RMI 3011 Exam 2 Keith Jones Question
and answers already passed
What is the Principle of Indemnity? - correct answer ✔- States that the
insurer agrees to pay no more than the actual amount of the loss; stated
differently, the insured should not profit from a loss.
- Insurance is a contract of indemnity.
What are the methods used by courts to determine actual cash value? -
correct answer ✔- Replacement Cost Less Depreciation
- Fair Market Value
- Broad Evidence Rule
What are the exceptions to Actual Cash Value? - correct answer
✔Replacement cost insurance, life insurance, value policy laws, and valued
policy.
What is the Replace Cost Less Depreciation method? - correct answer
✔This rule has been used traditionally to determine the actual cash value of
property in property insurance.
What is the Free Market Value method? - correct answer ✔The price a
willing buyer would pay a willing seller in a free market.
,What is the Broad Evidence Rule method? - correct answer ✔Means that the
determination of actual cash value should include all relevant factors an
expert would use to determine the value of the property.
What are the exceptions to the Principle of Indemnity? - correct answer ✔-
Valued Policy - Policy that pays the face amount of insurance if a total loss
occurs.
- Valued Policy Laws - Policy that pays the face amount of insurance,
regardless of actual cash value, if total loss occurs.
- Replacement Cost Insurance - Property insurance by which the insured is
indemnified based on replacement cost with no deduction for depreciation.
- Life Insurance - Not a contract of indemnity but is a valued policy that pays a
stated amount to the beneficiary at the time of the insured's death.
What is the Principle of Insurable Interest? - correct answer ✔- States that
the insured must be in a position to lose financially if a covered loss occurs.
- Ex. You have an insurable interest in your car because you may lose
financially if the car is damaged or stolen.
What are the reasons why an insurance contract must be supported by an
insurable interest? - correct answer ✔- Prevent gambling.
- Reduce moral hazard.
- Measure the amount of the insured's loss in property insurance.
,What is the 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.
What are the three basic purposes of Subrogation? - correct answer ✔-
Prevents the insured from collecting twice for the same loss.
- Used to hold the negligent person responsible for the loss.
- Helps to hold down insurance rates.
What are the exceptions to Subrogation? - correct answer ✔- Subrogation
does not apply to life insurance contracts.
- The insurer cannot subrogate against its own insureds.
What is the Principle of Utmost Good Faith? - correct answer ✔Higher
degree of honesty is imposed on both parties to an insurance contract than is
imposed on parties to other contracts.
What is Representation? - correct answer ✔Statements made by the
applicant for insurance to induce the insurer to enter an insurance contract.
What is Material Misrepresentation? - correct answer ✔If the insurer knew
the true facts, the policy would not be issued, or it would be issued on different
terms.
, What is Innocent Misrepresentation? - correct answer ✔An unintentional
misrepresentation. Also makes the contract voidable.
What is Fraud? - correct answer ✔Wrongful or criminal deception intended to
result in financial or personal gain.
What is Concealment? - correct answer ✔Intentional failure of the applicant
for insurance to reveal a material fact to the insurer.
What are Warranties? - correct answer ✔- Statement that becomes part of
the insurance contract and is guaranteed by the maker to be true in all
respects.
- Any breach of the warranty, even if minor or not material, allowed the insurer
to deny payment of a claim.
What are the requirements of an Enforceable Contract? - correct answer ✔-
Offer and Acceptance - Applicant for insurance makes the offer.
- Exchange of Consideration - The value that each party in a contract gives to
the other.
- Competent Parties - The parties must have legal capacity to enter into a
binding contract.
- Legal Purpose - Contract that is legal and enforceable only if it complies with
the law and public policy. A contract entered for an illegal purpose is not
binding.
- Legal Form - Written document is not always required.
and answers already passed
What is the Principle of Indemnity? - correct answer ✔- States that the
insurer agrees to pay no more than the actual amount of the loss; stated
differently, the insured should not profit from a loss.
- Insurance is a contract of indemnity.
What are the methods used by courts to determine actual cash value? -
correct answer ✔- Replacement Cost Less Depreciation
- Fair Market Value
- Broad Evidence Rule
What are the exceptions to Actual Cash Value? - correct answer
✔Replacement cost insurance, life insurance, value policy laws, and valued
policy.
What is the Replace Cost Less Depreciation method? - correct answer
✔This rule has been used traditionally to determine the actual cash value of
property in property insurance.
What is the Free Market Value method? - correct answer ✔The price a
willing buyer would pay a willing seller in a free market.
,What is the Broad Evidence Rule method? - correct answer ✔Means that the
determination of actual cash value should include all relevant factors an
expert would use to determine the value of the property.
What are the exceptions to the Principle of Indemnity? - correct answer ✔-
Valued Policy - Policy that pays the face amount of insurance if a total loss
occurs.
- Valued Policy Laws - Policy that pays the face amount of insurance,
regardless of actual cash value, if total loss occurs.
- Replacement Cost Insurance - Property insurance by which the insured is
indemnified based on replacement cost with no deduction for depreciation.
- Life Insurance - Not a contract of indemnity but is a valued policy that pays a
stated amount to the beneficiary at the time of the insured's death.
What is the Principle of Insurable Interest? - correct answer ✔- States that
the insured must be in a position to lose financially if a covered loss occurs.
- Ex. You have an insurable interest in your car because you may lose
financially if the car is damaged or stolen.
What are the reasons why an insurance contract must be supported by an
insurable interest? - correct answer ✔- Prevent gambling.
- Reduce moral hazard.
- Measure the amount of the insured's loss in property insurance.
,What is the 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.
What are the three basic purposes of Subrogation? - correct answer ✔-
Prevents the insured from collecting twice for the same loss.
- Used to hold the negligent person responsible for the loss.
- Helps to hold down insurance rates.
What are the exceptions to Subrogation? - correct answer ✔- Subrogation
does not apply to life insurance contracts.
- The insurer cannot subrogate against its own insureds.
What is the Principle of Utmost Good Faith? - correct answer ✔Higher
degree of honesty is imposed on both parties to an insurance contract than is
imposed on parties to other contracts.
What is Representation? - correct answer ✔Statements made by the
applicant for insurance to induce the insurer to enter an insurance contract.
What is Material Misrepresentation? - correct answer ✔If the insurer knew
the true facts, the policy would not be issued, or it would be issued on different
terms.
, What is Innocent Misrepresentation? - correct answer ✔An unintentional
misrepresentation. Also makes the contract voidable.
What is Fraud? - correct answer ✔Wrongful or criminal deception intended to
result in financial or personal gain.
What is Concealment? - correct answer ✔Intentional failure of the applicant
for insurance to reveal a material fact to the insurer.
What are Warranties? - correct answer ✔- Statement that becomes part of
the insurance contract and is guaranteed by the maker to be true in all
respects.
- Any breach of the warranty, even if minor or not material, allowed the insurer
to deny payment of a claim.
What are the requirements of an Enforceable Contract? - correct answer ✔-
Offer and Acceptance - Applicant for insurance makes the offer.
- Exchange of Consideration - The value that each party in a contract gives to
the other.
- Competent Parties - The parties must have legal capacity to enter into a
binding contract.
- Legal Purpose - Contract that is legal and enforceable only if it complies with
the law and public policy. A contract entered for an illegal purpose is not
binding.
- Legal Form - Written document is not always required.
