RMIN 4000 Test 3 Brown| Questions and Answers 100% Correct!

Principal of Indemnity - ANSWER-insurer pays no more than actual amount of the loss; insurer should not profit from the loss Replacement cost - ANSWER-the cost to replace an inventory item in its identical form (similar workmanship and quality) Actual Cash Value - ANSWER-replacement cost - depreciation in property ins, usually based on the actual cash value of the property at the time of loss Market Value - ANSWER-the price at which property would sell Valued Policy - ANSWER-a policy that pays the face amount of insurance if a total loss occurs (life insurance) Value Policy Law - ANSWER-requires payment of the face amount of insurance if a total loss to real property occurs from a peril specified in law Principle of Insurable Interest - ANSWER-The insured must be in a position to lose financially if a covered loss occurs Examples of Insurable Interest - ANSWER--ownership of property (house, car) -potential legal liability (business owners) -secured creditors -contractual rights (goods in transit) When must an insurable interest legally exist in life insurance? - ANSWER-at inception of the policy; ex-spouse can still collect on life insurance if listed as policy beneficiary Principle of Subrogation - 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 - ANSWER--prevents insured from collecting twice (once from insurer, once from responsible party) - holds the negligent party responsible for the loss - reduces insurance claims costs and therefore rates principle of upmost good faith - ANSWER-a higher degree of honesty is imposed on both parties to insurance contracts than is imposed on parties to other contracts What three legal doctrines support the principle of upmost good faith? - ANSWER--repre