RMIN 4000 test 2, UGA|3 Questions
and Answers 2024/2025
Principle of Indemnity - -The insurer agrees to pay no more than the actual
amount of the loss (make you whole again, no gain).
Purpose:
-To prevent the insured from profiting from a loss
-To reduce moral hazard
- Indemnification in property insurance is - -based on the actual cash value
(ACV) of the property at the time of loss
- 3 main methods to determine actual cash value: - --Replacement cost less
depreciation
-Fair market value
-Broad evidence rule
- There are some exceptions to the principle of indemnity: - --valued policy
-Some states have a valued policy law
-Replacement cost insurance
- Replacement cost insurance - -means there is no deduction for
depreciation in determining the amount paid for a loss
- valued policy law - -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
- valued policy - -pays the face amount of insurance if a total loss occurs
- Principle of Insurable Interest - -The insured must be in a position to lose
financially if a covered loss occurs (ex: can't buy life insurance policy on a
random person, but if that person owes you $100,000 you can buy one for
that amount).
- Purposes of the principle of insurable interest - --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
and Answers 2024/2025
Principle of Indemnity - -The insurer agrees to pay no more than the actual
amount of the loss (make you whole again, no gain).
Purpose:
-To prevent the insured from profiting from a loss
-To reduce moral hazard
- Indemnification in property insurance is - -based on the actual cash value
(ACV) of the property at the time of loss
- 3 main methods to determine actual cash value: - --Replacement cost less
depreciation
-Fair market value
-Broad evidence rule
- There are some exceptions to the principle of indemnity: - --valued policy
-Some states have a valued policy law
-Replacement cost insurance
- Replacement cost insurance - -means there is no deduction for
depreciation in determining the amount paid for a loss
- valued policy law - -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
- valued policy - -pays the face amount of insurance if a total loss occurs
- Principle of Insurable Interest - -The insured must be in a position to lose
financially if a covered loss occurs (ex: can't buy life insurance policy on a
random person, but if that person owes you $100,000 you can buy one for
that amount).
- Purposes of the principle of insurable interest - --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
