BUSFIN 3300: Insurance Midterm 2 Questions with Correct Answers
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Course
BUSFIN 3300
Institution
BUSFIN 3300
Principle of Indemnity Correct Answer-the insurer agrees to pay no more than the amount of the loss; the insured should not profit from the loss
Actual Cash Value Correct Answer-replacement cost less depreciation
Fair Market Value Correct Answer-the price a willing buyer would pay a willing s...
BUSFIN 3300: Insurance Midterm 2 Questions with
Correct Answers
Principle of Indemnity Correct Answer-the insurer agrees to pay no
more than the amount of the loss; the insured should not profit from the
loss
Actual Cash Value Correct Answer-replacement cost less depreciation
Fair Market Value Correct Answer-the price a willing buyer would pay a
willing seller in a free market
Broad Evidence Rule Correct Answer-the determination of actual cash
value should include all relevant factors an expert would use to
determine the value of the property
Valued Policy Correct Answer-a policy that pays the face amount of
insurance if a total loss occurs
Valued Policy Law Correct Answer-A law that exists in some states that
requires payment of the face amount of insurance to the insured if a total
loss to real property occurs from a peril specified in the law
Replacement Cost Insurance Correct Answer-there is no deduction for
physical depreciation in determining the amount paid for a loss
, Principle of Insurable Interest Correct Answer-the insured must be in a
position to lose financially if a covered loss occurs
pecuniary interest Correct Answer-insurable interest requirement is met
by this when there is no relationship with the person but the person may
be financially harmed by the death of another. Example.) business
partner insuring life of other business partner
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; the insurer is entitled to recover from a
negligent third party any loss payments made to the insured
Principle of Utmost Good Faith Correct Answer-a higher degree of
honesty is imposed on both parties to an insurance contract than is
imposed on parties to other contracts
Representations Correct Answer-statements made by the applicants for
insurance
Material Correct Answer-if the insurer knew the true facts, the policy
would not have been issued, or it would have been issued on different
terms
Innocent Misrepresentation Correct Answer-makes the contract voidable
even though it is unintentional
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