Question 1

Which of the following types of insurance policies can usually be assigned without the insurer's consent?
I.Life insurance
II.Property insurance

Accepted Answer

A) I only 
B) II only 
C) both I and II 
D) neither I nor II 
A) I only 
B) II only 
C) both I and II 
D) neither I nor II

Question 2

Dave is an agent for Easy Pay Insurance.Easy Pay insures only high-quality applicants.Dave wanted to earn more commissions,so he sold some policies to applicants he knew were below-average risks.When these policyowners started filing claims,Easy Pay tried to deny the claims stating that Dave had not acted appropriately.Which general rule of agency makes Easy Pay responsible for the claims of the higher-than-average risk policyowners?

Accepted Answer

A) There is no presumption of an agency relationship. 
B) Agents should be compensated based on the quality of the business they generate. 
C) A principal is responsible for the acts of its agents who are acting within the scope of their authority. 
D) An agent must have authority to represent the principal. 
A) There is no presumption of an agency relationship. 
B) Agents should be compensated based on the quality of the business they generate. 
C) A principal is responsible for the acts of its agents who are acting within the scope of their authority. 
D) An agent must have authority to represent the principal.

Question 3

Why does the insured get the benefit of the doubt if an insurance policy contains any ambiguities or uncertainties?

Accepted Answer

A) because insurance contracts are aleatory 
B) because insurance contracts are unilateral 
C) because insurance contracts are conditional 
D) because insurance contracts are contracts of adhesion 
A) because insurance contracts are aleatory 
B) because insurance contracts are unilateral 
C) because insurance contracts are conditional 
D) because insurance contracts are contracts of adhesion

Question 4

All of the following statements about subrogation are true EXCEPT

Accepted Answer

A) The general rule allows the insurer to recover up to the amount paid to its insured under the policy. 
B) Subrogation does not apply in life insurance. 
C) Interfering with the insurer's subrogation rights can jeopardize indemnification of the insured. 
D) The insurer reserves the right to subrogate against its own insureds. 
A) The general rule allows the insurer to recover up to the amount paid to its insured under the policy. 
B) Subrogation does not apply in life insurance. 
C) Interfering with the insurer's subrogation rights can jeopardize indemnification of the insured. 
D) The insurer reserves the right to subrogate against its own insureds.

Question 5

Hank bought a farm that had an old barn.He noticed one day that the roof of the barn was swaying in the wind.Hank went to see his insurance agent and he insured the barn for $20,000.The agent didn't ask if the roof might collapse,and Hank didn't say anything about it.One week later there was a strong wind and the roof collapsed.Assuming the insurer can prove it,under what legal grounds could the insurer deny payment of the claim?

Accepted Answer

A) estoppel 
B) concealment 
C) warranty 
D) misrepresentation 
A) estoppel 
B) concealment 
C) warranty 
D) misrepresentation

Question 6

A total loss under a valued policy is settled on the basis of the

Accepted Answer

A) market value of the loss. 
B) actual cash value of the loss. 
C) replacement value of the loss. 
D) amount of insurance covering the loss. 
A) market value of the loss. 
B) actual cash value of the loss. 
C) replacement value of the loss. 
D) amount of insurance covering the loss.

Question 7

Jacob sold his house to Shelia for $140,000 in cash.Jacob "threw in" insurance on the house as part of the deal and did not bother telling the insurer that there was a new owner.Four months after Shelia purchased the home,a windstorm damaged the roof.Which of the following legal characteristics of insurance contracts could the insurer use to legally deny payment to Shelia for the damage to the roof?

Accepted Answer

A) Insurance contracts are unilateral contracts. 
B) Insurance contacts are contracts of adhesion. 
C) Insurance contracts are aleatory contracts. 
D) Insurance contracts are personal contracts. 
A) Insurance contracts are unilateral contracts. 
B) Insurance contacts are contracts of adhesion. 
C) Insurance contracts are aleatory contracts. 
D) Insurance contracts are personal contracts.

Question 8

Fundamental purposes of the principle of indemnity include which of the following?
I.To reduce physical hazards
II.To prevent the insured from profiting from insurance

Accepted Answer

A) I only 
B) II only 
C) both I and II 
D) neither I nor II 
A) I only 
B) II only 
C) both I and II 
D) neither I nor II

Question 9

Sue's office building was damaged by a fire caused by a careless tenant.After paying Sue for the loss,the insurance company sued the tenant to recover its loss.This suit is based on the principle of

Accepted Answer

A) warranty. 
B) insurable interest. 
C) utmost good faith. 
D) subrogation. 
A) warranty. 
B) insurable interest. 
C) utmost good faith. 
D) subrogation.

Question 10

Why can an insurer refuse to pay a claim if an insured fails to abide by the policy provisions?

Accepted Answer

A) because insurance contracts are aleatory 
B) because insurance contracts are unilateral 
C) because insurance contracts are conditional 
D) because insurance contracts are contracts of adhesion 
A) because insurance contracts are aleatory 
B) because insurance contracts are unilateral 
C) because insurance contracts are conditional 
D) because insurance contracts are contracts of adhesion

Question 11

Mark owns a bar.The bar has a back room where Mark has some slot machines.Mark lets some of his patrons play the machines,and Mark keeps any profits.This type of gambling is illegal where Mark lives.Mark wanted to purchase insurance in case his slot machines were confiscated by the police.Such an insurance contract would not be enforceable.Which requirement needed to form a valid insurance contract is missing?

Accepted Answer

A) consideration 
B) offer and acceptance 
C) legal purpose 
D) competent parties 
A) consideration 
B) offer and acceptance 
C) legal purpose 
D) competent parties

Question 12

Which of the following statements about subrogation is true?

Accepted Answer

A) Subrogation eliminates adverse selection. 
B) Subrogation helps to hold down the cost of insurance. 
C) Subrogation results in violation of the principle of indemnity. 
D) Subrogation permits a party who caused a loss to avoid responsibility for the loss. 
A) Subrogation eliminates adverse selection. 
B) Subrogation helps to hold down the cost of insurance. 
C) Subrogation results in violation of the principle of indemnity. 
D) Subrogation permits a party who caused a loss to avoid responsibility for the loss.

Question 13

What is the practical effect of an insurance contract being a contract of adhesion?

Accepted Answer

A) The insurer can refuse to pay claims if the insured has not complied with all policy provisions. 
B) The insured can assign the policy only with the insurer's consent. 
C) The insurer can sue the insured for failure to pay any premiums. 
D) The policy is interpreted in the insured's favor if the policy contains any ambiguities or uncertainties. 
A) The insurer can refuse to pay claims if the insured has not complied with all policy provisions. 
B) The insured can assign the policy only with the insurer's consent. 
C) The insurer can sue the insured for failure to pay any premiums. 
D) The policy is interpreted in the insured's favor if the policy contains any ambiguities or uncertainties.

Question 14

Which distinct legal characteristic of insurance contracts states that only the insurer's promise to perform is legally enforceable?

Accepted Answer

A) contracts of adhesion 
B) unilateral contracts 
C) aleatory contracts 
D) personal contracts 
A) contracts of adhesion 
B) unilateral contracts 
C) aleatory contracts 
D) personal contracts

Question 15

Chris applied for life insurance and paid the first premium on Monday.She was given an insurability premium receipt which specified that coverage was effective on the date of the application or the date of the medical exam,whichever is later.She took the medical exam the following Thursday.She was found to be in perfect health.On which day was her coverage effective?

Accepted Answer

A) on Monday,when she completed the application and paid the first premium 
B) on Wednesday,two days after completing the application and paying the first premium 
C) on Thursday when she passed the medical exam 
D) on Saturday,two days after passing the medical exam 
A) on Monday,when she completed the application and paid the first premium 
B) on Wednesday,two days after completing the application and paying the first premium 
C) on Thursday when she passed the medical exam 
D) on Saturday,two days after passing the medical exam

Question 16

Dave and Meagan Philips borrowed $150,000 from Fifth National Bank to help fund the purchase of a new home.The home serves as collateral for the loan.Fifth National has an insurable interest in the home based on

Accepted Answer

A) potential responsibility for legal liability. 
B) being a secured creditor. 
C) expectation of ownership. 
D) having a contractual right. 
A) potential responsibility for legal liability. 
B) being a secured creditor. 
C) expectation of ownership. 
D) having a contractual right.

Question 17

All of the following will support an insurable interest for purposes of purchasing property and liability insurance EXCEPT

Accepted Answer

A) former ownership of property. 
B) potential legal liability. 
C) secured creditors. 
D) contractual right. 
A) former ownership of property. 
B) potential legal liability. 
C) secured creditors. 
D) contractual right.

Which of the following types of insurance policies can usually be assigned without the insurer's consent? I.Life insurance II.Property insurance

Why does the insured get the benefit of the doubt if an insurance policy contains any ambiguities or uncertainties?

All of the following statements about subrogation are true EXCEPT

A total loss under a valued policy is settled on the basis of the

Fundamental purposes of the principle of indemnity include which of the following? I.To reduce physical hazards II.To prevent the insured from profiting from insurance

Sue's office building was damaged by a fire caused by a careless tenant.After paying Sue for the loss,the insurance company sued the tenant to recover its loss.This suit is based on the principle of

Why can an insurer refuse to pay a claim if an insured fails to abide by the policy provisions?

Which of the following statements about subrogation is true?

What is the practical effect of an insurance contract being a contract of adhesion?

Which distinct legal characteristic of insurance contracts states that only the insurer's promise to perform is legally enforceable?

Dave and Meagan Philips borrowed $150,000 from Fifth National Bank to help fund the purchase of a new home.The home serves as collateral for the loan.Fifth National has an insurable interest in the home based on

All of the following will support an insurable interest for purposes of purchasing property and liability insurance EXCEPT

Risk and Its Treatment

Insurance and Risk

Introduction to Risk Management

Enterprise Risk Management

Types of Insurers and Marketing Systems

Insurance Company Operations

Financial Operations of Insurers

Government Regulation of Insurance

Analysis of Insurance Contracts

Life Insurance

Life Insurance and Contractual Provisions

Buying Life Insurance

Annuities and Individual Retirement Accounts

Health-Care Reform;individual Health Insurance Coverages

Employee Benefits: Group Life and Health Insurance

Employee Benefits: Retirement Plans

Social Insurance

The Liability Risk

Auto Insurance

Auto Insurance Continued

Homeowners Insurance,section I

Homeowners Insurance,section II

Other Property and Liability Insurance Coverages

Commercial Property Insurance

Commercial Liability Insurance

Crime Insurance and Surety Bonds

Filters

Exam 9: Fundamental Legal Principles

Which of the following types of insurance policies can usually be assigned without the insurer's consent? I.Life insurance II.Property insurance

Why does the insured get the benefit of the doubt if an insurance policy contains any ambiguities or uncertainties?

All of the following statements about subrogation are true EXCEPT

A total loss under a valued policy is settled on the basis of the

Fundamental purposes of the principle of indemnity include which of the following? I.To reduce physical hazards II.To prevent the insured from profiting from insurance

Sue's office building was damaged by a fire caused by a careless tenant.After paying Sue for the loss,the insurance company sued the tenant to recover its loss.This suit is based on the principle of

Why can an insurer refuse to pay a claim if an insured fails to abide by the policy provisions?

Which of the following statements about subrogation is true?

What is the practical effect of an insurance contract being a contract of adhesion?

Which distinct legal characteristic of insurance contracts states that only the insurer's promise to perform is legally enforceable?

Dave and Meagan Philips borrowed $150,000 from Fifth National Bank to help fund the purchase of a new home.The home serves as collateral for the loan.Fifth National has an insurable interest in the home based on

All of the following will support an insurable interest for purposes of purchasing property and liability insurance EXCEPT

Risk and Its Treatment

Insurance and Risk

Introduction to Risk Management

Enterprise Risk Management

Types of Insurers and Marketing Systems

Insurance Company Operations

Financial Operations of Insurers

Government Regulation of Insurance

Analysis of Insurance Contracts

Life Insurance

Life Insurance and Contractual Provisions

Buying Life Insurance

Annuities and Individual Retirement Accounts

Health-Care Reform;individual Health Insurance Coverages

Employee Benefits: Group Life and Health Insurance

Employee Benefits: Retirement Plans

Social Insurance

The Liability Risk

Auto Insurance

Auto Insurance Continued

Homeowners Insurance,section I

Homeowners Insurance,section II

Other Property and Liability Insurance Coverages

Commercial Property Insurance

Commercial Liability Insurance

Crime Insurance and Surety Bonds

Filters