Deck 35: Insurance

Question 1

Risk management is the transfer of certain risks from an individual to an insurance company.

Answer 1

True

Question 2

Insurance coverage is always effective the moment an insurance broker accepts the applicant's first payment toward the premium.

Answer 2

False

Question 3

Employer's liability insurance insures an employer against liability for injuries or losses sustained by employees during the course of their employment.

Answer 3

True

Question 4

Under a multiple insurance clause,a homeowner who insures a home for 80 percent of its value can recover only 80 percent of the cost for damage to it.

Question 5

The person who receives the proceeds under an insurance policy is called a beneficiary.

Question 6

Liability insurance provides indemnity against losses in trade or losses caused by the dishonesty of employees. 

Question 7

A person can insure anything in which he or she has an insurable interest.

Question 8

Businesses typically protect their financial interests by obtaining insurance. 

Question 9

The existence of an insurable interest is a primary concern when determining liability under an insurance policy.

Question 10

For property insurance,the insurable interest must exist when a policy is purchased.

Question 11

An applicant for an insurance policy is called an underwriter.

Question 12

Automobile insurance covers damage to automobiles resulting from specific hazards or occurrences.

Question 13

Insurance policies are governed by the principles of common law.

Question 14

A broker is not an agent of the insurance company or the applicant.

Question 15

An insurance application is part of the insurance contract.

Question 16

A business organization cannot obtain insurance on the life of a person,even on the life of an individual who is important to that organization.

Question 17

Insurers can estimate fairly accurately the amount they will have to pay if they insure the members of a particular group.

Question 18

For an insurance contract to be binding,consideration in the form of a premium must be given.

Question 19

There is little state regulation for the insurance industry.

Question 20

An insurance agent ordinarily works for the insurance company.

Question 21

Property insurance cannot be canceled for nonpayment of premiums.

Question 22

An insurer has a duty to avoid paying a claim even if it means acting in bad faith.

Question 23

The insured can cancel a policy at any time.

Question 24

The words used in an insurance contract are given their ordinary meanings in light of the nature of the coverage involved.

Question 25

An absolute defense against payment exists if the insurer can show that the insured lacked an insurable interest.

Question 26

A person who obtains insurance from an insurance company's agent is not usually protected until a formal written policy is issued.

Question 27

An insurance company may cancel an insured's policy for any reason and at any time.

Question 28

An incontestability clause prohibits an insurer from contesting statements made in an insurance application until a specified time has elapsed.

Question 29

Under an antilapse clause,an insurance policy will not lapse under any circumstances.

Question 30

When there is an ambiguity in an insurance policy,the provision generally is interpreted against the insurance company.

Question 31

An arbitration clause requires arbitration of disputes that arise between the insurer and the insured concerning the settlement of claims.

Question 32

Misstatements or misrepresentations in an application for insurance can affect the amount of a premium but cannot void a policy.

Question 33

Grace applies for a homeowners' insurance policy on her house with Heroic Insurance Company through Ian,a broker.In this transaction,Ian is 

A) ​an agent for both parties. 
B) ​Grace's agent, and not Heroic's agent. 
C) Heroic's agent, and not Grace's agent.​ 
D) ​not an agent.

Question 34

A loss sustained between the time of application and the delivery of an insurance policy may not be covered.

Question 35

Phil is an insurance broker.This means that Phil is 

A) ​an employee of an insurance company. 
B) ​an independent contractor. 
C) ​not allowed to deal directly with an insurance company. 
D) ​in charge of determining the appropriate premium for an insurance policy.

Question 36

Reno is the beneficiary of a life insurance policy on Sula's life obtained from Timekeepers Insurance Company through Ulani,Timekeepers' agent.The underwriter of this policy is 

A) ​Reno. 
B) ​Sula. 
C) ​Timekeepers. 
D) ​Ulani.

Question 37

A binder is an oral,temporary insurance policy.

Question 38

Allie applies for a life insurance policy with Long Life Insurance Company.The consideration Allie pays to Long Life is 

A) ​a premium. 
B) ​a fee. 
C) ​a policy. 
D) ​an insurable interest.

Question 39

Portia is the beneficiary of a life insurance policy on Quentin's life obtained from Renewall Insurance Company through Stan,an insurance broker.The insured of this policy is 

A) ​Portia. 
B) ​Quentin 
C) ​Renewall. 
D) ​Stan.

Question 40

An incorrect statement as to the age of the insured provides an insurance company with an excuse to avoid payment on the insured's death.

Question 41

Trial Lawyers,P.A.,obtains an insurance policy that protects its members against negligence claims by their clients.This is 

A) ​liability insurance. 
B) ​fidelity or guaranty insurance. 
C) ​malpractice insurance. 
D) ​workers' compensation insurance.

Question 42

Alain and Bette are partners who own and operate Cakes n' Pies,a chain of dessert restaurants.Their partnership obtains insurance on Alain and Bette's lives.This is 

A) ​disability insurance. 
B) ​fidelity insurance. 
C) ​key-person insurance. 
D) ​liability insurance.

Question 43

Adrian applies for,and obtains,casualty insurance coverage from Business Insurance Company for his business,Country Club,Inc.The effective date of the policy is the date 

A) ​Adrian submits the application. 
B) ​Business Insurance accepts the first premium. 
C) ​Business Insurance issues the policy. 
D) ​the application specifies as the effective date.

Question 44

Kaitlyn obtains an insurance policy that protects her against liability for personal injuries and property damage resulting from the operation of her vehicle.This is 

A) ​disability insurance. 
B) ​liability insurance. 
C) ​malpractice insurance. 
D) ​automobile insurance.

Question 45

International Corporation (IC)makes and sells kitchen appliances.To cover injuries to consumers if the appliances prove defective,IC should obtain 

A) ​group insurance. 
B) ​health insurance. 
C) ​liability insurance. 
D) ​life insurance.

Question 46

Global Reach,Inc.,insures its real and personal property,as well as the lives of its key employees,to protect its financial interest should some event undermine its security.This is 

A) ​risk management. 
B) ​risk pooling. 
C) ​risk rating. 
D) ​risk transference.

Question 47

Quality Insurance Company provides life insurance policies.Quality applies a concept of insuring a large number of people with the knowledge that only a small proportion of them will die in a given year.The large number of premiums provides the funds to pay for the small number of deaths.This concept is known as 

A) ​risk avoidance. 
B) ​risk pooling. 
C) ​risk rating. 
D) ​risk transference.

Question 48

U-Rents Company wants to insure the equipment that it rents to consumers.To obtain insurance,U-Rents must have an insurable interest in the property 

A) ​at any time. 
B) ​at the time a loss occurs. 
C) ​at the time a policy is obtained. 
D) ​continuously from the time a policy is obtained to the time a loss occurs.

Question 49

Home Insurance Company tells its customer Teri that she need not respond to questions about her national origin or race on her insurance application.Teri provides the information anyway.Home Insurance can 

A) ​use the information to avoid its obligations under its policy with Teri. 
B) ​not use the information to avoid its obligations under its policy with Teri. 
C) ​use the information to refuse to renew its policy with Teri. 
D) ​not use the information, except to cancel its policy with Teri.

Question 50

Discount Retail Corporation obtains an insurance policy that provides indemnity against losses in trade or losses caused by the dishonesty of employees,the insolvency of debtors,or breaches of contract.This is 

A) ​malpractice insurance. 
B) ​fidelity or guaranty insurance. 
C) ​liability insurance. 
D) ​key-person insurance.

Question 51

Rafe obtains a fire insurance policy on his vacation cabin near Smoky Mountain from Torchlight Insurance Company.The cabin is lost in a fire,but the parties dispute the amount of Torchlight's liability under an ambiguous clause in the policy.A court would most likely 

A) ​interpret the clause against Rafe. 
B) ​interpret the clause against Torchlight. 
C) ​rewrite the clause and apply it as rewritten. 
D) ​strike the clause from the policy.

Question 52

Donald applies for a life insurance policy with Equity Insurance Company through Fletch,an agent who works for Equity.Donald pays the initial premium.Fletch writes a binder,which 

A) ​acknowledges the application and promises to consider it. 
B) ​attests to the truth of each statement in the application 
C) ​evidences receipt of the payment of the initial premium. 
D) ​indicates that a policy is pending and states its essential terms.

Question 53

Ricky obtains an insurance policy from Security Insurance,Inc.The policy provides that on Ricky's death Security will pay $500,000 to Tori,Ricky's spouse and beneficiary.This is 

A) ​health insurance. 
B) ​key-person insurance. 
C) ​life insurance. 
D) ​disability insurance.

Question 54

Orin is a doctor with Physicians Health Clinic,which obtains insurance from Quotient Insurance,Inc.,on Orin's life.Orin dies.The proceeds of the policy belong to 

A) ​Orin's heirs. 
B) ​Physicians Health Clinic. 
C) ​Quotient Insurance. 
D) ​none of the choices.

Question 55

Mena applies for a homeowners' insurance policy on her house with Neighbors Insurance Company through Obie,an agent who works for Neighbors.In this transaction,Obie is 

A) ​an agent for both parties. 
B) ​Mena's agent, and not Neighbors's agent. 
C) ​Neighbors's agent, and not Mena's agent. 
D) ​not an agent.

Question 56

Frank applies to GuardDog Insurance Company for homeowners' insurance.The company issues a policy,but later discovers that Frank's application includes several misstatements.Most likely,these misstatements can 

A) ​affect the coverage under the policy but cannot void the policy. 
B) ​bind Frank but cannot affect the coverage. 
C) ​not bind Frank or affect the policy. 
D) ​void the policy.

Question 57

Lighting Concepts,Inc.,a trade fixture vendor and installer,wants to insure itself against injuries to employees sustained during the course of their employment.The policy covers claims not covered by workers' compensation insurance.Lighting Concepts should obtain 

A) key-person insurance.​ 
B) ​employer's liability insurance. 
C) ​fidelity or guaranty insurance. 
D) ​malpractice insurance.

Question 58

Bret obtains a fire insurance policy on his rental house with Continental Insurance Company.Like all insurance,this policy is an arrangement for 

A) avoiding the assumption of responsibility.​ 
B) ​predicting a potential loss based on unknown factors. 
C) ​shifting the imposition of liability. 
D) ​transferring and allocating risk.

Question 59

Estelle owns and operates a commercial dairy farm with her son Gabe.Estelle applies to obtain an insurance policy from Farm & Ranch Insurance Company to pay $1 million to Gabe on Estelle's death.This is an example of 

A) ​a violation of state law. 
B) ​an attempt at wagering, but not a violation of state law. 
C) ​liability insurance. 
D) ​life insurance.

Question 60

Hernandez obtains an insurance policy that protects him against some risks of loss to the contents of his residence.This is 

A) ​homeowners' insurance. 
B) ​title insurance. 
C) ​malpractice insurance. 
D) ​liability insurance.

Question 61

Greg obtains from Helpful Insurance Company a policy that provides that Greg has thirty days after a premium's due date to pay it before the policy will be canceled.This is 

A) ​a multiple insurance clause. 
B) ​an antilapse clause. 
C) ​an appraisal clause. 
D) ​an incontestability clause.

Question 62

Energy Industries,Inc.,obtains insurance policies with Fidelity Insurance,Inc.,and Goodworth Insurance Company against the risk of loss of Energy's property.Each policy includes a multiple insurance clause.A fire partially destroys one of Energy's buildings.Energy can collect from Fidelity 

A) ​all of the loss. 
B) ​half of the loss. 
C) ​its proportionate share of the loss to the total amount of insurance. 
D) ​none of the loss.

Question 63

Clark obtains from Delta Insurance,Inc.,a policy that provides if a dispute arises between the parties concerning the settlement of a claim,the dispute must be submitted to an impartial third party,not a court,for resolution.This is 

A) ​an antilapse clause. 
B) ​an arbitration clause. 
C) ​an appraisal clause. 
D) ​an incontestability clause.

Question 64

Anna obtains a business liability insurance policy for her Brew & Bagels Coffee Shop from ChoiceFirst Insurance Company.When an event occurs that gives rise to a claim,each party has a duty to 

A) ​cooperate in an investigation to determine the facts. 
B) ​file a suit against the other so that a court can settle the claim. 
C) ​find a third party on whom to impose liability. 
D) ​pay any outstanding premium or refund any unearned amount.

Question 65

Commerce & Business Insurance,Inc.,has a valid reason to cancel a policy issued to DIY Auto & Truck Parts Company.In most states,Commerce & Business could cancel the policy on 

A) ​advance oral or written notice. 
B) ​oral or written notice but only after arbitration. 
C) ​no notice. 
D) ​advance written-not oral-notice.

Question 66

Ginny obtains a health-insurance policy for her family from Hope Insurance Company.The policy includes an incontestability clause.Under such a clause,after a policy has been in force for a specified period or time,such as two or three years 

A) ​Ginny cannot enter a contest sponsored by Hope or its affiliate. 
B) ​Ginny cannot contest Hope's refusal to pay a claim under the policy. 
C) ​Hope cannot contest Ginny's eligibility for continued coverage. 
D) ​Hope cannot contest Ginny's statements in the application.

Question 67

Donovan obtains from Equity Insurance Company a policy that provides that if the parties cannot agree on the amount of a loss covered by the policy,an estimate of the value by an impartial third party can be demanded.This is 

A) ​an antilapse clause. 
B) ​an arbitration clause. 
C) ​an appraisal clause. 
D) ​an incontestability clause.

Question 68

Speedy Shipping Corporation applies to TransInsurance Company for a fire insurance policy on Speedy's warehouse.On the application,Speedy misrepresents the age of the property to obtain a lower premium.When a fire soon destroys the warehouse,TransInsurance can 

A) ​deny payment, because a fire destroyed Speedy's warehouse. 
B) ​deny payment, because of Speedy's fraud in the application. 
C) ​not deny payment, because a fire destroyed Speedy's warehouse. 
D) ​not deny payment, because the application is not part of the policy.

Question 69

Estimable Credit Company loans funds to Farmland Granaries,LLC,to buy a silo.Estimable obtains an insurance policy from Grangers Insurance,Inc.,to cover the silo.Farmland also obtains a policy from Grangers to cover the silo.Later,Farmland sells the silo to Hi-Yield Harvest Company but keeps the policy.Hi-Yield also obtains a policy from Grangers to cover the silo.Estimable agrees to finance Hi-Yield's purchase of the property.A fire totally destroys the silo.Who can recover for the loss?

Question 70

Myles obtains a property insurance policy from Nova Insurance Company for Myles's restored 1957 Chevy.Nova can cancel the policy 

A) ​if Myles increases the risk assumed by the Nova. 
B) ​if Myles files a claim under the policy. 
C) ​if Myles appears as a witness in a case brought against Nova. 
D) ​under no circumstances.

Question 71

Rob applies to Standard Insurance Company for a life insurance policy.On the application,Rob understates his age.Rob obtains the policy,but for a lower premium than he would have had to pay had he disclosed his actual age.The policy includes an incontestability clause.Five years later,Rob dies.Can Standard refuse payment on the policy?

Question 72

Kelsey obtains a business liability insurance policy from Loyal Insurance Company for Kelsey's Modeling & Hobby Crafts store.When an event occurs that gives rise to a claim,Loyal has a duty to 

A) ​investigate to determine the facts. 
B) ​file a suit against Kelsey so that a court can settle the claim. 
C) ​find a third party on whom to impose liability. 
D) ​refund any unearned amount of the premium.