Ted’s insurance claim was denied by XYZ Insurance Company. When Ted inquired why the claim was denied, he was told to, “Read the exclusion on page 5 of the policy.” Ted read the exclusion. In his opinion, the exclusion was poorly worded and vague. If a court of law agrees with Ted’s assessment of the […]
Date: September 19th, 2020
When Ben applied for life insurance, he was asked on the application if he smoked or used tobacco products. Ben answered “No.” In reality, Ben smokes two packs of cigarettes a day. The policy was issued at the “preferred, nonsmoker rate.” If Ben dies 6 months after the policy is issued, upon what grounds will […]
Date: September 19th, 2020
All of the following will support an insurable interest for purposes of purchasing property and liability insurance EXCEPT A) former ownership of property. B) potential legal liability. C) secured creditors. D) contractual right. ANSWER Answer: A
Date: September 19th, 2020
What is the practical effect of an insurance contract being a contract of adhesion? 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 […]
Date: September 19th, 2020
Which of the following statements about the principle of insurable interest is (are) true? I. It makes it difficult to measure the amount of an insured’s loss. II. It reduces moral hazard. A) I only B) II only C) both I and II D) neither I nor II ANSWER Answer: B
Date: September 19th, 2020
A contract in which the values exchanged are not equal because chance is involved is called a(n) A) contract of adhesion. B) unilateral contract. C) conditional contract. D) aleatory contract. ANSWER Answer: D
Date: September 19th, 2020
Which of the following statements describes how losses will be settled if a property insurance policy is written on a replacement cost basis? A) Losses are settled without the applicable deductible. B) Losses are settled without a deduction for depreciation. C) The insurer must replace the damaged or destroyed property in lieu of a cash […]
Date: September 19th, 2020
Why are insurance contracts said to be contracts of adhesion? A) The values exchanged by the parties to the contract are not equal. B) One party writes the contract, and the other party must accept the entire contract as written. C) Only one party makes a legally enforceable promise. D) Conditions are placed on the […]
Date: September 19th, 2020
When must an insurable interest legally exist in life insurance? A) only at the time of the insured’s death B) only at the inception of the policy C) only at the time the beneficiary is paid D) both at the time of the insured’s death and at the inception of the policy ANSWER […]
Date: September 19th, 2020
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 A) warranty. B) insurable interest. C) utmost good faith. D) subrogation. ANSWER Answer: D
Date: September 19th, 2020
