Question 1

Shicara owns a jewelry store. In exchange for a discount on her burglary insurance premium, she promises the insurer that her trained guard dog will be on the premises at all times, even when the store is closed. One evening she takes the dog home with her instead of leaving him at the store, and a burglar breaks in and steals everything. The insurance company finds out the dog wasn't in the store when the burglary happened, and denies the claim. WHY does the insurer do this?

Accepted Answer

A)   Because Shicara committed a material misrepresentation
B)   Because Shicara breached a warranty
C)   Because Shicara committed a concealment
D)   Because Shicara violated the principle of adhesionE) None of the above
F) B) and C)

Question 2

Tiffany, who is married to Saul, takes out a $1,000,000 life insurance policy on Saul's life in 2008. Two years later they get divorced and Tiffany immediately remarries. Saul is not required to pay any alimony or child support to Tiffany after the divorce. In 2015, Saul dies. What will Tiffany collect on the life insurance policy, assuming she continued to pay all premiums due following their divorce?

Accepted Answer

A)   $0, because Tiffany has no insurable interest
B)   $1,000,000, because Tiffany had insurable interest in Saul's life when the policy was purchased
C)   $1,000,000, because Tiffany had insurable interest in Saul's life at the time of his death
D)   $0, because Saul was not ordered to pay alimony to TiffanyE) B) and C)
F) A) and B)

Question 3

The parol evidence rule:

Accepted Answer

A)   allows statements made before the policy is sold to affect policy coverage
B)   benefits the insured more than the insurer
C)   makes written evidence more important than oral evidence
D)   makes oral evidence more important than written evidenceE) B) and D)
F) B) and C)

Question 4

Which of the following is not an exception to the rule that insurance contracts are contracts of indemnity?

Accepted Answer

A)   Life insurance
B)   Replacement cost insurance
C)   Functional replacement
D)   Valued insurance policiesE) C) and D)
F) B) and C)

Question 5

Joe has a dispute with his insurance company regarding how much he is entitled to recover on a claim. Joe believes he is entitled to get $8,000 based upon his interpretation of the policy wording. The insurer says the claim is not covered by the policy. Joe sues and a court of law decides that the policy wording is vague and ambiguous, and rules that the loss IS covered. What legal characteristic of insurance resulted in the court's decision?

Accepted Answer

A)   Insurance is aleatory.
B)   Insurance is a contract of indemnity.
C)   Insurance is a contract of adhesion.
D)   Insurance is personal.E) A) and D)
F) B) and D) C

Question 6

In most property insurance contracts assignment is:

Accepted Answer

A)   specifically prohibited
B)   permitted, but requires additional premium
C)   not mentioned, but is not permitted because insurance contracts are personal contracts
D)   valid with the written consent of the insurerE) B) and C)
F) A) and D)

Question 7

Which part of the insurance contract personalizes the coverage to the individual's exposure?

Accepted Answer

A)   Exclusions
B)   Insuring agreements
C)   Declaration page
D)   ConditionsE) B) and C)
F) A) and D)

Question 8

Property insurance policies are standardized for all the following reasons except:

Accepted Answer

A)   to improve the accuracy of insurance rates
B)   to help reduce costs to consumers
C)   to eliminate competition between insurers
D)   to reduce litigation over policy meaningE) A) and C)
F) C) and D)

Question 9

Which of the following is false concerning concealment?

Accepted Answer

A)   Would be illustrated by a false answer to a question
B)   To make a contract avoidable must be material
C)   Typically involves an element of deception
D)   The result is treated very much like material misrepresentations in insurance lawE) B) and D)
F) None of the above A

Question 10

If an insured has actual cash value coverage, how much would he collect given the following facts?
1) 	Replacement cost of the building is $200,000,
2) 	Replacement cost of the loss is $30,000,
3) 	Estimated total useful life is 30 years, and
4) 	Building has been in use 15 years.

Accepted Answer

A)   $70,000
B)   $45,000
C)   $30,000
D)   $15,000E) A) and B)
F) A) and C)

Question 11

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 lossE) C) and D)
F) A) and D)

Question 12

Jasmine phones her agent to obtain auto insurance. The agent binds coverage over the phone, and tells her she will have a $250 collision deductible. When the insurer issues the policy, the underwriter imposes a $1,000 deductible because of Jasmine's poor driving record, then mails her the policy. She does not read it or notice this change until she has an accident six months later. She then demands that the insurer only require a $250 deductible rather than a $1,000 deductible, since she did not approve this change. Which legal principle of insurance contracts would be the insurer's most convincing reason for refusing to honor the $250 deductible?

Accepted Answer

A)   Contract of adhesion
B)   Parol evidence rule
C)   Indemnity
D)   Utmost good faithE) All of the above
F) C) and D)

Question 13

The principle of utmost good faith:

Accepted Answer

A)   holds the insurer to a higher standard of honesty
B)   does not apply in life insurance
C)   holds the insured to a higher standard of honesty
D)   requires the insurer and insured to enter the contract with utmost good faithE) None of the above
F) All of the above

Question 14

Evan has his house insured for $200,000. He sells the house to Ann for $225,000. Three days after the sale is complete the house is destroyed by fire. Evan has not canceled his homeowner's insurance policy, so he decides to file a claim for losses caused by the fire. What will most likely happen?

Accepted Answer

A)   Evan will collect $200,000 in insurance payments.
B)   Evan will collect $200,000 in insurance payments ONLY IF Ann has not yet purchased a homeowner's policy of her own.
C)   Evan will collect nothing because he has no insurable interest.
D)   Ann will collect $200,000 from Evan's insurer.E) All of the above
F) A) and C)

Question 15

"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 insuranceE) A) and D)
F) All of the above B

Question 16

Describe the purposes of deductibles.

Accepted Answer

They reduce morale hazard, eli...

Question 17

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

Accepted Answer

The principle of indemnity states that a...

Question 18

Exclusions are not a basic part of an insurance contract.

Accepted Answer

A) True 
 B)False

Question 19

The parol evidence rule says:

Accepted Answer

A)   oral statements made prior to the issuance of an insurance policy are not a part of the contract
B)   oral statements made after a policy is issued are not a part of the contract
C)   after an oral agreement is put into writing, it becomes a contract of adhesion
D)   none of the aboveE) A) and C)
F) A) and B)

Question 20

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)   subrogationE) B) and C)
F) A) and D)

Exam 11: Insurance Contracts

Correct Answer
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Correct Answer
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The parol evidence rule:

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Which of the following is not an exception to the rule that insurance contracts are contracts of indemnity?

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Correct Answer
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C

In most property insurance contracts assignment is:

Correct Answer
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Which part of the insurance contract personalizes the coverage to the individual's exposure?

Correct Answer
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Property insurance policies are standardized for all the following reasons except:

Correct Answer
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Which of the following is false concerning concealment?

Correct Answer
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A

If an insured has actual cash value coverage, how much would he collect given the following facts? 1) Replacement cost of the building is $200,000, 2) Replacement cost of the loss is $30,000, 3) Estimated total useful life is 30 years, and 4) Building has been in use 15 years.

Correct Answer
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The doctrine of proximate cause:

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The principle of utmost good faith:

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Evan has his house insured for $200,000. He sells the house to Ann for $225,000. Three days after the sale is complete the house is destroyed by fire. Evan has not canceled his homeowner's insurance policy, so he decides to file a claim for losses caused by the fire. What will most likely happen?

Correct Answer
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"Binders" are typically used with:

Correct Answer
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B

Describe the purposes of deductibles.

Correct Answer
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They reduce morale hazard, eli...
View Answer

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

Correct Answer
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The principle of indemnity states that a...
View Answer

Exclusions are not a basic part of an insurance contract.

Correct Answer
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The parol evidence rule says:

Correct Answer
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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.

Correct Answer
verified

Exam 11: Insurance Contracts

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The parol evidence rule:

Correct AnswerverifiedShow Answer

Which of the following is not an exception to the rule that insurance contracts are contracts of indemnity?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedC

In most property insurance contracts assignment is:

Correct AnswerverifiedShow Answer

Which part of the insurance contract personalizes the coverage to the individual's exposure?

Correct AnswerverifiedShow Answer

Property insurance policies are standardized for all the following reasons except:

Correct AnswerverifiedShow Answer

Which of the following is false concerning concealment?

Correct AnswerverifiedA

If an insured has actual cash value coverage, how much would he collect given the following facts? 1) Replacement cost of the building is $200,000, 2) Replacement cost of the loss is $30,000, 3) Estimated total useful life is 30 years, and 4) Building has been in use 15 years.

Correct AnswerverifiedShow Answer

The doctrine of proximate cause:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The principle of utmost good faith:

Correct AnswerverifiedShow Answer

Evan has his house insured for $200,000. He sells the house to Ann for $225,000. Three days after the sale is complete the house is destroyed by fire. Evan has not canceled his homeowner's insurance policy, so he decides to file a claim for losses caused by the fire. What will most likely happen?

Correct AnswerverifiedShow Answer

"Binders" are typically used with:

Correct AnswerverifiedB

Describe the purposes of deductibles.

Correct AnswerverifiedThey reduce morale hazard, eli...View AnswerShow Answer

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

Correct AnswerverifiedThe principle of indemnity states that a...View AnswerShow Answer

Exclusions are not a basic part of an insurance contract.

Correct AnswerverifiedShow Answer

The parol evidence rule says:

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Correct Answer
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C

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A

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B

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They reduce morale hazard, eli...
View Answer

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The principle of indemnity states that a...
View Answer

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Correct Answer
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Correct Answer
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