RMIN 4000 UGA Brown Exam 3 Questions & Answers 100% Correct!

principle of indemnity - ANSWER-The insurer agrees to pay no more than the actual amount of the loss (prevent the insured from profiting from loss) replacement cost (RC) - ANSWER-the cost to replace property with an item of like kind and quality (similar workmanship and materials) (not the same as historical cost!) actual cash value (ACV) - ANSWER-- replacement cost - depreciation - in property insurance, indemnification is usually based on the actual cash value of the property at the time of loss market value - ANSWER-price buyer would be willing to pay in a free market valued policy - ANSWER-a policy that pays the face amount of insurance if a total loss occurs (life insurance) valued policy law (in some states) - ANSWER-requires payment of the face amount of insurance if a total loss to real property occurs from a peril specified in law principle of insurable interest - ANSWER-the insured/ beneficiary must be in a position to lose financially if a covered loss occurs - prevents gambling on losses - reduces moral hazard examples of insurable interest - ANSWER-- ownership of property (house, car) - potential legal liability (business owner) - secured creditors ( mtg co, auto lender) - contractual right (goods in transit property insurance - ANSWER-- must exist at time of loss - can't collect on an insurance policy after you sell your home life insurance - ANSWER-- exists at inception of policy - ex-spouse can still collect on life insurance if listed as policy beneficiary 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 reasons for subrogation - ANSWER-- prevents insured from collecting twice - holds negligent party responsible for the loss - reduces insurance claims costs (and therefore, rates) principle of utmost good faith - ANSWER-A higher degree of honesty is imposed on