RMI 2101 Exam 2|Questions with 100% Correct
Answers Rated A+
what constitutes insurable interest? - ✔property - liability
insurance Life insurance
liability insurance - ✔ownership, leases, bailee/bailor, related parties
life insurance - ✔must be a financial interest in continuance of a life
S= subject or insured life
O= owner of policy
B= beneficiary
when must insurable interest exist? - ✔in property - liability insurance must exist @ time
of loss
in life insurance - at the inception of the contract only
principle of subrogation - ✔think of substitution: legal substitution of the insurer for
the insured.
purpose of subrogation - ✔hold negligent 3rd parties at
fault control moral hazard
keeps insurance premiums low
, subrogation issues - ✔insured can not impair insurers right to subrogate, insurer CANT
subrogate against their own insured, insurer can keep subrogation proceeds only after their
insured has been fully indemnified
methods to control adverse selection - ✔pooling needs large amount of
homogenous exposure units
if not, group becomes unstable.
Products where pooling becomes an issue? - ✔health insurance, flood insurance,
terrorism insurance
what can we do to prevent unstable groups in homogenous pools? - ✔try to break people
into groups (more risk vs less risk)
control through the contract (deductible, good faith)
principle of utmost good faith - ✔parties of an insurance contract are held to a high
standard of honesty. if violated, insurer can deny the claim.
Representations - ✔statement made by the applicant, if false, it is a MISrepresentation
Can an insurer deny a claim due to misrepresentation? - ✔must be material to the insurer.
if not, can't deny claim.
innocent misrepresentation of material fact? - ✔lack of knowledge is not a defense.
applicant speaks at their own risk.
concealments - ✔failure to provide important or relevant info to the insurer. failure to
reveal a material fact to the risk. must volunteer material risk
Answers Rated A+
what constitutes insurable interest? - ✔property - liability
insurance Life insurance
liability insurance - ✔ownership, leases, bailee/bailor, related parties
life insurance - ✔must be a financial interest in continuance of a life
S= subject or insured life
O= owner of policy
B= beneficiary
when must insurable interest exist? - ✔in property - liability insurance must exist @ time
of loss
in life insurance - at the inception of the contract only
principle of subrogation - ✔think of substitution: legal substitution of the insurer for
the insured.
purpose of subrogation - ✔hold negligent 3rd parties at
fault control moral hazard
keeps insurance premiums low
, subrogation issues - ✔insured can not impair insurers right to subrogate, insurer CANT
subrogate against their own insured, insurer can keep subrogation proceeds only after their
insured has been fully indemnified
methods to control adverse selection - ✔pooling needs large amount of
homogenous exposure units
if not, group becomes unstable.
Products where pooling becomes an issue? - ✔health insurance, flood insurance,
terrorism insurance
what can we do to prevent unstable groups in homogenous pools? - ✔try to break people
into groups (more risk vs less risk)
control through the contract (deductible, good faith)
principle of utmost good faith - ✔parties of an insurance contract are held to a high
standard of honesty. if violated, insurer can deny the claim.
Representations - ✔statement made by the applicant, if false, it is a MISrepresentation
Can an insurer deny a claim due to misrepresentation? - ✔must be material to the insurer.
if not, can't deny claim.
innocent misrepresentation of material fact? - ✔lack of knowledge is not a defense.
applicant speaks at their own risk.
concealments - ✔failure to provide important or relevant info to the insurer. failure to
reveal a material fact to the risk. must volunteer material risk
