CPCU 500 Chapter 7 and 8 Exam Questions
and Answers with Verified Solutions | Latest
Updated 2026
CHAPTER 7 CHAPTER 7
List the distinguishing -indemnity
characteristics -utmost good faith
of an insurance policy -fortuitous losses
-contract of adhesion
-exchange of unequal amounts
-conditional
-nontransferable
identify reasons that an insurance -because most insurance policies contain
policy might not fully indemnify an a dollar
insured after a covered loss amount, deduct, or other provisions or
limitation on
the amount to be paid
explain the distinction between a contract of indemnity - compensates the
contract of indemnity and a valued insured
policy for the value of the loss
valued policy - insurer agrees to pay a
preestablished dollar amount in the event
of an
insured total loss, which may
overindemnify or
underind an insured
, Identify 2 policy characteristics -overindemnify the insured
that -indemnify insured more than once per
help an insurer reduce or avoid loss
moral hazards associated with
indemnification
What are 2 reasons an insurance 1. one party to a contract has information
policy might be vulnerable to the other
misrepresentation or opportunism party does not (info asymmetry)
and how the concept of utmost 2. costly verification of info may lead an
good faith helps prevent insurer to
occurrences of such abuses fail to verify info provided by insured
-helps prevent because the concept
obligates
parties to act with complete honesty and to
disclose all relevant facts
identify factors courts consider -size of the insured org
when -size of the org's RM department
determining whether to classify an -use of an insurance broker or legal
insured as a sophisticated insured counsel with
expertise in insurance policies
-relative bargaining power of the insured in
relation
to the insurer
Explain how an insurer makes - by charing a premium that is directly
certain proportional
that the tangible consideration to the insured expected losses on an
offered by the insured in an actuarially
insurance contract is quitable sound basis
and Answers with Verified Solutions | Latest
Updated 2026
CHAPTER 7 CHAPTER 7
List the distinguishing -indemnity
characteristics -utmost good faith
of an insurance policy -fortuitous losses
-contract of adhesion
-exchange of unequal amounts
-conditional
-nontransferable
identify reasons that an insurance -because most insurance policies contain
policy might not fully indemnify an a dollar
insured after a covered loss amount, deduct, or other provisions or
limitation on
the amount to be paid
explain the distinction between a contract of indemnity - compensates the
contract of indemnity and a valued insured
policy for the value of the loss
valued policy - insurer agrees to pay a
preestablished dollar amount in the event
of an
insured total loss, which may
overindemnify or
underind an insured
, Identify 2 policy characteristics -overindemnify the insured
that -indemnify insured more than once per
help an insurer reduce or avoid loss
moral hazards associated with
indemnification
What are 2 reasons an insurance 1. one party to a contract has information
policy might be vulnerable to the other
misrepresentation or opportunism party does not (info asymmetry)
and how the concept of utmost 2. costly verification of info may lead an
good faith helps prevent insurer to
occurrences of such abuses fail to verify info provided by insured
-helps prevent because the concept
obligates
parties to act with complete honesty and to
disclose all relevant facts
identify factors courts consider -size of the insured org
when -size of the org's RM department
determining whether to classify an -use of an insurance broker or legal
insured as a sophisticated insured counsel with
expertise in insurance policies
-relative bargaining power of the insured in
relation
to the insurer
Explain how an insurer makes - by charing a premium that is directly
certain proportional
that the tangible consideration to the insured expected losses on an
offered by the insured in an actuarially
insurance contract is quitable sound basis
