Deck 30: Insurance

Question 1

An insurance application is part of the insurance contract.

Answer 1

True

Question 2

An applicant for an insurance policy is called an underwriter.

Answer 2

False

Question 3

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

Answer 3

True

Question 4

An insurance agent ordinarily works for the insurance company.

Question 5

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

Question 6

If s broker fails to procure a policy, the applicant normally is not insured.

Question 7

State law determines the status of all parties obtaining insurance.

Question 8

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

Question 9

Federal law determines the status of all parties writing insurance.

Question 10

A person who obtains insurance from an insurance company's agent is usually protected the moment the premium is paid.

Question 11

Businesses can not typically protect their financial interests by obtaining insurance.

Question 12

A life insurance policy is not binding until the insured dies.

Question 13

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

Question 14

Any loss sustained before the effective date of an insurance policy will not be covered.

Question 15

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

Question 16

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

Question 17

A broker is an agent of an insurance company.

Question 18

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 19

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

Question 20

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 21

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 22

A binder provides temporary insurance coverage.

Question 23

Property insurance cannot be canceled for nonpayment of premiums.

Question 24

Comprehensive general liability insurance can encompass as many risks as the insurer is willing to cover.

Question 25

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

Question 26

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

A) ​Reno.
B) ​Sula.
C) ​Traditional Insurance.
D) ​the agent or broker through whom the policy was obtained.

Question 27

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

Question 28

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

Question 29

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

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

Question 30

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

Question 31

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 32

Automobile liability insurance covers liability for property damage but not bodily injury.

Question 33

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

Question 34

Misstatements or misrepresentations in an application for insurance can void a policy.

Question 35

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

Question 36

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

Question 37

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

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

Question 38

The insured can cancel a policy only under certain circumstances.

Question 39

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

Question 40

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 41

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 42

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

A) ​the insured submits the application.
B) ​the insurer accepts the first premium.
C) ​the insurer issues the policy.
D) ​the application specifies as the effective date.

Question 43

Cooks Delight LLC makes and sells kitchen appliances. To cover injuries to consumers if the appliances prove defective, Cooks should obtain

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

Question 44

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 45

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 46

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 47

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) ​universal life.
C) ​coinsurance.
D) ​underwriting.

Question 48

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 49

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) ​all-risk insurance.
C) ​key-person insurance.
D) ​liability insurance.

Question 50

Ben obtains a fire insurance policy on his house with Constant 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 51

Organic Produce Company obtains an insurance policy to protect against losses incurred by the firm as a result of being held liable for personal injuries or property damage sustained by others. This is

A) ​casualty insurance.
B) ​fire insurance.
C) ​life insurance.
D) ​malpractice insurance.

Question 52

Dan applies for a life insurance policy with Equity Insurance Company through Fletch, an agent who works for Equity. Dan 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

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 54

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

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

Question 55

Commerce Insurance, Inc., has a valid reason to cancel a policy issued to DIY Auto Parts Company. In most states, Commerce 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 56

Anna obtains a business liability insurance policy for her 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 57

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 58

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 59

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 60

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

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

Question 61

Greg obtains from Hearthstone 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

Vanessa obtains a life insurance policy with no cash surrender value and names her son Winthorp as the beneficiary. This is

A) ​whole life insurance.
B) ​limited-payment life insurance.
C) ​universal life insurance.
D) ​term insurance.

Question 63

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.

Question 64

Lighting Concepts, Inc., a trade fixture vendor and installer, wants to insure itself against injuries to employees and others on the premises during and after work hours. This business should obtain

A) ​workers' compensation insurance.
B) ​general liability insurance.
C) ​product liability insurance.
D) ​professional malpractice insurance.

Question 65

Riverside Storage obtains a fire insurance policy from Security Insurance, Inc., on a $400,000 warehouse. The policy includes an 80-percent coinsurance clause. Riverside insures the property for $320,000. In a fire, the warehouse suffers $200,000 in damage. The insured can recover

A) ​$400,000.
B) ​$320,000.
C) ​$200,000.
D) ​$80,000.

Question 66

Don 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 67

Ruth obtains a fire insurance policy on her house from Safety Insurance Company. Later, after she moves out and the house is empty, a fire destroys the structure. Most fire insurance policies require that at the time of a loss, the insured premises be

A) ​vacant and uninhabitable.
B) ​occupied.
C) ​unoccupied but habitable.
D) ​empty.

Question 68

Roy, an accountant, injures Sally. She files a claim to recover for the injury under Roy's homeowners' insurance policy. Liability coverage under a homeowners' policy normally applies to liability that arises from

A) ​business or professional activities.
B) ​the operation of a motor vehicle.
C) ​intentional misconduct.
D) ​none of the choices.

Question 69

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

A) ​product liability insurance.
B) ​general liability insurance.
C) ​professional malpractice insurance.
D) ​workers' compensation insurance.

Question 70

Gus obtains a health insurance policy for his family from Healthway Insurance Company. The policy includes an incontestability clause. Under such a clause, after a policy has been in force for two or three years

A) ​Gus cannot contest Healthway's insurable interest.
B) ​Gus cannot contest Healthway's refusal to pay a claim under the policy.
C) ​Healthways cannot contest Gus's eligibility for continued coverage.
D) ​Healthways cannot contest Gus's statements in the application.

Question 71

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 72

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?