Chapter 9 review questions Flashcards
Denise purchased a dining room set for $2,800 and insured it on an actual cash value (ACV) basis. At the time the dining room set was destroyed by a covered peril, the set was 40 percent depreciated. A replacement set will cost $3,000. Assuming no deductible, how much will Denise collect from her insurer?
1,800
Property insurance contracts have all of the following distinct legal characteristics EXCEPT
they are bilateral contracts.
Which of the following statements about law and the insurance agent is (are) true?
I. An insurer is responsible for the acts of its agents when the agents are acting within the scope of the agency agreement.
II. Consumers should not assume that an agency relationship exists just because someone claims to represent an insurance company.
both 1 and 2
Kyle purchased collision insurance on his new car. While Kyle was driving home from work, another driver failed to stop at a stop sign and hit Kyle’s car. Kyle phoned his insurance agent and reported the accident. The agent said, “Don’t worry, Kyle, we’ll pay to get your car fixed. After we pay for the damage to your car, we will try to collect from the driver who damaged your car.” The process the agent described is called
subrogation
When someone reasonably relies upon a representation of fact, what legal doctrine prevents the representation of fact from being retracted if the individual who relied upon the representation of fact would be harmed?
estoppel
The assignment of property insurance by the seller of the property to the purchaser of the property is only valid if the insurer approves the assignment. The reason that the insurer must approve the assignment of a property insurance policy is that
insurance contracts are personal contracts.
Which of the following statements about the principle of insurable interest is (are) true?
I. In life insurance, the insurable interest requirement must be met only at the time of the loss to receive life insurance proceeds after the insured has died.
II. The insurable interest requirement helps to reduce the problem of moral hazard.
2 only
For a legally binding property insurance contract to be in force, all of the following elements are necessary EXCEPT
written document
When Maria applied for a life insurance policy, she answered “No” in response to the question “Have you visited a doctor for any reason during the previous 12 months?” In fact, Maria visited a doctor five weeks ago after experiencing chest pains. She was referred to a specialist who determined that Maria has severe heart disease. If Maria dies shortly after the life insurance policy is issued, on what grounds will the insurer be successful in denying the claim?
misrepresentation
An insurance contract must be accepted in its entirety and any ambiguity in the contract is construed against the insurer. Because of these characteristics, we can describe insurance contracts as
contracts of adhesion
