Business Law II BA 304-01: N/A
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Chapter 36 - Insurance -Review

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1) Insurance is a contract by which one party for a stipulated consideration promises to pay another party a sum of money upon the occurrence of a stated event in which the other party has an interest.

2) An insurance broker generally is an independent contractor who is not employed by any one insurance company.

3) A contract of insurance ordinarily is stated in a writing called a policy.

4) In general, there is no requirement that an insurable interest exist at the time that a property insurance contract is created.

5) A person has an insurable interest in property if destruction of that property would cause a monetary or pecuniary loss to that person.

6) An insurable interest in property must exist at the time that the loss is suffered, while an insurable interest in life must exist at the time that the policy is issued.

7) A person who obtains life insurance generally can name anyone as beneficiary regardless of whether that beneficiary has an insurable interest in the life of the insured.

8) Any false statement in an application binds the insured.

9) The person to whom an insurance promise is made is called the insured, the assured, or the policyholder.

10) A person who would suffer a direct pecuniary loss if a particular piece of property were destroyed has an insurable interest.

11) For property insurance, an insurable interest must exist at the time of the loss.

12) If a man names his wife as beneficiary of his life insurance and the two are thereafter divorced, the insurance policy is not affected.

13) You purchased life insurance on your life. Regarding the beneficiary you may name whomever you wish.

14) An application for insurance generally is attached to the policy and becomes a part of the insurance contract.

15) An insured person generally is allowed a grace period of what length of time in which to make payment of a premium due on a life insurance policy, which is 30 to 31 days.

16) If a provision in an insurance policy is ambiguous it is interpreted against the insurer.

17) The application of exceptions to coverage is limited by strictly interpreting exceptions to coverage against the insurer, placing on the insurer the burden of proving that an exception applies, and a modern trend that ignores exceptions that are literally applicable when there is no cause-and-effect relationship between the loss and the conduct that violated the exception.

18) When a provision of an endorsement conflicts with a provision of a policy, the endorsement controls.

19) Coverages that are expressly excluded or excepted from the policy are called exceptions.

20) If an insurer denies liability for a loss, the insured or the beneficiary of the policy has the burden of proving that there was a loss that came within the coverage of the policy.

21) An insurer's bad-faith refusal to pay a claim generally is considered to be any frivolous or unfounded refusal to comply with the demand of a policyholder to pay according to the policy.

22) In most cases, both the policy and the general statute of limitations for contract actions set time limits for bringing suit on the policy.

23) Inland marine insurance principally covers domestic shipments of goods over land and inland waterways.

24) Homeowner's insurance is a combination of the standard fire insurance policy and comprehensive personal liability insurance.

25) The insured has the burden of proving that the loss was a covered loss.

26) An insurer who wrongfully refuses to defend the insured is liable for breach of contract.

27) You suffered the loss of your home as a result of a chimney fire that was caused by the ignition of soot in the chimney. This fire would be described as a hostile fire.

28) You purchased a house and also purchased fire insurance coverage on the house. The policy contained an 80 percent coinsurance clause. You maintained coverage in the amount of $150,000 and the value of the house was $250,000. A fire caused a loss of $100,000. You will collect part of the $100,000 loss because he failed to maintain coverage at 80 percent of the value of the house. A coinsurance clause requires the insured to maintain insurance on the covered property up to a certain amount or a certain percent of the value, generally 80 percent.

29) Insurance designed to protect an insured driver or owner from the claims of others is called liability insurance.

30) Insurance is written for a specified number of years and terminates at the end of that period is called term insurance.

31) Part of every whole-life insurance premium covers the cost of insurance. The remainder of the premium is devoted to the investment component of the policy, which builds up over time to its cash surrender value.

32) If the insured dies within the policy period, an endowment insurance policy pays the face amount of the policy.

33) If an insured person tells her current husband that she is going to name him as beneficiary of her life insurance in place of her former husband and dies a year later without having taken any further steps with respect to the change of the policy beneficiary, the insurance company must pay the proceeds of the policy to: the former husband.

34) An incontestability clause ordinarily bars contest of the validity of a life insurance policy by the insurer after the lapse of 2 years.

35) An attempt to assign total ownership of a fire insurance policy to a purchaser of the insured property commonly results in forfeiture of coverage.

36) Statutes and liability policies commonly provide for special coverage when the insured sustains loss because of an uninsured motorist.

37) An insured person uses an automobile for purposes of liability coverage by unloading groceries from the car while it is parked in the garage.

38) Under no-fault insurance, an insurer is obligated to pay an injured person without regard to whose fault caused the harm.

39) After the expiration of the incontestability period of a life insurance policy, the insurer must pay the face amount of the policy when the insured dies and cannot defend on the grounds that the contract of insurance could have been avoided because of fraud or other misconduct relating to the formation of the contract.

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