RMIN 4000 BROWN EXAM 3 STUDY GUIDE
TESTED QUESTIONS AND ACCURATE
ANSWERS
●● Replacement Cost (RC)
Answer: Cost to replace property with an item of like kind and quality
(similar workmanship and materials)
●● Actual Cash Value (ACV)
Answer: Replacement cost less depreciation
●● Market Value
Answer: Price buyer would be willing to pay in a free market
●● Valued Policy
Answer: A policy that requires the face amount of insurance if a total
loss occurs (life insurance)
●● Valued Policy Law
Answer: Requires payment of the face amount of insurance if a total loss
to real property occurs from a peril specified in law; used in some states
,●● Principle of Insurable Interest
Answer: The insured/beneficiary must be in a position to lose financially
if a covered loss occurs
●● Examples of Insurable Interest
Answer: Ownership of property, potential legal liability, secured
creditors, contractual right
●● Principle of Subrogation
Answer: substitution of the insurer in place of the insured for the
purpose of claiming indemnity from a third-party loss covered by
insurance; prevents insured from collecting twice
●● Principle of Utmost Good Faith
Answer: A higher degree of honesty is imposed on both parties to
insurance contracts than is imposed on parties to other contracts;
supported by representations, concealment, and warranty
●● Representations
Answer: Statements made by the applicant for insurance; contract is
voidable if misrepresentation is material, false, and relied on by insurer
●● Concealment
, Answer: Intentional failure of the applicant for insurance to reveal a fact
to the insurer; contract can be voided if concealed fact was known by
insured to be material or the insured intended to defraud the insurer
●● Warranty
Answer: A statement that becomes part of the insurance contract and is
guaranteed by the maker to be true in all respects; condition agreed to by
an insured to receive coverage
●● Bad Faith
Answer: Law that allows lawsuits against insurance companies for
improper denial or delay of claims
●● Requirements of an insurance contract
Answer: Offer and Acceptance, Exchange of Consideration, Competent
Parties, Legal Purpose
●● Offer and Acceptance
Answer: Insured completes an application (offer); Insured company
issues binder or policy (acceptance)
●● Conditional premium receipt
Answer: receipt given to applicant for life insurance; if policy is
approved, coverage becomes effective as of the date of the application
TESTED QUESTIONS AND ACCURATE
ANSWERS
●● Replacement Cost (RC)
Answer: Cost to replace property with an item of like kind and quality
(similar workmanship and materials)
●● Actual Cash Value (ACV)
Answer: Replacement cost less depreciation
●● Market Value
Answer: Price buyer would be willing to pay in a free market
●● Valued Policy
Answer: A policy that requires the face amount of insurance if a total
loss occurs (life insurance)
●● Valued Policy Law
Answer: Requires payment of the face amount of insurance if a total loss
to real property occurs from a peril specified in law; used in some states
,●● Principle of Insurable Interest
Answer: The insured/beneficiary must be in a position to lose financially
if a covered loss occurs
●● Examples of Insurable Interest
Answer: Ownership of property, potential legal liability, secured
creditors, contractual right
●● Principle of Subrogation
Answer: substitution of the insurer in place of the insured for the
purpose of claiming indemnity from a third-party loss covered by
insurance; prevents insured from collecting twice
●● Principle of Utmost Good Faith
Answer: A higher degree of honesty is imposed on both parties to
insurance contracts than is imposed on parties to other contracts;
supported by representations, concealment, and warranty
●● Representations
Answer: Statements made by the applicant for insurance; contract is
voidable if misrepresentation is material, false, and relied on by insurer
●● Concealment
, Answer: Intentional failure of the applicant for insurance to reveal a fact
to the insurer; contract can be voided if concealed fact was known by
insured to be material or the insured intended to defraud the insurer
●● Warranty
Answer: A statement that becomes part of the insurance contract and is
guaranteed by the maker to be true in all respects; condition agreed to by
an insured to receive coverage
●● Bad Faith
Answer: Law that allows lawsuits against insurance companies for
improper denial or delay of claims
●● Requirements of an insurance contract
Answer: Offer and Acceptance, Exchange of Consideration, Competent
Parties, Legal Purpose
●● Offer and Acceptance
Answer: Insured completes an application (offer); Insured company
issues binder or policy (acceptance)
●● Conditional premium receipt
Answer: receipt given to applicant for life insurance; if policy is
approved, coverage becomes effective as of the date of the application
