RMIN 4000 UGA Brown Exam 3 2026
Questions and Answers
principle of indemnity - Correct 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) - Correct 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) - Correct 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 - Correct answer-price buyer would be willing to pay in a free market
valued policy - Correct answer-a policy that pays the face amount of insurance if a
total loss occurs (life insurance)
valued policy law (in some states) - Correct answer-requires payment of the face
amount of insurance if a total loss to real property occurs from a peril specified in
law
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,principle of insurable interest - Correct 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 - Correct answer-- ownership of property (house,
car)
- potential legal liability (business owner)
- secured creditors ( mtg co, auto lender)
- contractual right (goods in transit
property insurance - Correct answer-- must exist at time of loss
- can't collect on an insurance policy after you sell your home
life insurance - Correct answer-- exists at inception of policy
- ex-spouse can still collect on life insurance if listed as policy beneficiary
principle of 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
reasons for subrogation - Correct answer-- prevents insured from collecting twice
©COPYRIGHT 2025, ALL RIGHTS RESERVED 2
, - holds negligent party responsible for the loss
- reduces insurance claims costs (and therefore, 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
- concealment
- warranty
representations - Correct answer-statements made by the applicant for insurance
- contract is voidable if the misrepresentation is: material, false, and relied on by
the insurer
concealment - Correct answer-intentional failure of the applicant for insurance to
reveal a material fact to the insurer
- contract can be voidable if: concealed fact was known by the insured to be
material and insured intended to defraud the insurer
warranty - Correct answer-- a statement that becomes part of the insurance contract
and is guaranteed by the maker to be true in all respects
©COPYRIGHT 2025, ALL RIGHTS RESERVED 3
Questions and Answers
principle of indemnity - Correct 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) - Correct 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) - Correct 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 - Correct answer-price buyer would be willing to pay in a free market
valued policy - Correct answer-a policy that pays the face amount of insurance if a
total loss occurs (life insurance)
valued policy law (in some states) - Correct answer-requires payment of the face
amount of insurance if a total loss to real property occurs from a peril specified in
law
©COPYRIGHT 2025, ALL RIGHTS RESERVED 1
,principle of insurable interest - Correct 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 - Correct answer-- ownership of property (house,
car)
- potential legal liability (business owner)
- secured creditors ( mtg co, auto lender)
- contractual right (goods in transit
property insurance - Correct answer-- must exist at time of loss
- can't collect on an insurance policy after you sell your home
life insurance - Correct answer-- exists at inception of policy
- ex-spouse can still collect on life insurance if listed as policy beneficiary
principle of 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
reasons for subrogation - Correct answer-- prevents insured from collecting twice
©COPYRIGHT 2025, ALL RIGHTS RESERVED 2
, - holds negligent party responsible for the loss
- reduces insurance claims costs (and therefore, 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
- concealment
- warranty
representations - Correct answer-statements made by the applicant for insurance
- contract is voidable if the misrepresentation is: material, false, and relied on by
the insurer
concealment - Correct answer-intentional failure of the applicant for insurance to
reveal a material fact to the insurer
- contract can be voidable if: concealed fact was known by the insured to be
material and insured intended to defraud the insurer
warranty - Correct answer-- a statement that becomes part of the insurance contract
and is guaranteed by the maker to be true in all respects
©COPYRIGHT 2025, ALL RIGHTS RESERVED 3
