RMIN4000 Brown Test 3 Exam Questions
and Answers Graded A+
What are the 4 legal principles of insurance? - Correct answer--Principle of
indemnity
-Principle of Insurable Interest
-Principle of Subrogation
-Principle of Utmost Good Faith
Principle of indemnity - Correct answer-The insurer agrees to pay no more than the
actual amount of the loss
- Purpose is to prevent the insured from profiting from the loss
Principle of indemnity : Replacement Cost - Correct answer-The cost to replace
property with an item of like kind and quality
Principle of indemnity: Actual Cash Value - Correct answer-Replacement Cost less
Depreciation
Property Insurance is typically based on this
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,Principle of Insurable Interest - Correct answer-The insured must be in a position
to lose financially if a covered loss occurs
-Prevents gambling on losses, Reduces moral hazard
Principle of Subrogation - Correct answer-Substitution of the insurer in place of the
insured for the purpose of claiming indemnity from a third party loss covered by
the insurance
- AKA Insurance company pays the insured for damages, then seeks
reimbursement from guilty party in court
Principle of Utmost Good Faith - Correct answer-A higher degree of honesty is
imposed on both parties to insurance contracts than is imposed on parties in other
contracts
Principle of Utmost good faith is supported by what 3 legal doctrines - Correct
answer-Representations
Concealment
Warrant
Representations - Correct answer-Statements made by the applicant for insurance
Contract is voidable IF misrepresentation is Material, False, AND relied on by the
insurer
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, Concealment - Correct answer-Intentional failure of the applicant for insurance to
reveal material fact to the insurer
-Contract can be voidable if concealed fact was known by the insured to be
material, or if concealed fact 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. Something that is agreed
upon by the insured in order to receive coverage
What is Bad faith? - Correct answer-law that allows lawsuits against insurance
companies for: improper denial of claims and improper delay of claims
Requirements of an insurance contract - Correct answer-1) Offer and acceptance
2) Exchange and Consideration
3) Competent Parties
4) Legal Purpose
Offer and Acceptance - Correct answer-Insured completes application
Insurance company issues policy/binder
Insurance can reject
©COPYRIGHT 2025, ALL RIGHTS RESERVED 3
and Answers Graded A+
What are the 4 legal principles of insurance? - Correct answer--Principle of
indemnity
-Principle of Insurable Interest
-Principle of Subrogation
-Principle of Utmost Good Faith
Principle of indemnity - Correct answer-The insurer agrees to pay no more than the
actual amount of the loss
- Purpose is to prevent the insured from profiting from the loss
Principle of indemnity : Replacement Cost - Correct answer-The cost to replace
property with an item of like kind and quality
Principle of indemnity: Actual Cash Value - Correct answer-Replacement Cost less
Depreciation
Property Insurance is typically based on this
©COPYRIGHT 2025, ALL RIGHTS RESERVED 1
,Principle of Insurable Interest - Correct answer-The insured must be in a position
to lose financially if a covered loss occurs
-Prevents gambling on losses, Reduces moral hazard
Principle of Subrogation - Correct answer-Substitution of the insurer in place of the
insured for the purpose of claiming indemnity from a third party loss covered by
the insurance
- AKA Insurance company pays the insured for damages, then seeks
reimbursement from guilty party in court
Principle of Utmost Good Faith - Correct answer-A higher degree of honesty is
imposed on both parties to insurance contracts than is imposed on parties in other
contracts
Principle of Utmost good faith is supported by what 3 legal doctrines - Correct
answer-Representations
Concealment
Warrant
Representations - Correct answer-Statements made by the applicant for insurance
Contract is voidable IF misrepresentation is Material, False, AND relied on by the
insurer
©COPYRIGHT 2025, ALL RIGHTS RESERVED 2
, Concealment - Correct answer-Intentional failure of the applicant for insurance to
reveal material fact to the insurer
-Contract can be voidable if concealed fact was known by the insured to be
material, or if concealed fact 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. Something that is agreed
upon by the insured in order to receive coverage
What is Bad faith? - Correct answer-law that allows lawsuits against insurance
companies for: improper denial of claims and improper delay of claims
Requirements of an insurance contract - Correct answer-1) Offer and acceptance
2) Exchange and Consideration
3) Competent Parties
4) Legal Purpose
Offer and Acceptance - Correct answer-Insured completes application
Insurance company issues policy/binder
Insurance can reject
©COPYRIGHT 2025, ALL RIGHTS RESERVED 3
