Question 1

The doctrine of proximate cause:

Accepted Answer

A) forces the insurer to pay for all claims arising out of an unbroken sequence of events if any one of the subsequent perils following the original excluded peril was covered 
B) forces the insurer to pay for all claims arising out of an unbroken sequence of events if the original insured peril was covered 
C) forces the insurer to pay for the loss when the proximate cause of the event is the insured's fault 
D) divides any loss payment among parties proximately affected by the loss 
A) forces the insurer to pay for all claims arising out of an unbroken sequence of events if any one of the subsequent perils following the original excluded peril was covered 
B) forces the insurer to pay for all claims arising out of an unbroken sequence of events if the original insured peril was covered 
C) forces the insurer to pay for the loss when the proximate cause of the event is the insured's fault 
D) divides any loss payment among parties proximately affected by the loss

Question 2

Which of the following is a contract of indemnity,using a strict definition of the term "indemnity"?

Accepted Answer

A) life insurance 
B) replacement cost insurance 
C) legal liability insurance 
D) valued insurance policies 
A) life insurance 
B) replacement cost insurance 
C) legal liability insurance 
D) valued insurance policies

Question 3

Since the homeowners' insurance policy is written by the insurer,ambiguities are interpreted in favor of the insured.

Accepted Answer

A) True 
 B)False

Question 4

Mr.Jiminez wants his 16 year old son to buy a life insurance policy as an investment for college. He asks you if it is legal for a minor child to purchase and own life insurance. You correctly respond by saying:

Accepted Answer

A) minors never have capacity to enter contracts 
B) minors always have capacity to enter contracts 
C) the courts have ruled that it is illegal for minors to purchase life insurance 
D) the courts have ruled both ways on minors' ability to own life insurance 
A) minors never have capacity to enter contracts 
B) minors always have capacity to enter contracts 
C) the courts have ruled that it is illegal for minors to purchase life insurance 
D) the courts have ruled both ways on minors' ability to own life insurance

Question 5

Explain the principle of indemnity. How does one measure indemnity?

Accepted Answer

The principle of indemnity states that a

Question 6

A misrepresentation:

Accepted Answer

A) always voids a contract 
B) makes a contract voidable if it is material 
C) is sometimes referred to as a "concealment" 
D) is legally treated the same way as a breach of warranty 
A) always voids a contract 
B) makes a contract voidable if it is material 
C) is sometimes referred to as a "concealment" 
D) is legally treated the same way as a breach of warranty

Question 7

All the following features are unique to insurance contracts (versus other business contracts)except:

Accepted Answer

A) insurable interest 
B) subrogation 
C) utmost good faith 
D) consideration 
A) insurable interest 
B) subrogation 
C) utmost good faith 
D) consideration

Question 8

The principle of indemnity says that the insured should profit from insurance.

Accepted Answer

A) True 
 B)False

Question 9

Void ab initio means

Accepted Answer

A) void at the option of the insurer 
B) void at the option of the insured 
C) void at the option of the court 
D) void at the beginning 
A) void at the option of the insurer 
B) void at the option of the insured 
C) void at the option of the court 
D) void at the beginning

Question 10

All of the following are requirements of a contract of insurance except:

Accepted Answer

A) the contract must be in writing 
B) it must be for a legal purpose 
C) there must be legal capacity of the parties 
D) there needs to be an offer and an acceptance 
A) the contract must be in writing 
B) it must be for a legal purpose 
C) there must be legal capacity of the parties 
D) there needs to be an offer and an acceptance

Question 11

Which one of the following is false concerning subrogation?

Accepted Answer

A) it reinforces the principle of indemnity 
B) it holds rates below what they would otherwise be 
C) it places the burden of loss on one or more responsible parties 
D) the insured can never receive any money collected through subrogation 
A) it reinforces the principle of indemnity 
B) it holds rates below what they would otherwise be 
C) it places the burden of loss on one or more responsible parties 
D) the insured can never receive any money collected through subrogation

Question 12

If insurance policies were not designed to support the principle of indemnity,then we would have fewer moral hazards in our society.

Accepted Answer

A) True 
 B)False

Question 13

"Binders" are typically used with:

Accepted Answer

A) Life and health insurance 
B) Property and liability insurance 
C) Life and liability insurance 
D) Health and property insurance 
A) Life and health insurance 
B) Property and liability insurance 
C) Life and liability insurance 
D) Health and property insurance

Question 14

The ____________ clause in an insurance policy says that when the insurer indemnifies the insured for a loss,it takes over the insured's right to collect payment from any negligent third party that may have caused the loss.

Accepted Answer

A) indemnity 
B) proof of loss 
C) adhesion 
D) subrogation 
A) indemnity 
B) proof of loss 
C) adhesion 
D) subrogation

Question 15

In which case is there no insurable interest?

Accepted Answer

A) Barbie's 25% ownership in an oil well 
B) a dry cleaner in its customers' clothes 
C) a bank (creditor)in property used to secure a loan 
D) a school principal in the lives of the students attending his school 
A) Barbie's 25% ownership in an oil well 
B) a dry cleaner in its customers' clothes 
C) a bank (creditor)in property used to secure a loan 
D) a school principal in the lives of the students attending his school

Question 16

What is the principle of indemnity? (choose the best answer)

Accepted Answer

A) a court precedent that gives insureds the right to sue their insurers if they get bad claims service 
B) the rule that a person may not collect more than his actual loss in the event of damage caused by an insured peril 
C) the rule that a person will not be reimbursed for a loss unless he can show proof of loss 
D) a way of requiring a person to pay a premium 
A) a court precedent that gives insureds the right to sue their insurers if they get bad claims service 
B) the rule that a person may not collect more than his actual loss in the event of damage caused by an insured peril 
C) the rule that a person will not be reimbursed for a loss unless he can show proof of loss 
D) a way of requiring a person to pay a premium

Question 17

In property insurance,to collect for a loss,insurable interest must exist:

Accepted Answer

A) at the beginning of the contract 
B) at all times 
C) when the insurer waives it 
D) at the time of the loss 
A) at the beginning of the contract 
B) at all times 
C) when the insurer waives it 
D) at the time of the loss

Question 18

There is no subrogation in life insurance.

Accepted Answer

A) True 
 B)False

Question 19

The doctrine of reasonable expectations has typically resulted in:

Accepted Answer

A) a reduction in the scope of insurance coverage 
B) an increase in morale hazard 
C) difficulties preventing adverse selection 
D) insurers having to cover things they never anticipated covering 
A) a reduction in the scope of insurance coverage 
B) an increase in morale hazard 
C) difficulties preventing adverse selection 
D) insurers having to cover things they never anticipated covering

Question 20

Ambiguities in the wording of an insurance contract are always construed against the writer.

Accepted Answer

A) True 
 B)False

Exam 8: Insurance Contracts

The doctrine of proximate cause:

Which of the following is a contract of indemnity,using a strict definition of the term "indemnity"?

Since the homeowners' insurance policy is written by the insurer,ambiguities are interpreted in favor of the insured.

Mr.Jiminez wants his 16 year old son to buy a life insurance policy as an investment for college. He asks you if it is legal for a minor child to purchase and own life insurance. You correctly respond by saying:

Explain the principle of indemnity. How does one measure indemnity?

A misrepresentation:

All the following features are unique to insurance contracts (versus other business contracts)except:

The principle of indemnity says that the insured should profit from insurance.

Void ab initio means

All of the following are requirements of a contract of insurance except:

Which one of the following is false concerning subrogation?

If insurance policies were not designed to support the principle of indemnity,then we would have fewer moral hazards in our society.

"Binders" are typically used with:

The ____________ clause in an insurance policy says that when the insurer indemnifies the insured for a loss,it takes over the insured's right to collect payment from any negligent third party that may have caused the loss.

In which case is there no insurable interest?

What is the principle of indemnity? (choose the best answer)

In property insurance,to collect for a loss,insurable interest must exist:

There is no subrogation in life insurance.

The doctrine of reasonable expectations has typically resulted in:

Ambiguities in the wording of an insurance contract are always construed against the writer.

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