RMI 3011 Exam 2 Keith Jones Correct Questions & Answers!!

What is the Principle of Indemnity? - ANSWER - States that the insurer agrees to pay no more than the actual amount of the loss; stated differently, the insured should not profit from a loss. - Insurance is a contract of indemnity. What are the methods used by courts to determine actual cash value? - ANSWER - Replacement Cost Less Depreciation - Fair Market Value - Broad Evidence Rule What are the exceptions to Actual Cash Value? - ANSWER Replacement cost insurance, life insurance, value policy laws, and valued policy. What is the Replace Cost Less Depreciation method? - ANSWER This rule has been used traditionally to determine the actual cash value of property in property insurance. What is the Free Market Value method? - ANSWER The price a willing buyer would pay a willing seller in a free market. What is the Broad Evidence Rule method? - ANSWER Means that the determination of actual cash value should include all relevant factors an expert would use to determine the value of the property. What are the exceptions to the Principle of Indemnity? - ANSWER - Valued Policy - Policy that pays the face amount of insurance if a total loss occurs. - Valued Policy Laws - Policy that pays the face amount of insurance, regardless of actual cash value, if total loss occurs. - Replacement Cost Insurance - Property insurance by which the insured is indemnified based on replacement cost with no deduction for depreciation. - Life Insurance - Not a contract of indemnity but is a valued policy that pays a stated amount to the beneficiary at the time of the insured's death. What is the Principle of Insurable Interest? - ANSWER - States that the insured must be in a position to lose financially if a covered loss occurs.