RMIN 4000 Test 3 Brown Exam with Guaranteed Accurate Answers

Principal of Indemnity - correct answer insurer pays no more than actual amount of the loss; insurer should not profit from the loss Replacement cost - correct answer the cost to replace an inventory item in its identical form (similar workmanship and quality) Actual Cash Value - correct answer replacement cost - depreciation in property ins, usually based on the actual cash value of the property at the time of loss Market Value - correct answer the price at which property would sell Valued Policy - correct answer a policy that pays the face amount of insurance if a total loss occurs (life insurance) Value Policy Law - correct 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 - correct answer The insured must be in a position to lose financially if a covered loss occurs Examples of Insurable Interest - correct 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? - correct answer at inception of the 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 (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 - correct 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? - correct answer -representations -concealment -warranty Representations - correct answer statements made by the applicant for insurance What makes a contract voidable on the premise of misrepresentation? - correct answer 1. material 2. false, and 3. relied on by the insurance company concealment - correct answer intentional failure of the applicant for insurance to reveal a material fact to the insurer What makes a contract voidable on the premise of concealment? - correct answer - concealed fact was known by the insured to be material -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 a condition agreed to by an insured in order to receive coverage What