Ch5

Samy purchased a living room set for $1000 and insured this furniture on an actual cash value basis. Two years later the living room set was destroyed by a covered peril. At the time of loss, the property had depreciated in value by 25 percent. The replacement cost of the furniture at the time of loss was $1200. Assuming no deductible, how much will Sammy receive from her insurer?

$900

1- Which of the following statements about insurance warranty is (are) true? I -It is part of insurance contract II - Statements made by an insurance applicant are considered warranties rather than representations.

I only

Which of the following types of insurance policies can usually be assigned without the insurer's consent? I- Life insurance II- Property insurance

I only

1- Which of the following statements about an insurable interest in life insurance is (are) true? I- It is required of any person named as beneficiary II- It may result from a pecuniary (financial) interest ,even if there is no relationship by marriage or blood

II only

Fundamental purposes of the principle of indemnity include which of the following? I- To reduce physical hazards II- To prevent the insured from profiting insurance

II only

Which of the following statements about consideration in an insurance contract is (are) true? I- The insured's consideration is the completion of the application II- The insured's consideration is the promise to do those specified in the policy.

II only

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

II only

Which of the following statements about an offer and acceptance for insurance contract is true?

In property insurance ,the offer and acceptance are usually in writing but may be oral

Which of the following statements describes the effect of a property insurance policy being written on a replacement cost basis?

Losses are settled without a deduction for depreciation

A false statement made by an applicant for insurance is an example of a

Misrepresentation

When Ben applied for a life insurance policy ,he was asked on the application if he smoked or used tobacco products. Ben answered "No". in reality, however, Ben smokes two packs of cigarettes a day. The policy was issued at the "preferred ,nonsmoker premium rate ". If Ben dies six months after the policy is issued ,upon what grounds will the insurer be able to legally deny the claim?

Misrepresentation

Assuming life insurance applicant who has been given an insurability premium receipt is found to be insurable, when is the coverage effective?

On the date of application or the date of receipt, whichever is earlier

Why are insurance contract said to be contracts of adhesion?

One party writes the contract and the other party must accept the contract as written.

When must an insurable interest legally exist in life insurance?

Only at the inception of policy

When must an insurable interest legally exist in property insurance?

Only at the time of loss

++ Suzan's office building was damaged by a fire caused by a careless tenant. After paying Suzan for her loss, the insurance company sued the tenant to recover its loss. This suit is based on the principle of

Subrogation

The principle of utmost good faith is supported by all of the following legal doctrines Except

Subrogation

What is legal significance of a material misrepresentation in an insurance application?

The contract is avoidable at the insurer's option

What is the legal significance of material concealment by an insurance applicant?

The contract is avoidable at the insurer's option

Which of the following statements about Subrogation is true?

The insured's rights to collect benefits may be forfeited if insured interferes with the insurer's rights after a loss

What is the practical effect of an insurance policy being a conditional contract

The insurer can refuse to pay claims unless the insured has complied with all policy conditions.

What is the practical effect of an insurance policy being a contract of adhesion?

The policy is interpreted in the insured's favor if a policy contains any ambiguities or uncertainties

All of the following statements about the rules governing agency relationships are true Except

The principal is responsible for the acts of agents only if the acts are fraudulent.

Sally's car was damaged when another driver ran a stop sign and hit her car. Sally decided to collect from her own insurer and to let her insurer recoup the loss payment from the driver who hit her. What fundamental legal principal upon which insurance is illustrated in this scenario?

The principal of Subrogation

All of the following will support an insurable interest for purposes of purchasing property and liability insurance Except

Ties of blood and marriage

All of the following are basic purposes of subrogation Except

To eliminate adverse selection

Which of the following is a fundamental purpose of the principle of indemnity?

To reduce moral hazard

All of the following are exceptions to the principle of indemnity except

Actual cash value property insurance

A contract in which the values exchanged are not equal because chance is involved is called a(n)

Aleatory contract

Why can an insurer refuse to pay a claim if an insured fails to abide by the policy provisions?

Because insurance contracts are conditional

Why does the insured get the benefit of the doubt if an insurance policy contains any ambiguities or uncertainties?

Because insurance contracts are contracts of adhesion

Shokry's insurance claim was denied by XYZ Insurance company. When shaker inquired why the claim was denied, he was told to "Read the exclusion on page 5 of the policy". Shaker read the exclusion. In his opinion, the exclusion was poorly worded and every vague. If a court of law agrees with Shaker's assessment of the exclusion ,Shaker may still be able to have his claim paid by the insurer because insurance contracts are

Contracts of adhesion

Omar entered into an insurance contract with XYZ insurance Company. When the agent who sold the coverage witnessed Omar doing something that violated the terms of the contract, he threatened to sue him to make his comply with the terms of contract. Which distinct legal characteristic of insurance contracts states that only the insurer's promise to perform is legally enforceable?

Unilateral contracts

The voluntary relinquishment of a legal right is called

Waiver

David, who lives in an apartment in a high - crime area, purchased an expensive car. In order to obtain physical damage insurance, David promised to park the car in an indoor garage with 24-security. This agreement, which was incorporated into the insurance contract ,is an example of a

Warranty

which of the following does not constitute an insurable an interest ?

You have custody of a valuable painting when the owner is away.

a total loss under a valued policy is settled on the basis of the

amount of insurance covering the loss

Osama sold his house to Aaya for $140,000 in cash. Osama "threw in "the 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 Aaya 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 for damage to the roof?

insurance contracts are personal contracts

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?

the broad evidence rule