Texas All-Lines Adjuster Pre-Licensing Chapter 1Questions and Answers

insurance - financial took that protects individual and organizations from unforeseen and extraordinary financial losses by transferring risk to another party insured - individual or organization that pays premiums in exchange for protection insurer - company, group, or government agency offering financial protection how does insurance work? - insured pays premium insurer promises to pay for specific losses if they occur insurer's promise gives peace of mind to insured principle of indemnity - when a loss occurs, an individual should be restored to the approximate financial condition he was in before the loss, no more and no less Q1: How can insurance companies afford to pay for an individual's catastrophic loss? - Q1: The purpose of the principle of indemnity: - prevents an insured from profiting from a loss Q1: Which of the following best defines premium? - the fee paid by the insured in exchange for the insurance policy Q1: What best describes insurance? - an economic device used to protect against the risk of unforeseen and extraordinary financial loss Q1: Mark incurred $8000 damage to his car in an accident. He received $8000 from his insurance company and $4000 from the other driver. By receiving profit from his loss, Mark could be in violation of: - the principle of indemnity he should be in the same financial condition. no better, no worse indemnification may include payment for: - repairs to property reimbursement for additional living expenses rental cars, hotels costs directly associated with a loss, as allowed under the policy legal contract/insurance policy is: - contract to provide financial protection for a fee legally binding because it meets the 4 requirements of a legal contract What are the 4 requirements of a legal contract? - agreement (offer and acceptance) consideration competent parties legal purpose agreement - mutual consent between offeror and offeree acceptance criteria - offeree communicates to the offeror his intent to enter into contract must be unconditional - the offeree accepts the terms proposed by the offeror original offeree is the only person who can legally accept the offer An offer may be terminated by: - revocation by offeror rejection by offeree time lapse termination by operation of law -either party dies or becomes disabled -performance of contract becomes illegal after the offer -subject matter is destroyed offer rejection - explicit rejection proposal of new offer counteroffer consideration - all parties bring something of value competent parties - 18 years old, sober, and sane legal purpose - no contracts for money laundering Q2: An offeree may legally reject a contract offer by any of the following means EXCEPT: - asking for clarification or additional information Q2: If covered by an insurance policy, an insured may be indemnified for all of the following except: - home remodels Q2: Which of the following is NOT a requirement for a legally binding contract? - it must be a notarized document Q2: Which of the following refers to being restored to the financial condition you were in before a loss? - indemnification Q2: A legally binding contract is where the risk of financial loss is transferred in exchange for premiums is called: - an insurance policy 1-A: The purpose of the principle of indemnity is: - to prevent and insured from making a profit on a loss