains a life insurance policy from Consumers Insurance Company,naming her spouse Don as the beneficiary.Beth and Don are di?vorced.There is no provision in the policy about divorce.On Beth's death,Consumers must

A)not pay because Don and Beth were divorced.
B)not pay because Don had no insurable in?terest on Beth's death.
C)pay Don.
D)pay Beth's estate.

Question 36

Reno is the beneficiary of a life insurance policy on Sula's life obtained from Thicket Insurance Company.The insured of this policy is

A)Reno.
B)Sula.
C)Thicket.
D)the agent or broker through whom the policy was obtained.

Question 37

Shelley obtains a life insurance policy with no cash surrender value or cash value,and names her son Thad as the beneficiary.This is

A)limited-payment life insurance.
B)term insurance.
C)universal insurance.
D)whole life insurance.

Question 38

Fred misstates his age in applying for a life insurance policy with Gamma Insurance Company.Due to this "error," Gamma can

A)adjust the amount of the premium or the benefits.
B)cancel the policy.
C)file criminal charges against Fred for fraud.
D)"misstate" the amount payable to the policy's beneficiary.

Question 39

Infinite Sales Corporation obtains an insurance policy that protects Infinite Sales in the event of the death or disability of Jacqueline,Infinite's executive sales manager.This is

A)casualty insurance.
B)fidelity or guaranty insurance.
C)key-person life insurance.
D)term life insurance.

Question 40

Kelsy obtains a business liability insurance policy from Luminous Insurance Company for Kelsy's Framing & Art Supplies store.When an event occurs that gives rise to a claim,each party has a duty to

A)cooperate in an investigation to determine the facts.
B)file a suit against the other so that a court can settle the claim.
C)find a third party on whom to impose liability.
D)pay any outstanding premium or refund any unearned amount.

Question 41

Computer Electronics Corporation (CEC)discovers a defect in its newly developed,recently marketed hard drives.CEC decides to recall the prod?uct and replace it with another.CEC's in?surance policy with Delta Business Insurance Company will cover any harm to customers that oc?curs before the drives are returned.Is it likely that the policy will also pay for the recall and replacement? If so,what type of policy does CEC have?

Question 42

Patty,who is divorced,owns a house.She has no reasonable expectation of benefit from the life of Quinn,her ex-spouse,but she applies for insur?ance on his life anyway.She also obtains a fire insurance policy on the house,which she later sells.Five years later,Quinn dies and the house is destroyed in a fire.Can Patty obtain payment on either the death of Quinn or the loss of the house? Explain.