Purpose of The insurer agrees to pay no more than the
actual amount of the loss - Correct Answer To prevent the insured from profiting from a
loss
-
To reduce moral hazard
There are three main methods to determine
actual cash value: - Correct Answer Replacement cost less depreciation...
BusFin 3300 Exam 2 Questions Correctly Answered
& Graded
Purpose of The insurer agrees to pay no more than the
actual amount of the loss - Correct Answer To prevent the insured from profiting from a
loss
-
To reduce moral hazard
There are three main methods to determine
actual cash value: - Correct Answer Replacement cost less depreciation
-
Fair market value
-
Broad evidence rule
Fair market value - Correct Answer is the price a willing buyer
would pay a willing seller in a free market
Broad evidence rule - Correct Answer means that the
determination of ACV should include all relevant
factors an expert would use to determine the
value of the propert
valued policy - Correct Answer pays the face amount of insurance
if a total loss occurs
Replacement cost insurance - Correct Answer there is no
deduction for depreciation in determining the
,amount paid for a loss
why The insured must be in a position to lose
financially if a covered loss occurs - Correct Answer Purposes:
-
To prevent gambling
-
To reduce moral hazard
-
To measure the amount of the insured's loss
•
An insurable interest can be supported by:
-
Ownership of property
-
Potential legal liability
-
Serving as a secured creditor
-
Contractual rights
When must insurable interest exist for Property and Life? - Correct Answer Property insurance: at the
time of the loss
-
Life insurance: only at inception of the policy
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.
purpose of subrogation - Correct Answer To prevent the insured from collecting twice for
the same loss
-
To hold the negligent person responsible for the
loss
-
To hold down insurance rates
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 applicant for insurance
Material - Correct Answer if the insurer knew the true
facts, the policy would not have been issued, or
would have been issued on different terms
Reliance - Correct Answer the insurer relies on the
misrepresentation in issuing the policy at a
specified premium
innocent misrepresentation - Correct Answer a material
fact, if relied on by the insurer, makes the
contract voidable
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