Deck 37: Principles of Insurance

Question 1

Untrue statements or unfulfilled promises by the insured permit the insurer to declare the policy void.

Answer 1

True

Question 2

A willful failure to disclose pertinent information by the insured is known as subrogation.

Answer 2

False

Question 3

The party agreeing to compensate a person for a certain loss is known as the _____.

A) policyholder
B) beneficiary
C) insurer
D) insured

Answer 3

C

Question 4

A creditor has insurable interest in the life of the debtor beyond the extent of the debt.

Question 5

A company in which policyholders are the members and owners and correspond to the stockholders in a stock company is known as a(n) ______.

A) mutual insurance company
B) premium insurance company
C) assessment insurance company
D) stock insurance company

Question 6

An oral or written misstatement of a material fact by the insured prior to the finalization of a contract is called a _____.

A) repudiation
B) false representation
C) subrogation
D) concealment

Question 7

Either party to an insurance contract may claim the benefit of a violation of the contract by the other party.

Question 8

A "binder" on an insurance policy is a clause added to another contract to limit the base contract.

Question 9

Which of the following best defines subrogation?

A) It is the right of an insurer to claim warranty in case of breach of contract.
B) It is the right of an insurer to assume the legal rights of the insured.
C) It is the right of an insured to conceal certain facts from the insurer.
D) It is the right of an insurer to deny life insurance claims in the case of suicide.

Question 10

A partner does not have an insurable interest to the extent of the possible loss in the property owned by a firm.

Question 11

James mortgaged his house and received a certain amount of money in return as a loan. However, he repaid half the loan in six months. Which of the following is likely to be true in this scenario, at the present moment?

A) The mortgagee has an insurable interest towards 25 percent of the loan amount.
B) The mortgagee does not have an insurable interest in the loan amount.
C) The mortgagee has an insurable interest towards the entire loan amount.
D) The mortgagee has an insurable interest towards half the loan amount.

Question 12

A minor who wishes to disaffirm is bound on insurance contracts.

Question 13

Insurance contracts must specify the particular risks being transferred from one party to another.

Question 14

A stock insurance company is a corporation for which the original investment was made by stockholders.

Question 15

Which of the following best defines insurance?

A) It is a contract whereby a party transfers his right to receive interest to a third-party such as an agent.
B) It is a contract whereby a party transfers a risk of physical injury to the risk bearer for a fee.
C) It is a contract whereby a party transfers his right to a claim for a particular fee.
D) It is a contract whereby a party transfers a risk of financial loss to a risk bearer for a fee.

Question 16

Explain subrogation.

Question 17

Which of the following best defines concealment?

A) It is a willful failure to disclose any information pertinent to the insurance contract by the insured.
B) It is an unintentional failure to disclose any information pertinent to the insurance contract by the insurer.
C) It is an unintentional failure to disclose any information pertinent to the insurance contract by the underwriter.
D) It is a willful failure to disclose any information irrelevant to the insurance contract by the insurer.

Question 18

The maximum amount that the insurer agrees to pay in case of a loss is known as the face of the policy.

Question 19

The danger of a loss of, or injury to, property, life, or anything else, is called a _____.

A) rider
B) face
C) peril
D) hazard

Question 20

A bailee has an insurable interest in the property bailed to the extent of possible loss.