Question 1

Peg obtains from QT Insurance Company a policy that provides that af?ter it has been in force for a certain time,QT cannot question state?ments made in the application.This is

Accepted Answer

The policy provision that QT cannot question statements made in the application after a certain time is an incontestability clause. This clause protects the insured by preventing the insurance company from avoiding the contract or denying coverage based on misrepresentations that were made in the application.

Question 2

Erte applies for,and obtains,casualty insurance coverage from Friendly Insurance Company for his business,Golf Club,Inc.The effective date of the policy is the date

Accepted Answer

The effective date of an insurance policy is typically the date specified in the application as the effective date, assuming the policy is issued and the premium is paid.

Question 3

Cathy obtains from Depend Insurance Company a policy that pro?vides if a dispute arises between the parties concerning the settle?ment of a claim,the dispute must be submitted to an impartial third party,not a court,for resolution.This is

Accepted Answer

The provided policy clause states that any disputes must be resolved through arbitration, which means the parties agree to use an impartial third party to make a final decision instead of going to court. This is known as an arbitration clause.

Question 4

Trustworthy Insurance,Inc. ,has a valid reason to cancel a policy issued to USA Sales Company.In most states,Trustworthy could cancel the policy on

Accepted Answer

In most states, insurance companies are required to provide advance written notice of policy cancellation. Therefore, option D is the most likely choice in this scenario.

Question 5

Isabel obtains a fire insurance policy on her home from Justice Insurance Company.The home is lost in a fire,but the parties dispute the amount of Justice's liability under an ambiguous clause in the policy.A court would most likely

Accepted Answer

Courts typically interpret ambiguous insurance policy clauses against the insurer, as they are the ones who drafted the policy. This principle is known as "contra proferentem."

Question 6

Feta is a partner in the game design firm GR8 Games,Inc. ,which ob?tains key-person life in?surance on Feta in the amount of $1 million from Halo Insurance Company.Feta quits GR8 Games to join Icy Applications,Inc.Feta dies.Under the principle of insurable interest,Halo must pay the $1 million to

Accepted Answer

The principle of insurable interest means that the person who takes out an insurance policy must have a financial interest in the insured person's life. In this case, the insurance policy was taken out by GR8 Games, indicating that they had an insurable interest in Feta's life while he was still working for them. Since Feta has now quit and joined Icy Applications, his former employer no longer has an insurable interest in his life, and the insurance policy is no longer valid. Therefore, Halo Insurance Company does not have to pay anyone.

Question 7

Trina pays a premium to Unity Insurance Corporation for fire insurance against the loss of her Viewpoint Office Building.After Trina sells the building to Wade,it burns down.Under the policy,Unity must pay

Accepted Answer

Once Trina sells the building to Wade, she no longer has an insurable interest in the property. Wade, as the new owner, would need to have his own insurance policy to claim for the loss.

Question 8

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

Accepted Answer

A binder is a temporary agreement that provides coverage until the actual policy is issued. It typically indicates that a policy is pending and states its essential terms, such as the amount of coverage, premium, and effective date. A binder does not attest to the truth of the application or promise to consider it, nor does it evidence receipt of payment (although it may state that payment was made). Therefore, the best choice is D, which describes the typical purpose and content of a binder.

Question 9

Mila,who captains a commercial fishing boat,obtains a policy from North Coast Insurance Company,which agrees to pay $500,000 to Mila's beneficiary on Mila's death.This is

Accepted Answer

The policy obtained by Mila is a life insurance policy, as it agrees to pay a sum of money upon Mila's death. Floater insurance typically covers movable property, major medical insurance provides coverage for medical expenses, and marine insurance covers risks associated with ships, boats, and cargo.

Question 10

Haya obtains an insurance policy from Inviolable Insurance Corporation (IIC).IIC may cancel,or refuse to renew,the policy because of

Accepted Answer

IIC cannot cancel or refuse to renew the policy based on Haya's appearance as a witness against IIC, gender, or national origin as these are all discriminatory practices that are illegal under the law.

Question 11

Felicity Cookware Company makes and sells kitchen products.To cover injuries to consumers if the products prove de?fective,Felicity should obtain

Accepted Answer

Felicity should obtain liability insurance, which covers injuries and damages that are caused by their products. This type of insurance protects the company from financial losses resulting from legal action taken by injured consumers. Group insurance, health insurance, and life insurance are not relevant for covering injuries caused by a defective product.

Question 12

Regular Business,Inc.(RBI),obtains a fire insurance policy from Statistical Insurance Company on a $400,000 warehouse.The policy includes an 80-percent coinsurance clause.RBI insures the property for $320,000.In a fire,the warehouse suffers $200,000 in damage.RBI can recover

Accepted Answer

Since RBI insured the property for $320,000 which is less than the 80% requirement, they are considered underinsured. The calculation to determine the amount RBI can recover is:
Amount of insurance carried ($320,000) divided by the amount of insurance required (80% of $400,000 = $320,000) multiplied by the amount of the loss ($200,000) = $200,000
Therefore, RBI can recover $200,000 which is Option C.

Question 13

Doctors Medical Associates obtains an insurance policy that protects its members against negligence claims by their pa?tients.This is

Accepted Answer

Malpractice insurance is specifically designed to protect healthcare professionals against claims of negligence by their patients. Choices A, B, and D do not apply to this situation.

Question 14

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

Accepted Answer

Obie is acting as the agent for Neighbors Insurance Company, not for Mena. Obie's job is to sell insurance policies on behalf of Neighbors, therefore he is the insurer's representative, not the customer's.

Question 15

Beth obtains a life insurance policy from Consumers Insurance Company,naming her spouse Don as the beneficiary.Beth and Don are di?vorced.There is no provision in the policy about divorce.On Beth's death,Consumers must

Accepted Answer

In the absence of a specific provision in the policy regarding divorce, the named beneficiary, Don, is still entitled to the proceeds of the life insurance policy.

Question 16

Reno is the beneficiary of a life insurance policy on Sula's life obtained from Thicket Insurance Company.The insured of this policy is

Accepted Answer

The insured of a life insurance policy is the person whose life is insured, in this case, it is Sula. Therefore, the beneficiary is Reno, and Thicket Insurance Company is the insurer. The agent or broker through whom the policy was obtained is a third party in this transaction.

Question 17

Shelley obtains a life insurance policy with no cash surrender value or cash value,and names her son Thad as the beneficiary.This is

Accepted Answer

The fact that there is no cash surrender value or cash value indicates that this is a term insurance policy. Thad being named as the beneficiary simply means he will receive the death benefit if Shelley passes away during the term of the policy.

Question 18

Fred misstates his age in applying for a life insurance policy with Gamma Insurance Company.Due to this "error," Gamma can

Accepted Answer

Gamma Insurance Company can adjust the amount of the premium or the benefits to reflect the correct age, as this is a common practice in insurance when there is a misstatement of age.

Question 19

Infinite Sales Corporation obtains an insurance policy that protects Infinite Sales in the event of the death or disability of Jacqueline,Infinite's executive sales manager.This is

Accepted Answer

The answer of Infinite Sales Corporation obtains an insurance policy...

Question 20

Kelsy obtains a business liability insurance policy from Luminous Insurance Company for Kelsy's Framing & Art Supplies store.When an event occurs that gives rise to a claim,each party has a duty to

Accepted Answer

Both parties have a duty to cooperate in investigating the facts surrounding the event that gave rise to the claim. This is essential in determining whether the claim falls within the scope of the insurance policy and the indemnification responsibilities of the insurer. Filing a suit against the other party or finding a third party to impose liability on may not be necessary or applicable in all situations. Paying outstanding premiums or refunding unearned amounts only concerns the financial aspect of the insurance policy, which is not directly related to the parties' duty in dealing with a claim.

Quiz 51: A: Insurance