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RMIN 4000 Test 3 Brown Questions and Answers 2024
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RMIN 4000 Test 3 Brown
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RMIN 4000 Test 3 BrownPrincipal of Indemnity - answer insurer pays no more than actual amount of the loss;
insurer should not profit from the loss
Replacement cost - answer the cost to replace an inventory item in its identical form
(similar workmanship and quality)
Actual Cash Value - answer replacement cost - depreciation
in property ins, usually based on the actual cash value of the property at the time of loss
Market Value - answer the price at which property would sell
Valued Policy - answer a policy that pays the face amount of insurance if a total loss
occurs (life insurance)
Value Policy Law - answer requires payment of the face amount of insurance if a total
loss to real property occurs from a peril specified in law
Principle of Insurable Interest - answerThe insured must be in a position to lose
financially if a covered loss occurs
Examples of Insurable Interest - answer-ownership of property (house, car)
-potential legal liability (business owners)
-secured creditors
-contractual rights (goods in transit)
When must an insurable interest legally exist in life insurance? - answerat inception of
the policy; ex-spouse can still collect on life insurance if listed as policy beneficiary
Principle of Subrogation - answersubstitution of the insurer in place of the insured for
the purpose of claiming indemnity from a third party for a loss covered by insurance
Reasons for subrogation - answer-prevents insured from collecting twice (once from
insurer, once from responsible party)
- holds the negligent party responsible for the loss
- reduces insurance claims costs and therefore rates
principle of upmost good faith - answera higher degree of honesty is imposed on both
parties to insurance contracts than is imposed on parties to other contracts
, What three legal doctrines support the principle of upmost good faith? - answer-
representations
-concealment
-warranty
Representations - answerstatements made by the applicant for insurance
What makes a contract voidable on the premise of misrepresentation? - answer1.
material
2. false, and
3. relied on by the insurance company
concealment - answerintentional failure of the applicant for insurance to reveal a
material fact to the insurer
What makes a contract voidable on the premise of concealment? - answer- concealed
fact was known by the insured to be material
-insured intended to defraud the insurer
Warranty - answera statement that becomes part of the insurance contract and is
guaranteed by the maker to be true in all respects
a condition agreed to by an insured in order to receive coverage
What is bad faith? - answerlaw that allows lawsuits against insurance companies for:
improper denial of claims and improper delay of claims
Bad faith damages can exceed policy limits and include: - answer-attorney's fees
-emotional distress
-punitive damages
Requirements of an Insurance Contract - answer1. offer and acceptance
2. consideration
3. competent parties
4. legal purpose
Offer and Acceptance - answerinsured completes application (offer) and insurance
company issues a binder or policy (acceptance) or company rejects the offer
conditional premium receipt - answerProvides temporary insurance coverage only if
specified conditions are met
exchange of consideration - answerthe value that each party gives to the other
Competent Parties - answerThose who are legally capable of entering into contracts.
must be: old enough to enter into contract, not be intoxicated, not be insane
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