RMI EXAM 3 !!!
Amber believes that her auto insurance premium is too high. Which of the following would most likely lower Amber's premium? A) Amber could increase her physical damage deductible. B) Amber could move from the rural area where she lives to an urban or suburban area. C) Amber could increase the amount of liability insurance that she carries. D) Amber could add "other-than-collision loss" coverage to her policy.
A
Arguments often used against no-fault automobile insurance laws include all of the following EXCEPT A) It is often difficult to determine which driver was negligent when a multiple-vehicle accident occurs. B) Many injured persons will not be compensated for their full losses because payments for pain and suffering will be eliminated. C) The defects of the negligence system are exaggerated, and the system needs only to be reformed. D) Claims of efficiency and premium saving are exaggerated, and automobile insurance premiums might actually increase.
A
Bill is attempting to determine how much life insurance to purchase. He has two dependent children and his wife does not work outside of the home. An advisor suggested that Bill should consider Social Security benefits when doing his life insurance planning. One concern in this regard is the period after Social Security benefits to a widow terminate until they resume again. This period is called the A) blackout period. B) dependency period. C) emergency period. D) readjustment period.
A
Defects of financial responsibility laws include which of the following? I. Accident victims may not be fully compensated for their injuries. II. They apply only to property damage losses, not to bodily injury claims. A) I only B) II only C) both I and II D) neither I nor II
A
In Maryland, drivers who are unable to obtain auto insurance in the voluntary market are insured through a(n) A) state fund. B) reinsurance facility. C) joint underwriting association D) automobile insurance plan.
A
Janet was unable to obtain auto insurance in the voluntary insurance market. She was contacted by the state insurance department and notified that XYZ Insurance would be her insurer. The mechanism used in Janet's state to provide auto insurance to high-risk drivers is a(n) A) automobile insurance plan. B) joint underwriting association. C) specialty automobile insurer. D) reinsurance facility
A
The multi-car discount is based on the assumption that A) two cars owned by the same person will not be driven as frequently as one car. B) multiple vehicle owners are safer drivers. C) owners of more than one vehicle are more likely to be financially responsible. D) lower liability limits are needed if there are multiple autos insured.
A
Under which type of automobile insurance arrangement are all automobile insurers in a state assigned their proportionate share of high-risk drivers based on the total volume of automobile business written in the state? A) automobile insurance plan B) unsatisfied judgment fund C) reinsurance facility D) specialty automobile plan
A
What is the practical effect of an insurance policy being a conditional contract? A) The insurer can refuse to a pay claim if the insured has not complied with all policy provisions. B) The insured can assign the policy only with the insurer's consent. C) The insurer can sue the insured for failure to pay any premiums. D) The insurer gets the benefit of the doubt if a policy contains any ambiguities or uncertainties.
A
Which of the following is a cost/expense that an estate clearance fund is designed to pay? A) burial expenses B) retiring the mortgage C) education costs D) income for the widow(er) during the readjustment period
A
Which of the following losses would be covered under Section II of an unendorsed Homeowners 3 policy? A) The homeowner accidentally dropped a bowling ball, injuring another bowler's foot. B) The homeowner's nanny was injured on her day off while hiking at a state park. C) The insured slandered a city council member at a city council meeting. D) The homeowner's dog bit the homeowner's daughter.
A
Which of the following statements about an earthquake endorsement for a homeowners policy is (are) true? I. The endorsement also covers landslides and volcanic eruptions. II. The coverage for earthquakes is written without a deductible. A) I only B) II only C) both I and II D) neither I nor II
A
Which of the following statements about endorsements to the homeowners policy is (are) true? I. The purpose of the inflation guard endorsement is to help prevent home owners from being under-insured. II. The purpose of the watercraft endorsement is to provide coverage for watercraft when they are used outside the United States. A) I only B) II only C) both I and II D) neither I nor II
A
Which of the following statements about the needs approach for estimating the amount of life insurance to purchase is (are) true? I. It involves an analysis of various family needs which must be met if a family breadwinner dies. II. Its use is appropriate only if a person currently has no life insurance protection. A) I only B) II only C) both I and II D) neither I nor II
A
Which of the following statements about uninsured motorists coverage is true? A) An innocent motorist must establish that the uninsured motorist is legally liable. B) The amount of coverage in most states must be at least $300,000. C) Property damage is covered in all states but bodily injury is not covered in all states. D) The coverage is very expensive and beyond the affordability of all but wealthy insureds.
A
Which of the following statements about unsatisfied judgment funds is (are) true? I. An accident victim must obtain a judgment against the motorist who caused an accident and must show the judgment cannot be collected. II. The major disadvantage is that the negligent uninsured motorist is relieved of legal liability. A) I only B) II only C) both I and II D) neither I nor II
A
Which of the following statements is (are) true concerning the home business insurance coverage endorsement? I. It increases the coverage on business personal property at the insured residence from $2,500 to the Coverage C limit. II. It excludes coverage for liability arising out of the home business. A) I only B) II only C) both I and II D) neither I nor II
A
Which of the following statements is (are) true with respect to drug-impaired driving? I. It is a growing problem in the United States. II. It is impossible to test whether someone is driving under the influence of opioids or marijuana. A) I only B) II only C) both I and II D) neither I nor II
A
Which of the following statements is (are) true with respect to the use of credit-based insurance scores as an auto insurance rating factor? I. Insurers claim that drivers who have poor insurance scores are expected to have relatively more accidents. II. The use of insurance scores has been banned as a rating factor in all states as it unfairly discriminates against certain groups of individuals. A) I only B) II only C) both I and II D) neither I nor II
A
Which of the following types of insurance policies can usually be assigned without the insurer's consent? I. Life insurance II. Property insurance A) I only B) II only C) both I and II D) neither I nor II
A
A credit-based score that is highly predictive of future claims cost is an individual's A) CLUE score. B) insurance score. C) motor vehicle record score. D) underwriting score.
B
A no-fault law under which benefits are paid to an accident victim without regard to fault and the accident victim can still sue the negligent driver who caused the accident is referred to as a(n) A) pure no-fault law. B) add-on no-fault law. C) modified no-fault law. D) choice no-fault law
B
A whole life insurance policy in which premiums are reduced for an initial period (e.g. 3 5 years) and are higher thereafter is an example of a A) level-term policy. B) modified life policy. C) limited-payment whole life policy. D) variable life policy.
B
Alan has been involved in three accidents and has been ticketed for a number of driving violations. He tried to purchase auto insurance, but three insurers refused to sell him coverage. The generic name for state plans designed to insure drivers like Alan is the A) exchange market. B) residual market. C) voluntary market. D) excess market.
B
All of the following losses are excluded from coverage under Section II of an unendorsed 4 Homeowners 3 policy EXCEPT A) Phyllis, a medical technician, misread a lab test and the patient is suing her. B) While using his canoe, Bert hit another canoe. The other canoe sank. Bert is being sued. C) Violet runs a for-profit daycare service in her home. The parents of a child injured while in Violet's care are suing Violet. D) The homeowner's son was injured when he fell off a swing in the homeowner's yard.
B
Dave and Meagan Philips borrowed $150,000 from Fifth National Bank to help fund the purchase of a new home. The home serves as collateral for the loan. Fifth National has an insurable interest in the home based on A) potential responsibility for legal liability. B) being a secured creditor. C) expectation of ownership. D) having a contractual right.
B
Hank bought a farm that had an old barn. He noticed one day that the roof of the barn was swaying in the wind. Hank went to see his insurance agent and he insured the barn for $20,000. The agent didn't ask if the roof might collapse, and Hank didn't say anything about it. One week later there was a strong wind and the roof collapsed. Assuming the insurer can prove it, under what legal grounds could the insurer deny payment of the claim? A) estoppel B) concealment C) warranty D) misrepresentation
B
In the state where Susan lives, drivers whom private insurance companies do not want to insure are placed in a common pool, and each insurer pays its pro rata share of pool losses and expenses. A common policy is used for all high-risk drivers. Susan's state handles high-risk drivers through a(n) A) automobile insurance plan. B) joint underwriting association. C) pure no-fault plan. D) specialty auto insurer.
B
Julian, age 45, would like to determine how much life insurance to purchase using the human life value approach. He assumes his average annual earnings over the next 20 years will be $40,000. Of this amount, $20,000 is available annually for the support of his family. Julian will generate this income for 20 more years and he believes that 5 percent is the appropriate interest (discount) rate. The present value of one dollar payable for 20 years at a discount rate of 5 percent is $12.46. What is Julian's human life value? A) $184,600 B) $249,200 C) $360,800 D) $400,000
B
Liability arising out of which of the following is covered under the personal injury endorsement to the homeowners policy? A) property damage liability B) false arrest C) bodily injury D) business liability
B
New Jersey's dollar-a-day auto insurance coverage is limited to A) elderly individuals. B) Medicaid recipients. C) drivers under age 25. D) high-risk drivers.
B
Robin plans to open a bar in a high-crime area. She had difficulty obtaining insurance for the business. She found an insurer willing to write the coverage, but only if Robin agreed to have a security alarm system in operation at all times when the business is closed. Robin's promise to have a security alarm system operational as a condition of having the insurance coverage in force is a A) binder. B) warranty. C) waiver. D) deductible.
B
Sam's furniture was destroyed by a fire. The furniture cost $1200 when it was purchased, but similar new furniture now costs $1800. Assuming the furniture was 50 percent depreciated, what is the actual cash value of Sam's loss? A) $600 B) $900 C) $1200 D) $1800
B
Sarah is using the needs approach to determine how much life insurance to buy. Her cash needs are $30,000; her income needs are $140,000; and special needs are $100,000. Sarah has the following assets: $20,000 in bank accounts, $30,000 in retirement plans, and $40,000 in investment accounts. Sarah owns no individual life insurance. She is covered by a $50,000 group life insurance policy through her employer. Based on this information, how much additional life insurance should Sarah purchase? A) $80,000 B) $130,000 C) $150,000 D) $160,000
B
Sharon lives in a state that has a no-fault automobile insurance law. Under the law, an injured person has the right to sue the negligent driver only if the bodily injury claim exceeds a dollar or verbal threshold. The no-fault law in Sharon's state is a(n) A) pure no-fault plan. B) modified no-fault plan. C) add-on plan. D) choice no-fault plan.
B
Some states have enacted laws which prohibit uninsured drivers from suing a negligent driver for noneconomic damages, such as pain and suffering. These laws are called A) comparative negligence laws. B) "no pay, no play" laws. C) financial responsibility laws. D) unsatisfied judgment laws.
B
To calculate a human life value, it is necessary to deduct certain costs from a person's average annual earnings. These costs include A) funeral costs. B) income taxes. C) investment income. D) pension benefits after retirement.
B
Under the needs approach, when is the dependency period of a surviving spouse assumed to end? A) 1 or 2 years after the breadwinner's death B) when the youngest child reaches age 18 C) when the surviving spouse reaches age 65 D) when the surviving spouse dies
B
Under which of the following rules is actual cash value determined by taking into consideration all relevant factors an expert would use to determine the value of the property? A) the circumstantial evidence rule B) the broad evidence rule C) the property indemnity rule D) the objective value rule
B
What is the length of the readjustment period which is considered when the needs approach is used to determine the amount of life insurance to own? A) 3 to 6 months B) 1 to 2 years C) until the youngest child reaches age 18 D) until the surviving spouse reaches age 65
B
When Ben applied for life insurance, he was asked on the application if he smoked or used tobacco products. Ben answered "No." In reality, Ben smokes two packs of cigarettes a day. The policy was issued at the "preferred, nonsmoker rate." If Ben dies 6 months after the policy is issued, upon what grounds will the insurer be able to legally deny the claim? A) warranty B) misrepresentation C) waiver D) estoppel
B
When using the needs approach, several "special needs" should be considered. One special need is money to cover unexpected events, such as major car repairs, dental bills, or home repairs. Money set aside for this purpose is called a(n) A) estate clearance fund. B) emergency fund. C) readjustment period fund. D) mortgage redemption fund.
B
Which of the following is a noneconomic cost associated with premature death? A) reduction in the standard of living B) loss of a parental role model C) additional expenses, such as uninsured medical bills D) loss of the deceased breadwinner's future earnings
B
Which of the following losses would be covered under the personal liability coverage (Coverage E) of an unendorsed Homeowners 3 policy? A) liability arising out of the manufacture and sale of illegal narcotics B) liability arising out of damage to a neighbor's property that occurred over time C) liability arising out of a business operated in the home. D) liability arising out of bodily injury to an insured
B
Which of the following statements about premature death is (are) true? I. From an economic standpoint, premature means death before a specified age, such as 65. II. The economic problem of problem of premature death in the U.S. has declined substantially over time. A) I only B) II only C) both I and II D) neither I nor II
B
Which of the following statements about second-to-die life insurance is (are) true? I. The insurance is a form of endowment coverage. II. The premium is lower than the combined cost of purchasing a life insurance policy on each insured. A) I only B) II only C) both I and II D) neither I nor II
B
Which of the following statements about the additional coverage for damage to property of others in Section II of the homeowners policy is true? A) The maximum amount of coverage is $25,000 per occurrence. B) Payments are made on the basis of the replacement cost of the damaged property. C) There is coverage for property damage arising out of a business engaged in on a full-time basis by an insured. D) There is coverage for intentional property damage by any insured who is a teenager.
B
Which of the following statements about the principle of insurable interest is (are) true? I. It makes it difficult to measure the amount of an insured's loss. II. It reduces moral hazard. A) I only B) II only C) both I and II D) neither I nor II
B
Which of the following statements about the scheduled personal property endorsement to the homeowners policy is (are) true? I. It provides named-perils coverage on scheduled items. II. It can be used to insure valuable items such as jewelry, silverware, and coin collections. A) I only B) II only C) both I and II D) neither I nor II
B
Which of the following statements describes how losses will be settled if a property 5 insurance policy is written on a replacement cost basis? A) Losses are settled without the applicable deductible. B) Losses are settled without a deduction for depreciation. C) The insurer must replace the damaged or destroyed property in lieu of a cash settlement. D) The policy is converted to a valued policy.
B
Which of the following statements is (are) true concerning the use of an individual's credit history as an insurance rating factor? I. Individuals with poor credit histories, as a group, generally file fewer homeowners claims than do individuals with good credit histories. II. A poor credit history can be improved over time, allowing for the purchase of homeowners insurance at a lower premium. A) I only B) II only C) both I and II D) neither I nor II
B
A credit-based score that insurers claim is highly predictive of future claims costs is an individual's A) combined ratio. B) loss ratio. C) insurance score. D) underwriting score.
C
A pharmaceutical company employs a young chemist who is responsible for three new patents last year and for the development of the company's two best-selling drugs. The company purchased a large life insurance policy on the chemist. In this case, the insurable interest requirement was met because of a(n) A) ownership interest. B) close family relationship. C) pecuniary interest. D) economic family relationship.
C
All of the following statements about the rules governing agency relationships are true EXCEPT A) An agent must be authorized to act on behalf of a principal. B) An agency agreement may grant certain powers to the agent as well as denying the agent other powers. C) The principal is responsible for the acts of agents only if the acts are criminal. D) Knowledge of the agent is presumed to be knowledge of the principal with respect to matters within the scope of the agency relationship.
C
Criticisms of compulsory insurance laws include which of the following? I. They provide less than complete protection since they require only a minimum amount of liability insurance. II. Even with compulsory insurance laws, a substantial number of motorists continue to operate vehicles without insurance. A) I only B) II only C) both I and II D ) neither I nor II
C
Dave is an agent for Easy Pay Insurance. Easy Pay insures only high-quality applicants. Dave wanted to earn more commissions, so he sold some policies to applicants he knew were belowaverage risks. When these policyowners started filing claims, Easy Pay tried to deny the claims stating that Dave had not acted appropriately. Which general rule of agency makes Easy Pay responsible for the claims of the higher-than-average risk policyowners? A) There is no presumption of an agency relationship. B) Agents should be compensated based on the quality of the business they generate. C) A principal is responsible for the acts of its agents who are acting within the scope of their authority. D) An agent must have authority to represent the principal
C
Factors that affect the cost of homeowners insurance include which of the following? I. Construction material II. Deductible amount A) I only B) II only C) both I and II D) neither I nor II
C
Frank asked his company's employee benefits director if his group health coverage could be converted to individual coverage. The benefits director said, "Yes, you can convert to an individual policy, and the coverage is identical to your group coverage." Frank quit his job and converted to an individual policy. Six months later he filed a claim. He was dismayed to learn the conversion policy was more limited compared to the group coverage, and his claim was denied. What legal doctrine will allow Frank to bring a successful legal action against his former employer because he was financially harmed due to his reasonable reliance upon a representation of fact? A) adhesion B) waiver C) estoppel D) subrogation
C
Liability arising out of which of the following is covered under the personal injury endorsement to the homeowners policy? A) bodily injury B) property damage C) slander D) professional liability
C
Melody's car was damaged when another driver ran a stop sign and hit her car. Melody decided to collect from her own insurer and to let her insurer recoup the loss payment from the negligent driver who hit her. What fundamental legal principle is illustrated in this scenario? A) the principle of utmost good faith B) the principle of insurable interest C) the principle of subrogation D) the principle of reasonable expectations
C
Robert purchased an unendorsed Homeowners 3 policy. He is concerned that if his personal property is destroyed, the insurer will take depreciation into consideration when determining the loss settlement and will pay him less than the amount needed to purchase new property. Which endorsement can Robert add to his Homeowners 3 policy to address this concern? A) inflation guard endorsement B) personal injury endorsement C) personal property replacement cost endorsement D) earthquake endorsement
C
Scott had trouble obtaining auto insurance. After three companies refused to insure him, he called the state insurance department. A representative suggested he obtain coverage through Last Chance Insurance Company because "that's all they insure-high-risk drivers." Scott contacted Last Chance. He was not refused coverage; however, the premium Scott was required to pay was three times greater than the average premium in the market. Last Chance Insurance Company is a(n) A) reinsurance facility. B) automobile insurance plan. C) specialty auto insurer. D) joint underwriting association.
C
The human life value is defined as the A) present value of a deceased breadwinner's future gross income. B) future value of a deceased breadwinner's past earnings. C) present value of the family's share of a deceased breadwinner's future earnings. D) future value of the family's share of a deceased breadwinner's future earnings.
C
The term used to describe plans in which automobile insurers participate to make insurance available to drivers unable to obtain coverage in the standard market is the A) foreign market. B) fair market. C) residual (shared) market. D) high-premium market.
C
Tom and Tammy Evans were ready to purchase a home. The home was to serve as collateral for their mortgage loan. Two insurers declined to insure the home, citing "an adverse CLUE report." Why would an insurer reject a homeowners insurance application because of an adverse CLUE report? A) because the previous owner had defaulted on the mortgage loan B) because the home is located in an area where the zoning law had been changed C) because there had been property insurance claims filed on the home's previous owner D) because the home is located in an area that does not have a certified fire department
C
Tom is planning to build a home. He is weighing many factors, including construction materials, location, and other considerations. Which of the following statements is true with regard to homeowners insurance and Tom's new home? A) The higher the construction costs are in the area, the lower Tom's homeowners insurance premiums will be. B) The lower the homeowners deductible selected, the lower the premium will be. C) Older homes cost more to insure than newer homes. D) A wood frame home costs less to insure than a brick home.
C
Under financial responsibility laws, proof of financial responsibility is generally required under which of the following circumstances? A) The use of an auto by any driver with fewer than 3 years of driving experience B) When an individual renews his or her driver's license C) Failure to pay a final judgment resulting from an auto accident D) The accumulation of unpaid parking tickets exceeding a specified value
C
Which of the following losses would be covered under the medical payments coverage of the Homeowners 3 policy? A) injuries to another person arising out of the insured's negligent operation of an automobile B) medical payments resulting from the transmission of a communicable disease C) injury to a resident employee at the insured's home D) workers compensation medical payments
C
Which of the following pieces of information is needed to calculate a person's human life value? A) the marital status of the person. B) the person's estimated annual Social Security benefits after retirement. C) the person's cost of self-maintenance. D) current outstanding debts, including mortgage debt.
C
Which of the following statements about buying homeowners insurance is true? A) There is no reason to carry insurance for more than 80 percent of a dwelling's replacement cost. B) The deduction for depreciation will be increased if a personal property replacement cost endorsement is purchased. C) Premiums often can be reduced substantially by selecting a higher deductible. D) There is little reason to compare cost since the lack of competition results in little price variation among companies.
C
Which of the following statements about policies sold to preferred risks is (are) true? I. Preferred risks are people whose mortality experience (deaths per thousand at a given age) is expected to be more favorable than average. II. Insurers require preferred risks to purchase at least a minimum amount of life insurance, such as $250,000. A) I only B) II only C) both I and II D) neither I nor II
C
Which of the following statements about re-entry term insurance is true? A) It permits substandard risks to purchase insurance at standard rates. B) It permits a refund of premiums paid if the term insurance is renewed a specified number of times. C) It permits a lower renewal premium if the insured demonstrates insurability. D) It permits a lapsed whole life policy to be reinstated as term insurance.
C
Which of the following statements about the characteristics of current no-fault laws is true? A) Most laws in force today are pure no-fault laws. B) Most laws apply to both bodily injury and property damage. C) Most laws permit payment of survivor benefits to a surviving spouse and children. D) States with add-on plans restrict the right of accident victims to sue negligent drivers
C
Which of the following statements about the personal property coverage (Coverage C) of the Which of the following statements about the personal property coverage (Coverage C) of the Homeowners 3 policy is (are) true? I. There are special limits of liability that apply to certain types of personal property. II. The full amount of coverage applies only if the property is permanently located at any residence of the insured. A) I only B) II only C) both I and II D) neither I nor II
C
Which of the following types of families is likely to have the least need for a large amount of life insurance? A) a blended family B) a traditional family C) a single person family D) a sandwiched family
C
Why can an insurer refuse to pay a claim if an insured fails to abide by the policy provisions? A) because insurance contracts are aleatory B) because insurance contracts are unilateral C) because insurance contracts are conditional D) because insurance contracts are contracts of adhesion
C
A few states have dual automobile insurance systems. A motorist can pay a higher premium and retain the right to sue under the tort system, or pay a lower premium and be covered under the state's no-fault law. This dual system is called a A) pure no-fault plan. B) modified no-fault plan. C) "no pay, no play" law. D) choice no-fault plan.
D
A few states have enacted laws to make minimum amounts of liability insurance available at reduced rates to individuals who cannot afford regular insurance or who have limited financial assets to protect. The coverage made available through such a plan is called A) probationary insurance. B) uninsured motorists insurance. C) no-fault auto insurance. D) low-cost auto insurance.
D
A number of benefits are payable under no-fault plans. Under one provision, benefits are paid for tasks normally performed by the insured, including such things as lawn care, housework, and home repairs. These tasks are called A) home health care services. B) hospice services. C) activities of daily living. D) essential services expenses.
D
A total loss under a valued policy is settled on the basis of the A) market value of the loss. B) actual cash value of the loss. C) replacement value of the loss. D) amount of insurance covering the loss.
D
All of the following are arguments for no-fault automobile insurance laws EXCEPT A) No-fault is unnecessary as it's easy to determine which driver was negligent when a multiplevehicle accident occurs. B) A large portion of each premium dollar is used for purposes other than compensating accident victims for their losses. C) There are delays in compensating accident victims under the tort system. D) Seriously injured accident victims tend to be overcompensated, while those with small economic losses are inadequately indemnified.
D
All of the following are defects which limit the usefulness of the human life value approach in determining the correct amount of life insurance to purchase EXCEPT A) The effects of inflation are ignored. B) Other sources of income for survivors are ignored. C) Earnings are assumed to remain constant. D) Earnings during the individual's productive lifetime are ignored.
D
All of the following are endorsements that can be added to an ISO Homeowners 3 policy EXCEPT A) personal property replacement cost endorsement. B) scheduled personal property endorsement. C) earthquake endorsement. D) personal liability endorsement.
D
All of the following losses are subject to special limits of liability under the Homeowners 3 policy EXCEPT A) theft of firearms. B) destruction by fire of property used for business purposes. C) storm damage to a boat at a marina. D) furniture destroyed by a fire.
D
Bob purchased insurance on his home with an insurer that was not licensed to do business in the state. In this case, which requirement to form a binding insurance contract is lacking? A) exchange of consideration B) offer and acceptance C) legal purpose D) competent parties
D
Gail lives near a fault line. She added an earthquake endorsement to her Homeowners 3 policy. All of the following statements about the endorsement are true EXCEPT A) The deductible is expressed as a percentage of the coverage limit rather than as a dollar amount. B) The endorsement also covers landslides and volcanic eruptions. C) Aftershocks occurring within 72 hours of an earthquake are considered part of the same occurrence. D) The endorsement also covers flood losses
D
Jacob sold his house to Shelia for $140,000 in cash. Jacob "threw in" insurance on the house as part of the deal and did not bother telling the insurer that there was a new owner. Four months after Shelia purchased the home, a windstorm damaged the roof. Which of the following legal characteristics of insurance contracts could the insurer use to legally deny payment to Shelia for 2 the damage to the roof? A) Insurance contracts are unilateral contracts. B) Insurance contacts are contracts of adhesion. C) Insurance contracts are aleatory contracts. D) Insurance contracts are personal contracts.
D
Jane would like to save money on her homeowners premium. All of the following steps will help her to reduce her homeowners premium EXCEPT A) raising the deductible in the homeowners policy to a higher amount. B) shopping around a homeowners policy. C) installing burglar alarms, smoke detectors, and dead-bolt locks. D) adding a personal property replacement cost endorsement.
D
Jessica is an agent for LMN Life Insurance Company. She met with Brad, who was interested in purchasing life insurance. Jessica explained the various uses of life insurance, including income for Brad's wife during the 1- or 2-year period following Brad's death. This period is known as the A) dependency period. B) estate clearance period. C) blackout period. D) readjustment period.
D
Most family heads need substantial amounts of life insurance. However, with limited income, money spent on life insurance reduces the amount of discretionary income available for other high-priority needs. What an insured person gives up when he or she purchases life insurance instead of using the premium dollars for other purposes is called the A) estimated cost of life insurance. B) net cost of life insurance. C) real (inflation-adjusted) cost of life insurance. D) opportunity cost of buying life insurance.
D
The loss settlement under which of the following supports the principle of indemnity? A) life insurance B) valued policies C) replacement cost property insurance D) actual cash value property insurance
D
The period during which a surviving spouse is ineligible for Social Security benefits is referred to as the A) emergency period. B) readjustment period. C) dependency period. D) blackout period.
D
Tom and Nancy Boyle provide financial support for their two children. In addition, they provide financial support for Tom's aged father and Nancy's aged mother. The Boyle family can be described as a A) blended family. B) single-parent family. C) two-income earner family. D) sandwiched family.
D
What is the practical effect of an insurance contract being a contract of adhesion? A) The insurer can refuse to pay claims if the insured has not complied with all policy provisions. B) The insured can assign the policy only with the insurer's consent. C) The insurer can sue the insured for failure to pay any premiums. D) The policy is interpreted in the insured's favor if the policy contains any ambiguities or uncertainties
D
Which of the following statements about modified no-fault laws is (are) true? I. Claims less than a certain dollar threshold must be assumed by the injured accident victim, but the injured person has the right to sue a negligent driver. II. Claims above a certain dollar threshold are paid in full by an injured accident victim's insurer, and the right to sue a negligent driver is eliminated. A) I only B) II only C) both I and II D) neither I nor II
D
Which of the following statements about savings bank life insurance is true? A) The maximum amount that a depositor can purchase is $50,000. B) The maximum amount of insurance that a depositor can purchase is limited to the amount of money on deposit in his or her savings account with the savings bank. C) The objective of savings bank life insurance is to provide protection to the bank in case a borrower dies before a loan is repaid. D) The objective of savings bank life insurance is to provide low-cost insurance to consumers by holding down expenses.
D
Which of the following statements about the personal property replacement cost endorsement used with the homeowners policy is (are) true? I. The damaged or destroyed property must be repaired or replaced, no matter the size of the loss. II. It is designed primarily for antiques and fine art. A) I only B) II only C) both I and II D) neither I nor II
D
Which of the following statements is true with respect to a pure no-fault auto insurance plan? A) Under such a plan, you would collect from your own insurer and retain the right to sue the other party if your injuries surpass a dollar or verbal threshold. B) Most no-fault plans that have been adopted by states are pure no-fault plans. C) Under such a plan, you would collect from your own insurer and retain the right to sue the other party without having to satisfy a threshold. D) Under such a plan, an accident victim cannot sue the other party, and no payments are made for pain and suffering.
D
Which of the following statements regarding convertible term insurance is true? A) Evidence of insurability must be provided to convert the policy. B) More term policies are converted using the original-age method than using the attained-age method. C) The converted coverage has a lower face amount than the term coverage. D) The annual premium for the cash value coverage is lower if an original-age conversion is used than if an attained-age conversion is used.
D
Why does the insured get the benefit of the doubt if an insurance policy contains any ambiguities or uncertainties? A) because insurance contracts are aleatory B) because insurance contracts are unilateral C) because insurance contracts are conditional D) because insurance contracts are contracts of adhesion
D
