Deck 35: Principles of Insurance

Question 1

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

Answer 1

C

Question 2

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

Answer 2

True

Question 3

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.

Answer 3

D

Question 4

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

Question 5

Give some examples of an insurable interest and explain why they are insurable .

Question 6

A tenant has an insurable interest in property to the extent of the loss that would be suffered by damage to the property.

Question 7

An insurer is a party who purchases insurance to provide protection from a loss.

Question 8

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

Question 9

A statement of the insured that relates to the risk is called a .

A)false representation
B)warranty
C)subrogation
D)estoppel

Question 10

To contract for a policy of insurance, one must have a(n), or an interest in the nonoccurrence of the risk insured against.

A)policy
B)beneficiary
C)insurable interest
D)rider

Question 11

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

Question 12

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

Question 13

A minor may disaffirm an insurance contract, but may only be able to demand the unearned premium for the unexpired portion of the policy.

Question 14

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)The mortgagee has an insurable interest towards half the loan amount It is a willful failure to disclose any information irrelevant to the insurance contract by the insurer.

Question 15

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

A)face
B)insurable risk
C)premium
D)policy

Question 16

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 17

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

Question 18

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

Question 19

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

Question 20

Which of the following best defines subrogation? It is the right of an insurer to assume the legal rights of the insured.

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.