Question 1

A term life insurance contract:

Accepted Answer

A)  obligates the insured to pay the specified premium for the duration of his or her life. 
B)  obligates the insurer to pay the face amount of the policy if the insured dies within a specified period of time. 
C)  develops a loan value that the insured can recover if the policy is terminated. 
D)  develops a cash surrender value that the insured can recover if the policy is terminated. 
A)  obligates the insured to pay the specified premium for the duration of his or her life. 
B)  obligates the insurer to pay the face amount of the policy if the insured dies within a specified period of time. 
C)  develops a loan value that the insured can recover if the policy is terminated. 
D)  develops a cash surrender value that the insured can recover if the policy is terminated.

Question 2

Those who have an insurable interest in property must have that interest at the time the loss occurs.

Accepted Answer

A) True 
 B)False

Question 3

Describe portable health insurance.

Accepted Answer

Rising costs of hospitalization, medical

Question 4

A person who seeks to recover benefits under a life insurance policy:

Accepted Answer

A)  must notify the insured before a loss is likely to happen. 
B)  needs to furnish a sworn statement of loss. 
C)  needs to furnish proof of third party witness to the loss. 
D)  must notify the insurer of the loss and furnish proof of loss. 
A)  must notify the insured before a loss is likely to happen. 
B)  needs to furnish a sworn statement of loss. 
C)  needs to furnish proof of third party witness to the loss. 
D)  must notify the insurer of the loss and furnish proof of loss.

Question 5

A term life insurance contract obligates the insurer to pay only the face amount of the policy if the insured dies within a specified period of time-the term of the policy.

Accepted Answer

A) True 
 B)False

Question 6

As a general rule, contracts are assignable:

Accepted Answer

A)  even if the policy's terms limit assignability. 
B)  if they are not life insurance policies. 
C)  even without a designated beneficiary's consent. 
D)  if they are not property insurance policies. 
A)  even if the policy's terms limit assignability. 
B)  if they are not life insurance policies. 
C)  even without a designated beneficiary's consent. 
D)  if they are not property insurance policies.

Question 7

As a general rule, if an applicant suffers a loss after applying but before the insurer formally accepts the application, the:

Accepted Answer

A)  insurer must cover the loss. 
B)  applicant and the insured must bear the loss equally. 
C)  applicant must bear the loss. 
D)  insurer must cover the loss only if there is no binder. 
A)  insurer must cover the loss. 
B)  applicant and the insured must bear the loss equally. 
C)  applicant must bear the loss. 
D)  insurer must cover the loss only if there is no binder.

Question 8

Each liability insurance provider has a duty to defend the insured when a third party files a legal claim against the insured that falls within the coverage terms of the policy.

Accepted Answer

A) True 
 B)False

Question 9

The fire insurance policy on Dullard's home contained a 50 percent coinsurance clause. Dullard's home had a fair market value of $100,000. The face amount of the policy covering the home was $30,000. A hostile fire caused $30,000 worth of damage to the home. To what amount is Dullard entitled?

Accepted Answer

A)  $100,000 
B)  $9,000 
C)  $30,000 
D)  $18,000 
A)  $100,000 
B)  $9,000 
C)  $30,000 
D)  $18,000

Question 10

Malpractice insurance is similar to business liability coverage in that it:

Accepted Answer

A)  requires the insured to insure the property to a specified percentage of its fair market value in order to fully recover the value of partial losses. 
B)  provides an alternative to prohibitively expensive individual health care insurance policies. 
C)  provides protection for professionals whose negligent professional conduct causes injuries to third persons. 
D)  requires the insured to pay up to a certain amount each year before the insurer's payment obligation begins. 
A)  requires the insured to insure the property to a specified percentage of its fair market value in order to fully recover the value of partial losses. 
B)  provides an alternative to prohibitively expensive individual health care insurance policies. 
C)  provides protection for professionals whose negligent professional conduct causes injuries to third persons. 
D)  requires the insured to pay up to a certain amount each year before the insurer's payment obligation begins.

Question 11

Which of the following statements is true about cancellation of an insurance policy?

Accepted Answer

A)  Insurers can cancel insurance contracts by surrendering the policy to the insured. 
B)  Insurance contracts contain a reinstatement clause that allows an insured to reinstate a cancelled policy. 
C)  Insureds who terminate a contract are entitled to a return of the premium on a short-rate basis. 
D)  Insurers that cancel a contract need not return the unearned portion of any premiums paid by the insured. 
A)  Insurers can cancel insurance contracts by surrendering the policy to the insured. 
B)  Insurance contracts contain a reinstatement clause that allows an insured to reinstate a cancelled policy. 
C)  Insureds who terminate a contract are entitled to a return of the premium on a short-rate basis. 
D)  Insurers that cancel a contract need not return the unearned portion of any premiums paid by the insured.

Question 12

Health insurance policies generally require the insured to pay up to a certain amount each year before the insurer's payment obligation begins. This specific amount, which is a set amount established by federal law, is known as the deductible.

Accepted Answer

A) True 
 B)False

Question 13

The "incontestability clause" found in life insurance policies:

Accepted Answer

A)  bars the insurer from objecting on the basis of the purchase of the policy with the intent to murder the insured. 
B)  allows the insurer to contest its liability on the policy only if the policy has been in force for a specified period of time. 
C)  bars an insured from reinstating a lapsed policy that has not been surrendered for its cash surrender value. 
D)  allows the insurer to object on the basis of absence of insurable interest. 
A)  bars the insurer from objecting on the basis of the purchase of the policy with the intent to murder the insured. 
B)  allows the insurer to contest its liability on the policy only if the policy has been in force for a specified period of time. 
C)  bars an insured from reinstating a lapsed policy that has not been surrendered for its cash surrender value. 
D)  allows the insurer to object on the basis of absence of insurable interest.

Question 14

An addendum is an agreement for temporary insurance pending the insurer's decision to accept or reject the risk.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is most likely to be non-claimable under property insurance contracts?

Accepted Answer

A)  Overflows from burst pipes 
B)  Loss from vandalism 
C)  Loss from hostile fire 
D)  Nuclear contamination 
A)  Overflows from burst pipes 
B)  Loss from vandalism 
C)  Loss from hostile fire 
D)  Nuclear contamination

Question 16

In life insurance contracts, the required insurable interest must exist at the time of the insured's death.

Accepted Answer

A) True 
 B)False

Question 17

In whole life insurance contracts, the _____.

Accepted Answer

A)  rate of the premiums to be paid decreases if the face value increases 
B)  loan value decreases as the age of the policy increases 
C)  insurer pays the face value of the policy on the death of the insured 
D)  loan value developed by the contract enables the insurer to borrow money from the insured 
A)  rate of the premiums to be paid decreases if the face value increases 
B)  loan value decreases as the age of the policy increases 
C)  insurer pays the face value of the policy on the death of the insured 
D)  loan value developed by the contract enables the insurer to borrow money from the insured

Question 18

Serena purchased a home for $220,000, insuring it for $120,000 with Falcon Insurance. She later purchased a $60,000 policy from Devon Life. The home was totally destroyed by fire six months later. Under these circumstances, which of the following statements is true?

Accepted Answer

A)  Serena can claim the entire damages, $220,000, only from Falcon Insurance as its policy amount is greater. 
B)  She cannot claim insurance from either as policies with pro rata clauses cover only partial losses. 
C)  Serena cannot recover $180,000-the total of both policies. 
D)  Serena cannot claim more than $60,000 from Devon Life. 
A)  Serena can claim the entire damages, $220,000, only from Falcon Insurance as its policy amount is greater. 
B)  She cannot claim insurance from either as policies with pro rata clauses cover only partial losses. 
C)  Serena cannot recover $180,000-the total of both policies. 
D)  Serena cannot claim more than $60,000 from Devon Life.

Question 19

Under federal law, businesses that provide group health insurance plans must offer self-paid, continued group coverage to qualified employees for at least two years after termination of employment.

Accepted Answer

A) True 
 B)False

Question 20

According to the _____ clause, when the insured has purchased insurance policies from more than one insurer, the loss will be apportioned among the insurance companies.

Accepted Answer

A)  coinsurance 
B)  pro rata 
C)  exculpatory 
D)  valued 
A)  coinsurance 
B)  pro rata 
C)  exculpatory 
D)  valued

Exam 37: Insurance

A term life insurance contract:

Those who have an insurable interest in property must have that interest at the time the loss occurs.

Describe portable health insurance.

A person who seeks to recover benefits under a life insurance policy:

A term life insurance contract obligates the insurer to pay only the face amount of the policy if the insured dies within a specified period of time-the term of the policy.

As a general rule, contracts are assignable:

As a general rule, if an applicant suffers a loss after applying but before the insurer formally accepts the application, the:

Each liability insurance provider has a duty to defend the insured when a third party files a legal claim against the insured that falls within the coverage terms of the policy.

The fire insurance policy on Dullard's home contained a 50 percent coinsurance clause. Dullard's home had a fair market value of $100,000. The face amount of the policy covering the home was $30,000. A hostile fire caused $30,000 worth of damage to the home. To what amount is Dullard entitled?

Malpractice insurance is similar to business liability coverage in that it:

Which of the following statements is true about cancellation of an insurance policy?

Health insurance policies generally require the insured to pay up to a certain amount each year before the insurer's payment obligation begins. This specific amount, which is a set amount established by federal law, is known as the deductible.

The "incontestability clause" found in life insurance policies:

An addendum is an agreement for temporary insurance pending the insurer's decision to accept or reject the risk.

Which of the following is most likely to be non-claimable under property insurance contracts?

In life insurance contracts, the required insurable interest must exist at the time of the insured's death.

In whole life insurance contracts, the _____.

Serena purchased a home for $220,000, insuring it for $120,000 with Falcon Insurance. She later purchased a $60,000 policy from Devon Life. The home was totally destroyed by fire six months later. Under these circumstances, which of the following statements is true?

Under federal law, businesses that provide group health insurance plans must offer self-paid, continued group coverage to qualified employees for at least two years after termination of employment.

According to the _____ clause, when the insured has purchased insurance policies from more than one insurer, the loss will be apportioned among the insurance companies.

Law, Legal Reasoning, and the Legal Profession

Dispute Settlement

Business Ethics and Corporate Social Responsibility

Business and the Constitution

Crimes

Intentional Torts

Negligence and Strict Liability

Licensing and Intellectual Property

The Nature and Origins of Contracts

Creating a Contract: Offers

Creating a Contract: Acceptances

Consideration

Capacity to Contract

Voluntary Consent

Illegality

The Form and Meaning of Contracts

Third Parties Contract Rights

Performance and Remedies

Formation and Terms of Sales Contracts

Warranties and Product Liability

Performance of Sales Contracts

Remedies for Breach of Sales Contracts

The Agency Relationship-Creation, Duties, and Termination

Liability of Principals and Agents to Third Parties

Employment Laws

Which Form of Business Organization

Partnerships

Formation and Termination of Corporations

Management of the Corporate Business

Financing the Corporation and the Role of the Shareholders

Securities Regulation

Legal Liability of Accountants

Personal Property and Bailments

Real Property

Landlord and Tenant

Estates and Trusts

Negotiable Instruments

Negotiation and Holder in Due Course

Liability of Parties

Checks and Electronic Fund Transfers

Introduction to Security

Security Interests in Personal Property

Bankruptcy

The Antitrust Laws

Consumer Protection Laws

Environmental Regulation

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