RMIN 4000 Test 2, UGA Questions and Answers 100% Verified!

Principle of Indemnity - ANSWER-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 - ANSWER-based on the actual cash value (ACV) of the property at the time of loss 3 main methods to determine actual cash value: - ANSWER--Replacement cost less depreciation -Fair market value -Broad evidence rule There are some exceptions to the principle of indemnity: - ANSWER--valued policy -Some states have a valued policy law -Replacement cost insurance Replacement cost insurance - ANSWER-means there is no deduction for depreciation in determining the amount paid for a loss valued policy law - ANSWER-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 - ANSWER-pays the face amount of insurance if a total loss occurs Principle of Insurable Interest - ANSWER-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 - ANSWER--To prevent gambling -To reduce moral hazard -To measure the amount of the insured's loss An insurable interest can be supported by: - ANSWER--Ownership of property -Potential legal liability -Serving as a secured creditor -Contractual rights When must insurable interest exist? Property insurance: - ANSWER-at the time of the