RMI 300 Final Exam UPDATED Exam Questions and CORRECT Answers
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Course
RMI 300
Institution
RMI 300
RMI 300 Final Exam UPDATED Exam
Questions and CORRECT Answers
What are the different parts of an insurance contract? - CORRECT ANSWER- 1.
Declarations page
2. Insuring agreement
3. Exclusions
4. Conditions
5. Attachments
What are the different parts in the declarations page? - CORRECT ANS...
RMI 300 Final Exam UPDATED Exam
Questions and CORRECT Answers
What are the different parts of an insurance contract? - CORRECT ANSWER✔✔- 1.
Declarations page
2. Insuring agreement
3. Exclusions
4. Conditions
5. Attachments
What are the different parts in the declarations page? - CORRECT ANSWER✔✔- 1.
Exposure information
2. Insurer and policy information
What is the exposure information used for in the declarations page of an insurance contract? -
CORRECT ANSWER✔✔- Underwriting purposes
What does the exposure information contain in the declarations page of an insurance
contract? - CORRECT ANSWER✔✔- 1. Insured name, location, type of organization and
activities, etc
2. Possible misrepresentation/concealment (this is where it is most likely to occur!)
(insurance is a contract of utmost good faith)
Insurance is a contract of ______ - CORRECT ANSWER✔✔- Utmost good faith
What does the insurer and policy information contain in the declarations page of the
insurance contract? - CORRECT ANSWER✔✔- 1. Premium due, policy period, coverage
territory, valuation method
2. Covered causes of loss (perils) (named "broad" perils and open "special" perils)
3. Limit
4. Deductible
,Named Peril - CORRECT ANSWER✔✔- Also called a "broad peril" and means that the
covered losses are named in the contract
Open Perils - CORRECT ANSWER✔✔- Also called "special perils" and means that every
loss is covered unless it is specified that it is excluded in the contract
Limit - CORRECT ANSWER✔✔- Maximum amount an insurer will pay, also called the
face value
Per occurrence limit - CORRECT ANSWER✔✔- Separate limit for each event covered by
the policy
Annual aggregate limit - CORRECT ANSWER✔✔- Total limit for the entire year (or policy
period)
Deductible - CORRECT ANSWER✔✔- Insured retains risk below a dollar amount (200
deductible on a 1000 dollar loss? you pay 800)
Per occurrence and annual aggregate deductible? - CORRECT ANSWER✔✔- Per occurence
= separate deductible for each event covered by the policy
Annual aggregate = total deductible amount for the entire year
How is a deductible stated other than an actual number value? - CORRECT ANSWER✔✔-
Period of time or a percentage of loss (called a copay or coinsurance)
Limit of 100,000; loss of 80,000 and 5,000 deductible?
Limit of 100,000; loss of 110,000 and 5,000 deductible?
Limit of 100,000; loss of 80,000, deductible of 5,000 and copay of 20%?
What does insurance company pay? How much do you retain? - CORRECT ANSWER✔✔-
75,000; 5000
100,000; 10,000
,80,000-5000-(80,000-5000)*.2 = 60,000; 20,000
Stop loss agreement - CORRECT ANSWER✔✔- Limits the total "out of pocket" expense
Why do we have deductibles? - CORRECT ANSWER✔✔- 1. Limit moral hazard
2. Lowers our premiums (expected loss lower if we retain, which lowers premium)
Latent - CORRECT ANSWER✔✔- Don't know until the future
Incontestability - CORRECT ANSWER✔✔- In a life insurance contract, and it is that after 2
years of you experiencing a loss and the insurance company finds out you misrepresented
something, they cannot come back and recover the money UNLESS you misrepresented your
age
Manuscript policy - CORRECT ANSWER✔✔- Policyholder has input into the insurance
agreement, then it is not a contract of adhesion, which makes the court to not favor the
contract towards the insured when interpreting the contract (just look at most reasonable
interpretation)
Components of insuring agreement in the insurance contract? - CORRECT ANSWER✔✔- 1.
Insurer's consideration (giving up possible benefit of not having to pay you)
2. Types of losses
Types of losses under the insuring agreement in the insurance contract? - CORRECT
ANSWER✔✔- 1. Direct vs indirect (consequential)
2. Liability often covers legal defense costs (but not fines)
Why would an insurance company want to represent you in a lawsuit if you are covered for
that lawsuit? - CORRECT ANSWER✔✔- Moral hazard! You will be a lot more likely to
settle because you know that you will not have to pay
Declaration - CORRECT ANSWER✔✔- Statement about a truth
, Insuring agreement - CORRECT ANSWER✔✔- Promise of the insurance company
Exclusions - CORRECT ANSWER✔✔- Loss situations not covered in the policy
(categorized by purpose)
Components of exclusions under the insurance contract? - CORRECT ANSWER✔✔- 1.
Avoid insurer catastrophe
2. Standardize the risk
3. Limit duplicate coverage
4. Maintain fortuity
What is important about a catastrophe? - CORRECT ANSWER✔✔- It has positive
correlation (like a flood), so if one loss occurs, this means that more losses will occur and
could put financial strain on the insurance company to pay
What does it mean to standardize the risk? - CORRECT ANSWER✔✔- Assist in
categorizing insureds to limit adverse selection (put into similar pools so then people won't
leave because the premium is way too big)
Why does an insurance company want to limit duplicate coverage? - CORRECT
ANSWER✔✔- limit moral hazard; if you over indemnify someone, they will more likely
cause a loss just because they know they will be better off after the loss than before
Components of the condition portion of the insurance contract? - CORRECT ANSWER✔✔-
1.valuation (think the indemnity principle) AND 2.Other insurance provisions
3. Subrogation
How do you calculate the actual cash value of a property loss in order to correctly indemnify?
- CORRECT ANSWER✔✔- Replacement cost new - true depreciation on lost property (so
this is going to be the amount they actually paid....less depreciation)
Insurable Interest - CORRECT ANSWER✔✔- One who gets paid actually experienced the
loss
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