BusFin 3300 Exam 2 Questions with Correct Answers
Purpose of The insurer agrees to pay no more than the
actual amount of the loss Correct Answer-To prevent the insured from
profiting from a
loss
-
To reduce moral hazard
There are three main methods to determine
actual cash value: Correct Answer-Replacement cost less depreciation
-
Fair market value
-
Broad evidence rule
Fair market value Correct Answer-is the price a willing buyer
would pay a willing seller in a free market
Broad evidence rule Correct Answer-means that the
determination of ACV should include all relevant
factors an expert would use to determine the
value of the propert
,valued policy Correct Answer-pays the face amount of insurance
if a total loss occurs
Replacement cost insurance Correct Answer-there is no
deduction for depreciation in determining the
amount paid for a loss
why The insured must be in a position to lose
financially if a covered loss occurs Correct Answer-Purposes:
-
To prevent gambling
-
To reduce moral hazard
-
To measure the amount of the insured's loss
•
An insurable interest can be supported by:
-
Ownership of property
-
Potential legal liability
-
,Serving as a secured creditor
-
Contractual rights
When must insurable interest exist for Property and Life? Correct
Answer-Property insurance: at the time of the loss
-
Life insurance: only at inception of the policy
Subrogation Correct 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.
purpose of subrogation Correct Answer-To prevent the insured from
collecting twice for
the same loss
-
To hold the negligent person responsible for the
loss
-
To hold down insurance rates
, Principle of Utmost Good Faith Correct Answer-A higher degree of
honesty is imposed on
both parties to an insurance contract than
is imposed on parties to other contracts
Representations Correct Answer-statements made by
the applicant for insurance
Material Correct Answer-if the insurer knew the true
facts, the policy would not have been issued, or
would have been issued on different terms
Reliance Correct Answer-the insurer relies on the
misrepresentation in issuing the policy at a
specified premium
innocent misrepresentation Correct Answer-a material
fact, if relied on by the insurer, makes the
contract voidable
concealment Correct Answer-intentional failure of the
applicant for insurance to reveal a material
fact to the insurer
Purpose of The insurer agrees to pay no more than the
actual amount of the loss Correct Answer-To prevent the insured from
profiting from a
loss
-
To reduce moral hazard
There are three main methods to determine
actual cash value: Correct Answer-Replacement cost less depreciation
-
Fair market value
-
Broad evidence rule
Fair market value Correct Answer-is the price a willing buyer
would pay a willing seller in a free market
Broad evidence rule Correct Answer-means that the
determination of ACV should include all relevant
factors an expert would use to determine the
value of the propert
,valued policy Correct Answer-pays the face amount of insurance
if a total loss occurs
Replacement cost insurance Correct Answer-there is no
deduction for depreciation in determining the
amount paid for a loss
why The insured must be in a position to lose
financially if a covered loss occurs Correct Answer-Purposes:
-
To prevent gambling
-
To reduce moral hazard
-
To measure the amount of the insured's loss
•
An insurable interest can be supported by:
-
Ownership of property
-
Potential legal liability
-
,Serving as a secured creditor
-
Contractual rights
When must insurable interest exist for Property and Life? Correct
Answer-Property insurance: at the time of the loss
-
Life insurance: only at inception of the policy
Subrogation Correct 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.
purpose of subrogation Correct Answer-To prevent the insured from
collecting twice for
the same loss
-
To hold the negligent person responsible for the
loss
-
To hold down insurance rates
, Principle of Utmost Good Faith Correct Answer-A higher degree of
honesty is imposed on
both parties to an insurance contract than
is imposed on parties to other contracts
Representations Correct Answer-statements made by
the applicant for insurance
Material Correct Answer-if the insurer knew the true
facts, the policy would not have been issued, or
would have been issued on different terms
Reliance Correct Answer-the insurer relies on the
misrepresentation in issuing the policy at a
specified premium
innocent misrepresentation Correct Answer-a material
fact, if relied on by the insurer, makes the
contract voidable
concealment Correct Answer-intentional failure of the
applicant for insurance to reveal a material
fact to the insurer
