Tutorial 4

1.

1 point

What is the practical effect of an insurance policy being a conditional contract?

The insured can assign the policy only with the insurer's consent.

The insured gets the benefit of the doubt if a policy contains any ambiguities or uncertainties.

The insurer can refuse to a pay claim unless the insured has complied with all policy provisions.

The insurer can sue the insured for failure to pay any premiums

2.

1 point

Sue's office building was damaged by a fire caused by a careless tenant. After paying Sue for her loss, the insurance company sued the tenant to recover its loss. This suit is based on the principle of

warranty.

utmost good faith.

insurable interest.

subrogation.

3.

1 point

Chris applied for life insurance and paid the first premium on Monday. She was given an insurability premium receipt which specified that coverage was effective on the date of the application or the date of the medical exam, whichever is later. She took the medical exam the following Thursday. She was found to be in perfect health. On which day was her coverage effective?

on Wednesday, two days after completing the application and paying the first premium

on Saturday, two days after passing the medical exam

on Monday, when she completed the application and paid the first premium

on Thursday when she passed the medical exam

4.

1 point

All of the following statements about the rules governing agency relationships are true EXCEPT

An agent must be authorized to act on behalf of a principal.

The principal is responsible for the acts of agents only if the acts are criminal.

An agency agreement may grant certain powers to the agent as well as denying the agent other powers

Knowledge of the agent is presumed to be knowledge of the principal with respect to matters within the scope of the agency relationship

5.

1 point

Fundamental purposes of the principle of indemnity include which of the following?
I. To reduce physical hazards.
II. To prevent the insured from profiting from insurance.

I only

II only

both I and II

neither I nor II

6.

1 point

Which of the following statements describes how losses will be settled if a property insurance policy is written on a replacement cost basis?

The policy is converted to a valued policy.

The insurer must replace the damaged or destroyed property in lieu of a cash settlement.

Losses are settled without the applicable deductible.

Losses are settled without a deduction for depreciation

7.

1 point

The principle of utmost good faith is supported by all of the following legal doctrines EXCEPT

subrogation.

warranty.

concealment.

representations.

8.

1 point

Which of the following statements about subrogation is true?

It allows the insurer to sue its own insured who is negligent

The insured's right to collect benefits may be forfeited if the insured interferes with the insurer's rights after a loss occurs

The insurer is required to exercise its subrogation rights

It is used primarily for losses paid under life insurance policies

9.

1 point

Under which of the following rules is actual cash value determined by taking into consideration all relevant factors an expert would use to determine the value of the property?

the objective value rule

the property indemnity rule

the broad evidence rule

the circumstantial evidence rule

10.

1 point

Sam's furniture was destroyed by a fire. The furniture cost $1200 when it was purchased, but similar new furniture now costs $1800. Assuming the furniture was 50 percent depreciated, what is the actual cash value of Sam's loss?

$600

$1200

$1800

$900

11.

1 point

David owns a liquor store in a high-crime area. In order to obtain a reduced insurance premium, David promised to have a burglar alarm operating at the store when the store was closed. This agreement, which was incorporated into the insurance contract, is an example of a

representation.

contract of adhesion

unilateral contract

warranty.

12.

1 point

When must an insurable interest legally exist in life insurance?

only at the time of the insured's death

only at the time the beneficiary is paid

only at the inception of the policy

both at the time of the insured's death and at the inception of the policy

13.

1 point

What is the legal significance of a material concealment by an insurance applicant?

Loss payments are reduced by the degree of the concealment.

The contract is automatically voided from its inception.

The contract is voidable at the insurer's option.

The insurer is immediately entitled to a higher premium.

14.

1 point

A false statement made by an applicant for insurance is an example of a

concealment.

misrepresentation.

lack of offer and acceptance

breach of warranty.

15.

1 point

Which of the following is a fundamental purpose of the principle of indemnity?

to minimize physical hazards

to reduce moral hazard

to require deductibles in all property insurance policies

to settle property insurance losses on a replacement cost basis