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RMIN 4000 Test 3 Brown Study Guide Solutions

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RMIN 4000 Test 3 Brown Study Guide Solutions Principal of Indemnity - ANSWER-insurer pays no more than actual amount of the loss; insurer should not profit from the loss Replacement cost - ANSWER-the cost to replace an inventory item in its identical form (similar workmanship and quality) Act...

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  • November 11, 2024
  • 14
  • 2024/2025
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RMIN 4000 Test 3 Brown Study Guide

Solutions


Principal of Indemnity - ANSWER✔✔-insurer pays no more than actual amount of the loss; insurer

should not profit from the loss


Replacement cost - ANSWER✔✔-the cost to replace an inventory item in its identical form (similar

workmanship and quality)


Actual Cash Value - ANSWER✔✔-replacement cost - depreciation




in property ins, usually based on the actual cash value of the property at the time of loss


Market Value - ANSWER✔✔-the price at which property would sell


Valued Policy - ANSWER✔✔-a policy that pays the face amount of insurance if a total loss occurs (life

insurance)


Value Policy Law - ANSWER✔✔-requires payment of the face amount of insurance if a total loss to real

property occurs from a peril specified in law


Principle of Insurable Interest - ANSWER✔✔-The insured must be in a position to lose financially if a

covered loss occurs


Examples of Insurable Interest - ANSWER✔✔--ownership of property (house, car)




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-potential legal liability (business owners)


-secured creditors


-contractual rights (goods in transit)


When must an insurable interest legally exist in life insurance? - ANSWER✔✔-at inception of the policy;

ex-spouse can still collect on life insurance if listed as policy beneficiary


Principle of Subrogation - ANSWER✔✔-substitution of the insurer in place of the insured for the purpose

of claiming indemnity from a third party for a loss covered by insurance


Reasons for subrogation - ANSWER✔✔--prevents insured from collecting twice (once from insurer, once

from responsible party)


- holds the negligent party responsible for the loss


- reduces insurance claims costs and therefore rates


principle of upmost good faith - ANSWER✔✔-a higher degree of honesty is imposed on both parties to

insurance contracts than is imposed on parties to other contracts


What three legal doctrines support the principle of upmost good faith? - ANSWER✔✔--representations


-concealment


-warranty


Representations - ANSWER✔✔-statements made by the applicant for insurance


What makes a contract voidable on the premise of misrepresentation? - ANSWER✔✔-1. material


2. false, and


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