RMIN 2005 Test 2 Questions and Answers
Graded A+
Indemnity - Correct answer-financial restoration or making whole again without
profiting, restore someone financially as they were before the loss; whole not better
Indemnity - Correct answer-reduce moral and morale hazard; indemnity is violated
when the value of the loss cannot be clearly known
Moral hazard - Correct answer-insurance fraud
Morale hazard - Correct answer-indifference to loss or carelessness
Exceptions to Principle of Indemnity - Correct answer-1) Valued Policies-
over/under value such as life insurance, works of art, jewelry, antiques; value is
determined before loss
2) Replacement Costs
3) Cost Sharing
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, Valued Policy Laws - Correct answer-requires insurer to pay policy limits for a
total loss which prevents insurer/agent from encouraging insured to over insure
(includes moral and morale hazard)
Replacement Cost - Correct answer-allows insured to obtain new property or
replace old property at the new cost (best) with no depreciation
Cost Sharing - Correct answer-helps to reduce moral and morale hazard; Ex. pay
$500 out of pocket before insurance helps
Includes deductibles, co-payments, co-insurance
Common in property and health insurance
Insured will be under paid because you only get your deductable
3 Ways Companies Force Indemnification - Correct answer-1) Insurance Interest
2) Subrogation
3) Actual Cash Value
Insurable Interest - Correct answer-insurance must be in a financial chance to lose
(skin in the game)
Insurable Interest in Property and Casualty - Correct answer-Ownership, Bailee
(care, custody, control), Secured Creditor, Customer/Buyer/Supplier, Leader
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Graded A+
Indemnity - Correct answer-financial restoration or making whole again without
profiting, restore someone financially as they were before the loss; whole not better
Indemnity - Correct answer-reduce moral and morale hazard; indemnity is violated
when the value of the loss cannot be clearly known
Moral hazard - Correct answer-insurance fraud
Morale hazard - Correct answer-indifference to loss or carelessness
Exceptions to Principle of Indemnity - Correct answer-1) Valued Policies-
over/under value such as life insurance, works of art, jewelry, antiques; value is
determined before loss
2) Replacement Costs
3) Cost Sharing
©COPYRIGHT 2025, ALL RIGHTS RESERVED 1
, Valued Policy Laws - Correct answer-requires insurer to pay policy limits for a
total loss which prevents insurer/agent from encouraging insured to over insure
(includes moral and morale hazard)
Replacement Cost - Correct answer-allows insured to obtain new property or
replace old property at the new cost (best) with no depreciation
Cost Sharing - Correct answer-helps to reduce moral and morale hazard; Ex. pay
$500 out of pocket before insurance helps
Includes deductibles, co-payments, co-insurance
Common in property and health insurance
Insured will be under paid because you only get your deductable
3 Ways Companies Force Indemnification - Correct answer-1) Insurance Interest
2) Subrogation
3) Actual Cash Value
Insurable Interest - Correct answer-insurance must be in a financial chance to lose
(skin in the game)
Insurable Interest in Property and Casualty - Correct answer-Ownership, Bailee
(care, custody, control), Secured Creditor, Customer/Buyer/Supplier, Leader
©COPYRIGHT 2025, ALL RIGHTS RESERVED 2
