Question 1

Construction Cranes LLC wants to insure the equipment that it leases to its customers. To obtain insurance, the company must have an insurable interest in the property

Accepted Answer

The answer of Construction Cranes LLC wants to insure the...

Question 2

Dyan and Ed are partners who own and operate Footlong's, a chain of hot-dog stands. Their partnership obtains insurance on their lives. This is

Accepted Answer

Key-person insurance is a policy taken out by a business to cover the life of an important individual, such as a partner, whose death would have a significant financial impact on the business.

Question 3

World Hotels, Inc., insures its real and personal property to protect its financial interest should some event undermine its security. This is risk

Accepted Answer

Risk management involves identifying, assessing, and prioritizing risks, and taking steps to minimize or control the impact of those risks, such as insuring property to protect financial interests.

Question 4

Jason wants to insure himself against injuries and damage resulting from the operation of his taxi that he owns. Jason should obtain

Accepted Answer

The answer of Jason wants to insure himself against injuries...

Question 5

Darlene owns and operates an organic farm with her son Evan. Darlene obtains an insurance policy from Farm Insurance Company to pay $1 million to Evan on Darlene's death. This is

Accepted Answer

This is a life insurance policy, as it is designed to pay a specified amount to a beneficiary (Evan) upon the death of the insured (Darlene).

Question 6

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

Accepted Answer

Misstatements in an insurance application can be grounds for voiding the policy if they are material to the risk being insured.

Question 7

Multi-Enterprise Corporation offers its employees, as an employment benefit, individual medical insurance coverage. This is

Accepted Answer

Individual medical insurance coverage offered as an employment benefit is a type of group insurance, as it is provided to a group of employees by the employer.

Question 8

Adrian applies for, and obtains, casualty insurance coverage from Business Insurance Company for his business, Class Courses LLC. 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 insurer accepts the application and issues the policy accordingly.

Question 9

Irene obtains an insurance policy that protects her against some risks of loss to the contents of her residence. This is

Accepted Answer

Homeowners' insurance typically covers the contents of a residence against risks of loss, such as theft or damage.

Question 10

Rita is the chief executive officer for Sales Inc., a successful market research firm. The company obtains insurance on Rita's life from Tempo Insurance Company. This policy is

Accepted Answer

Key-person insurance is a policy taken out by a company to cover the life of a key employee, such as a CEO, whose death would have a significant financial impact on the company.

Question 11

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 between the insured and the insurance company indicating that a policy is pending and stating its essential terms. It evidences receipt of the payment of the initial premium, but it does not attest to the truth of each statement in the application or promise to consider it.

Question 12

Cutting Edge Corporation makes and sells knives, scissors, garden shears, and other cutting devices. To cover injuries to consumers if the products prove defective, Cutting Edge should obtain

Accepted Answer

Liability insurance is designed to cover injuries or damages that a company's products may cause to consumers if they prove defective.

Question 13

Leon obtains an insurance policy that will replace a portion of his monthly income from employment in the event that illness or injury causes a disability. This is

Accepted Answer

Disability insurance is designed to replace a portion of an individual's income if they are unable to work due to illness or injury.

Question 14

Long-life Insurance Company insures a large number of people with the knowledge that only a small proportion of them will die in any one year. The large number of premiums provides the funds to pay for the small number of deaths. This is risk

Accepted Answer

Risk pooling involves spreading financial risks evenly among a large number of people, which is what the insurance company is doing by using premiums from many to cover the few claims.

Question 15

Commercial Storage Corporation obtains an insurance policy that covers losses to the insured as a result of fire.  This is

Accepted Answer

The insurance policy specifically covers losses due to fire, making it fire insurance.

Question 16

Roma obtains a fire insurance policy on her house with Safe-wise Insurance Company. This policy is an arrangement best described as

Accepted Answer

The fire insurance policy transfers the risk of loss from Roma to the insurance company, which is a form of risk management and allocation.

Question 17

Greta applies for a homeowners' policy with Homewood Insurance Company through Ivy, an insurance agent. As a general rule, Homewood is bound by

Accepted Answer

Homewood Insurance Company is generally bound by the acts of its agent, Ivy, as she represents the company in dealings with clients like Greta.

Question 18

Insurance companies deal with risk by

Accepted Answer

Insurance companies manage risk by pooling it among a large group of policyholders, which helps to mitigate the financial impact of individual claims.

Question 19

Rick obtains an insurance policy from Stable Insurance Inc. The policy provides that on Rick's death Stable will pay $500,000 to Taylor, the beneficiary. This is

Accepted Answer

This is life insurance because it provides a payout to a beneficiary upon the policyholder's death.

Question 20

Dino is the beneficiary of a life insurance policy on Erin's life obtained from Fidelity Insurance LLC through Gillian, Fidelity's agent. The insured of this policy is

Accepted Answer

Erin is the insured because the policy is on her life.

Quiz 35: Insurance