RMI EXAM 2(2024 Latest Update)Accurate 100%

RMI EXAM 2(2024 Latest Update)Accurate 100% chapter 5 - ANSWER chapter 5 principle of indemnity - ANSWER The insurer agrees to pay no more than the actual amount of the loss purpose of principle of indemnity - ANSWER -to prevent the insured from profiting from a loss -to reduce moral hazard in property insurance, indemnification is based on the _____ - ANSWER actual cash value methods of determining actual cash value - ANSWER -replacement cost less depreciation -fair market value -broad evidence rule actual cash value - ANSWER defined as replacement cost less depreciation fair market value - ANSWER the price a willing buyer would pay a willing seller in a free market broad evidence rule - ANSWER the determination of actual cash value should include all relevant factors an expert would use to determine the value of the property important EXCEPTIONS to the principle of indemnity - ANSWER -valued policy -valued policy laws -replacement cost insurance -life insurance valued policy - ANSWER a policy that pays the face amount of insurance if a total loss occurs. such as antiques that don't have an exact price since you cant find them anymore. value policy law - ANSWER a law that exist in some states that requires payment of the face amount of insurance to the insured if a total loss to real property occurs from a peril specified in the law replacement cost insurance - ANSWER There is no deduction for physical depreciation in determining the amount paid for a loss principle of insurable interest - ANSWER The insured must be in a position to lose financially if a covered loss occurs purpose of the principle of insurable interest - ANSWER -to prevent gambling -to reduce moral hazards -to measure the amount of the insured's loss insurable interest can be supported by - ANSWER -ownership of property -potential legal liability -serving as a secured creditor -contractual rights pecuniary interest - ANSWER the insurable interest requirement in life insurance can be met when must insurable interest exist? - ANSWER -property -life insurance principle of subrogation - ANSWER substitution of the insurer in place of the insured for the purpose of claiming indemnity from a third party for a loss covered by insurance