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NEW STATE FARM EXAM /291/ QUESTIONS WITH VERIFIED ANSWERS
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NEW STATE FARM EXAM /291/ QUESTIONS WITHVERIFIED ANSWERS
Which of the following refers to returning to your previous financial situation after
a loss? - ANSWER indemnification.
In an accident, Mark's car was damaged for 8,000 dollars. He collected $8,000 from
his insurance company and $4000 from the other driver. Mark is breaking the law
by profiting from his losses. - ANSWER Principle of Indemnity
The transfer of risk from one party to another is known as ANSWER insurance.
The indemnification principle is intended to prevent the insured from profiting
from an insured loss.
The fee paid by the insured in exchange for an insurance policy is known as the
ANSWER premium.
Insurance transfers the risk of financial loss from one party to another.
insured - ANSWER an individual or organization that pays premiums for
protection.
insurer - ANSWER corporation group or government body that provides financial
protection.
An insurance policy is a legally binding contract in which the insurer promises to
take on specific risks in exchange for the insured's payments.
Indemnity principle: ANSWER restoration to prior financial state; no more, no less.
,What are the four contract qualifications? Answer: agreement, consideration,
competent parties, and legal purpose. Must be 18 years of age.
What is not required for a legally binding contract? ANSWER: notarization.
When an insurer offers an insurance policy, the actual item, person, or organization
that is being covered is referred to as the risk.
In insurance, a reserve is a pool of collected premiums set aside by the insurer to
satisfy claims.
aleatory - ANSWER of or about accidental causes; luck or chance; unpredictable.
unilateral - A one-sided ANSWER
greatest good faith - ANSWER To make the contract legal, both parties must act
honestly and openly.
adhesion - ANSWER one side defines the terms of the contract; the other can
simply agree or disagree.
unilateral - ANSWER only the insurer promises to act; the insured can void the
contract at any time.
personal - ANSWER The insured person is protected against losses, not the
covered goods.
Conditional - ANSWER: The insurer must only honour the contract if the insured
meets specified requirements.
,aleatory - ANSWER The execution of the contract is contingent on an unknown
future event.
An insurance applicant admitting his intoxicated driving convictions to an insurer
exemplifies - ANSWER highest good faith.
Tom buys a new automobile from his local dealership. He also decides to buy
insurance that will cover the cost of repairing the car if he is involved in an
accident. This is because Tom wishes to safeguard his financial interest in the car.
Tom decides to buy an insurance policy to cover his home. According to the
definition of a personal contract, which of the following most truly defines what
Tom's insurance genuinely protects? ANSWER Tom's financial stake in the home
What is not true about an aleatory contract - ANSWER An aleatory contract
provides equal benefits to the insured and insurer.
What does "D.I.C.E." stand for? - ANSWER declarations page (with definitions),
ensuring agreement, conditions, and exclusions (and endorsements)
'We shall offer the insurance described in this policy in exchange for the premium
and compliance with all applicable provisions of this policy.' Where may this line
appear in the insurance policy? - ANSWER insuring agreement
Which section of the policy might contain the following statement? "Damage to
insured property must be reported within 15 days of the damaging occurrence." -
ANSWER conditions.
Which of these types of loss is unlikely to be covered by a standard insurance
policy? - Answer: nuclear hazard.
, Edna loses some of her belongings in a hailstorm. When an adjuster arrives to
assess the loss, he provides Edna an estimate that she believes is way too low. As
the conversations continue, neither Edna nor the adjuster will budge. Where in
Ednas' policy would you look for the procedure to follow in this situation? -
ANSWER Conditions
ANSWER specifies the conditions that the insured must meet for coverage to
apply.
Declarations - ANSWER information that distinguishes the policy for a specific
insured.
Exclusions – ANSWER causes of loss or items of property not covered by the
policy.
endorsements: add, reduce, or vary the policy's coverage in some way.
definitions - ANSWER clarifies what key words mean in the context of the policy.
Insuring agreement - Respond to the contract's substance. Often merely a single
sentence
Xavier owns a small insurance company. Recently, the company won a proposal to
insure a new housing development in Omaha, Nebraska. His company can handle
any claims that emerge, but if a series of tornadoes ripped through the area,
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