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Principles and Practices of Insurance C11 Chapters 9 and 10
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- Captains Career Course Module 5 Post Test 2
Principles and Practices of Insurance C11 Chapters 9 and 10
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Principles and Practices of Insurance C11Chapters 9 and 10
How are insurance contracts distinguished from other types of contracts? -
CORRECT ANSWER--Insurable interest.
-Utmost good faith.
In whose lives does an insured have an insurable interest? - CORRECT
ANSWER-1. His or her child or grandchild.
2. His or her spouse.
3. Any person on whom he or she is wholly or in part dependent for, or from
whom he or she is receiving, support or education.
4. His or her employee.
5. Any person in the duration of whose life he or she has a pecuniary interest.
Give examples of insurable interests in property and in liability - CORRECT
ANSWER--You have insurable interest in property when you stand in such a
legal relationship to it that you will be financially prejudiced by its loss or damage
and financially benefited by its continued existence.
-Also have insurable interest in your potential capability to pay damages in the
event that you are found responsible for having caused injuries to others or
damage to their property.
What is the principle of indemnity? - CORRECT ANSWER-You purchase
insurance to protect yourself against loss. Should a loss occur, you expect to be
put back into the same financial position you were in before the loss.
How do you determine the actual cash value of a property? - CORRECT
ANSWER-Defined as the value of an equivalent piece of property of the same
age and condition and subject to the same to wear and tear as the property that
was lost or destroyed.
What is a replacement cost contract? - CORRECT ANSWER-Damaged or
destroyed property will be valued on the basis of the cost to repair or replace
, (whichever costs less) it with property of like kind and quality without deduction
for depreciation.
What is a valued contract? - CORRECT ANSWER-In the event of a total loss,
pays a predetermined amount agreed upon by the insurer and insured at the time
the contract was made. When the policy is issued, professional valuations are
usually required for items over a certain value and the amount of insurance is
based on them.
What is a policy of compensation? - CORRECT ANSWER-Specifies that a stated
amount is payable on the occurrence of the event insured against. This amount
is not directly dependent on the monetary value of the insured's loss.
What does utmost good faith mean? - CORRECT ANSWER--One party is in a
superior position of knowledge; only an applicant or insured has knowledge of all
material facts relating to the risk.
-Law imposes duty to disclose any information that is basic to the acceptance of
the risk or the terms of the policy.
-Requires that an insured act with a high standard of honesty.
What is the connection between utmost good faith and misrepresentation as they
relate to insured property? - CORRECT ANSWER-Insureds should be reminded
of the importance of honest and full disclosure in completing applications. Failure
to do so can be costly. Failing to disclose material facts is a type of
misrepresentation known as non-disclosure or concealment.
What is a material fact? - CORRECT ANSWER-A fact which would influence a
prudent underwriter in setting the premium or determining whether to accept or
reject the risk.
Define non-disclosure - CORRECT ANSWER-May be defined as silence where
there exists an obligation to speak. An applicant for insurance is presumed to be
a prudent and reasonable person who knows the material facts of the risk.
Give an example of a non-disclosure that relates to insurance - CORRECT
ANSWER-Green applies for and obtains a homeowners policy on his dwelling,
which he describes as a single-family brick dwelling. He neglects to mention he
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