Question 1

Liability insurance protects against liability imposed on the insured as a result of injuries to the person or property of another.

Accepted Answer

A) True 
 B)False

Question 2

Tira obtains two fire insurance policies on her house. Each is an open policy with a pro rata clause. Tira's policy with Unity Insurance Company is for a maximum amount of $100,000. Her policy with Verity Insurance Company is for a maximum amount of $50,000. Each policy includes a pro rata clause. Due to defective electrical wiring, Tira's house catches fire and burns completely. The value the house at the time of the loss is $120,000. Tira files a proof of loss with each insurer. What is an open policy What is a pro rata clause What is the liability of Unity and Verity for this event

Accepted Answer

Under an open policy, an insurer's liabi

Question 3

A sibling may have an insurable interest in his or her sibling's life.

Accepted Answer

A) True 
 B)False

Question 4

Term insurance provides life insurance with an accumulated cash surrender value that can be used as collateral for a loan.

Accepted Answer

A) True 
 B)False

Question 5

Bret obtains a fire insurance policy on his rental house with Continental Insurance Company. Like all insurance, this policy is an arrangement for

Accepted Answer

A)  avoiding the assumption of responsibility. 
B)  predicting a potential loss based on unknown factors. 
C)  shifting the imposition of liability. 
D)  transferring and allocating risk. 
A)  avoiding the assumption of responsibility. 
B)  predicting a potential loss based on unknown factors. 
C)  shifting the imposition of liability. 
D)  transferring and allocating risk.

Question 6

State law may mandate that an incontestability clause be included in an insurance policy.

Accepted Answer

A) True 
 B)False

Question 7

Myles obtains a business liability insurance policy from Nova Insurance Company for Myles's Hydraulics & Transmission Repair shop. Nova can cancel the policy

Accepted Answer

A)  if Myles increases the risk assumed by the Nova. 
B)  if Myles files a claim under the policy. 
C)  if Myles appears as a witness in a case brought against Nova. 
D)  under no circumstances. 
A)  if Myles increases the risk assumed by the Nova. 
B)  if Myles files a claim under the policy. 
C)  if Myles appears as a witness in a case brought against Nova. 
D)  under no circumstances.

Question 8

Dhani is the beneficiary of a life insurance policy on Elmo's life obtained from Famous Insurance Company. The insurer of this policy is

Accepted Answer

A)  Dhani. 
B)  Elmo. 
C)  Famous. 
D)  the agent or broker through whom the policy was obtained. 
A)  Dhani. 
B)  Elmo. 
C)  Famous. 
D)  the agent or broker through whom the policy was obtained.

Question 9

An insurance application is part of the insurance contract.

Accepted Answer

A) True 
 B)False

Question 10

Under an antilapse clause, an insurance policy will lapse only if no premium is paid on the date due.

Accepted Answer

A) True 
 B)False

Question 11

Lila obtains a life insurance policy with no cash surrender value and names her son Maurice as the beneficiary. This is

Accepted Answer

A)  casualty insurance. 
B)  decreasing-term life insurance. 
C)  health insurance. 
D)  term life insurance. 
A)  casualty insurance. 
B)  decreasing-term life insurance. 
C)  health insurance. 
D)  term life insurance.

Question 12

Shingle & Tile Roofing Contractor, LLC, obtains an insurance policy against liability for injuries or losses sustained by employees during the course of their employment. The policy covers claims not covered by workers' compensation insurance. This is

Accepted Answer

A)  casualty insurance. 
B)  fidelity or guaranty insurance. 
C)  key-person life insurance. 
D)  employer's liability insurance. 
A)  casualty insurance. 
B)  fidelity or guaranty insurance. 
C)  key-person life insurance. 
D)  employer's liability insurance.

Question 13

The consideration paid to an insurer to obtain an insurance policy is the premium.

Accepted Answer

A) True 
 B)False

Question 14

Investors Commercial Property Corporation obtains an insurance policy that protects against any losses incurred as a result of existing claims against or liens on certain property at the time of its purchase. This is

Accepted Answer

A)  casualty insurance. 
B)  fire insurance. 
C)  life insurance. 
D)  title insurance. 
A)  casualty insurance. 
B)  fire insurance. 
C)  life insurance. 
D)  title insurance.

Question 15

A fire insurance policy covers losses to the insured as a result of fire and lightning, but not damage from smoke and water.

Accepted Answer

A) True 
 B)False

Question 16

Ace Investments, Inc., is the mortgagee for a warehouse owned by Best Storage, Inc. Ace obtains an insurance policy from Complete Insurance Corporation (CIC) to cover the warehouse. Best also obtains a policy from CIC to cover the warehouse. Later, Best sells the warehouse to Delta Company but keeps the policy. Delta also obtains a policy from CIC to cover the warehouse. Ace agrees to act as Delta's mortgagee. A fire totally destroys the warehouse. Who can recover for the loss

Accepted Answer

Ace has an insurable interest in the war

Question 17

The existence of an insurable interest is a primary concern when determining liability under an insurance policy.

Accepted Answer

A) True 
 B)False

Question 18

Bob applies to City Insurance Company for homeowners' insurance. City issues a policy, but later discovers that Bob's application includes several misstatements. Most likely, these misstatements can

Accepted Answer

A)  affect the coverage under the policy but cannot void the policy. 
B)  bind Bob but cannot affect the coverage. 
C)  not bind Bob or affect the policy. 
D)  void the policy. 
A)  affect the coverage under the policy but cannot void the policy. 
B)  bind Bob but cannot affect the coverage. 
C)  not bind Bob or affect the policy. 
D)  void the policy.

Question 19

Boyce obtains from Capital Insurance Company a policy that provides that if the parties cannot agree on the amount of a loss covered by the policy, an estimate of the value by an impartial third party can be demanded. This is

Accepted Answer

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

Question 20

Brassy obtains an insurance policy for her electric guitar collection from Crest Insurance Company. Brassy can cancel the policy

Accepted Answer

A)  at any time. 
B)  only at the end of a period for which a premium has been paid. 
C)  only if Brassy no longer has an insurable interest in the collection. 
D)  only on advance written notice. 
A)  at any time. 
B)  only at the end of a period for which a premium has been paid. 
C)  only if Brassy no longer has an insurable interest in the collection. 
D)  only on advance written notice.

Exam 51: Insurance

Liability insurance protects against liability imposed on the insured as a result of injuries to the person or property of another.

A sibling may have an insurable interest in his or her sibling's life.

Term insurance provides life insurance with an accumulated cash surrender value that can be used as collateral for a loan.

Bret obtains a fire insurance policy on his rental house with Continental Insurance Company. Like all insurance, this policy is an arrangement for

State law may mandate that an incontestability clause be included in an insurance policy.

Myles obtains a business liability insurance policy from Nova Insurance Company for Myles's Hydraulics & Transmission Repair shop. Nova can cancel the policy

Dhani is the beneficiary of a life insurance policy on Elmo's life obtained from Famous Insurance Company. The insurer of this policy is

An insurance application is part of the insurance contract.

Under an antilapse clause, an insurance policy will lapse only if no premium is paid on the date due.

Lila obtains a life insurance policy with no cash surrender value and names her son Maurice as the beneficiary. This is

Shingle & Tile Roofing Contractor, LLC, obtains an insurance policy against liability for injuries or losses sustained by employees during the course of their employment. The policy covers claims not covered by workers' compensation insurance. This is

The consideration paid to an insurer to obtain an insurance policy is the premium.

Investors Commercial Property Corporation obtains an insurance policy that protects against any losses incurred as a result of existing claims against or liens on certain property at the time of its purchase. This is

A fire insurance policy covers losses to the insured as a result of fire and lightning, but not damage from smoke and water.

The existence of an insurable interest is a primary concern when determining liability under an insurance policy.

Bob applies to City Insurance Company for homeowners' insurance. City issues a policy, but later discovers that Bob's application includes several misstatements. Most likely, these misstatements can

Boyce obtains from Capital Insurance Company a policy that provides that if the parties cannot agree on the amount of a loss covered by the policy, an estimate of the value by an impartial third party can be demanded. This is

Brassy obtains an insurance policy for her electric guitar collection from Crest Insurance Company. Brassy can cancel the policy

Introduction to Law and Legal Reasoning

Courts and Alternative Dispute Resolution

Court Procedures

Constitutional Authority to Regulate Business

Ethics and Business Decision Making

Intentional Torts and Privacy

Negligence and Strict Liability

Intellectual Property and Internet Law

Criminal Law and Cyber Crime

Nature and Terminology

Agreement in Traditional and E-Contracts

Consideration

Capacity and Legality

Mistakes, Fraud, and Voluntary Consent

The Statute of Frauds

Third Party Rights

Performance and Discharge

Breach of Contract and Remedies

The Formation of Sales and Lease Contracts

Title, Risk, and Insurable Interest

Performance Breach of Sales Lease Contracts

Warranties and Product Liability

International Law in a Global Economy

The Function Creation of Negotiable Instruments

Transferability and Holder in Due Course

Liability, Defenses, and Discharge

Checks and Banking in the Digital Age

Creditors Rights and Remedies

Secured Transactions

Bankruptcy Law

Mortgages Foreclosures After the Recession

Agency Formation and Duties

Agency Liability and Termination

Employment, Immigration, and Labor Law

Employment Discrimination

Sole Proprietorships and Franchises

Partnerships and Limited Liability Partnerships

Limited Liability Companies Special Business Forms

Corporate Formation and Financing

Corporate Directors, Officers, Shareholders

Corporate Merger, Consolidation, Termination

Securities Law Corporate Governance

Law for Small Business

Administrative Law

Consumer Law

Environmental Law

Antitrust Law

Professional Liaility and Accountability

Personal Property and Bailments

Real Property Landlord-Tenant Relationships

Wills and Trusts

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