Question 1

If there were a $22,000 loss and a $700 straight deductible, the insurer would pay:

Accepted Answer

A)  $700 
B)  $21,300 
C)  $22,000 
D)  $0 
A)  $700 
B)  $21,300 
C)  $22,000 
D)  $0

Question 2

The personal feature of property insurance contracts means that:

Accepted Answer

A)  subrogation always applies 
B)  ambiguities in the wording will always be construed against the insurer 
C)  insurance contracts cannot be freely transferred to other parties 
D)  the buyer of insurance must have insurable interest in property before the policy is issued 
A)  subrogation always applies 
B)  ambiguities in the wording will always be construed against the insurer 
C)  insurance contracts cannot be freely transferred to other parties 
D)  the buyer of insurance must have insurable interest in property before the policy is issued

Question 3

Choose the best example of a promissory warranty.

Accepted Answer

A)  The cargo is not flammable 
B)  This vessel is seaworthy 
C)  The building's fire sprinkler system works and will work 
D)  The dump truck is in good condition 
A)  The cargo is not flammable 
B)  This vessel is seaworthy 
C)  The building's fire sprinkler system works and will work 
D)  The dump truck is in good condition

Question 4

Which of the following does not support the principle of indemnity?

Accepted Answer

A)  Actual cash value 
B)  Contract of adhesion 
C)  Insurable interest 
D)  Subrogation 
A)  Actual cash value 
B)  Contract of adhesion 
C)  Insurable interest 
D)  Subrogation

Question 5

Standardized insurance policies make it easier to calculate an insurance rate than do non-standardized policies.

Accepted Answer

A) True 
 B)False

Question 6

A void contract is:

Accepted Answer

A)  voided by the insurer 
B)  voided by the insured 
C)  voided by law 
D)  voided by the court 
A)  voided by the insurer 
B)  voided by the insured 
C)  voided by law 
D)  voided by the court

Question 7

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 8

What is the principle of indemnity?

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 9

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 10

Concealment or fraud before, during, or after a loss generally allows an insurer to contest property insurance contracts.

Accepted Answer

A) True 
 B)False

Question 11

Which one of the following is not a basic part of an insurance contract?

Accepted Answer

A)  Deductibles 
B)  Conditions 
C)  Declarations 
D)  All of the above are a basic part of an insurance contract. 
A)  Deductibles 
B)  Conditions 
C)  Declarations 
D)  All of the above are a basic part of an insurance contract.

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

Explain what a contract of adhesion is. How does the doctrine of reasonable expectations influence adhesion?

Accepted Answer

Insurance is a contract of adhesion whic

Question 14

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 15

Which of the following is correct concerning when insurable interest must exist?

Accepted Answer

A)  In property and liability insurance, it must exist at the inception of the contract. 
B)  It is seldom required in property insurance unless there are liens on the property. 
C)  It must exist at the time of death of the insured for the beneficiary to collect in life insurance. 
D)  In life insurance, it must exist at the inception of the policy but it is not necessary at the time of the loss. 
A)  In property and liability insurance, it must exist at the inception of the contract. 
B)  It is seldom required in property insurance unless there are liens on the property. 
C)  It must exist at the time of death of the insured for the beneficiary to collect in life insurance. 
D)  In life insurance, it must exist at the inception of the policy but it is not necessary at the time of the loss.

Question 16

"Actual cash value" means "historical cost less depreciation."

Accepted Answer

A) True 
 B)False

Question 17

If there were a $200,000 loss and a $500 straight deductible, the insured would pay:

Accepted Answer

A)  $500 
B)  $199,500 
C)  $200,000 
D)  $200,500 
A)  $500 
B)  $199,500 
C)  $200,000 
D)  $200,500

Question 18

Actual cash value is defined as:

Accepted Answer

A)  replacement cost minus accounting depreciation 
B)  replacement cost minus depreciation 
C)  actual replacement cost 
D)  original purchase price minus depreciation 
A)  replacement cost minus accounting depreciation 
B)  replacement cost minus depreciation 
C)  actual replacement cost 
D)  original purchase price minus depreciation

Question 19

The purpose of the insuring agreement of an insurance policy is to:

Accepted Answer

A)  specify the perils covered 
B)  list reasons allowing the insurer to cancel the policy 
C)  present the language giving force to the contract 
D)  indicate who can collect for a covered loss 
A)  specify the perils covered 
B)  list reasons allowing the insurer to cancel the policy 
C)  present the language giving force to the contract 
D)  indicate who can collect for a covered loss

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 11: Insurance Contracts

If there were a $22,000 loss and a $700 straight deductible, the insurer would pay:

The personal feature of property insurance contracts means that:

Choose the best example of a promissory warranty.

Which of the following does not support the principle of indemnity?

Standardized insurance policies make it easier to calculate an insurance rate than do non-standardized policies.

A void contract is:

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:

What is the principle of indemnity?

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

Concealment or fraud before, during, or after a loss generally allows an insurer to contest property insurance contracts.

Which one of the following is not a basic part of an insurance contract?

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

Explain what a contract of adhesion is. How does the doctrine of reasonable expectations influence adhesion?

In which case is there no insurable interest?

Which of the following is correct concerning when insurable interest must exist?

"Actual cash value" means "historical cost less depreciation."

If there were a $200,000 loss and a $500 straight deductible, the insured would pay:

Actual cash value is defined as:

The purpose of the insuring agreement of an insurance policy is to:

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

Introduction to Enterprise Risk Management and Insurance

Risk Identification

Risk Assessment and Pooling

Risk-Handling Techniques: Loss Control, Risk Transfer, and Loss Financing

Risk-Handling Techniques: Diversification and Hedging

Fundamentals of Insurance

Insurable Perils and Insuring Organizations

Insurance Functions

Insurance Markets: Economics and Issues

Insurance Regulation

The Personal Auto Policy

Homeowners Insurance

Professional Financial Planning

Life Insurance Policies

Standard Life Insurance Contract Provisions and Options

Annuities

Health Insurance and Disability Income

Employee Benefits

Social Security

Unemployment and Workers Compensation Insurance

Commercial Property Insurance

Commercial Liability Insurance

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