Know The Basics Of Insurance In This Quiz

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| By Sarahjean197
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Sarahjean197
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  • 1/10 Questions

    All of the following are required elements of a legal contract EXCEPT

    • Consideration
    • Competent parties
    • Countersignature
    • Agreement
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About This Quiz

Insurance is a contract, represented by a policy, in which an individual or entity receives financial protection or reimbursement against losses from an insurance company. The company pools clients' risks to make payments more affordable for the insured.
Know the basics of insurance in this quiz

Know The Basics Of Insurance In This Quiz - Quiz

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  • 2. 

    Replacement cost minus depreciation best defines

    • Actual cash value

    • Direct loss value

    • Insurable interest

    • Financial risk

    Correct Answer
    A. Actual cash value
    Explanation
    Actual cash value is the correct answer because it refers to the value of an asset after accounting for depreciation. It is calculated by subtracting the depreciation from the replacement cost of the asset. This term is commonly used in insurance policies to determine the amount that will be reimbursed to the policyholder in the event of a loss or damage to the insured property.

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  • 3. 

    Attachments that broaden or amend coverage in a property or casualty policy are known as

    • Binders

    • Amendments

    • Endorsements

    • Conditions

    Correct Answer
    A. Endorsements
    Explanation
    Endorsements are attachments that broaden or amend coverage in a property or casualty policy. They are additional provisions or modifications to the original policy that provide additional coverage or limit certain conditions. Endorsements can be used to add or remove coverage, change policy limits, or modify policy conditions to better suit the policyholder's needs. They are a common way for insurance companies to customize policies to meet specific requirements or address unique situations for their customers.

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  • 4. 

    Placing an insrued in the same financial condition in which he existed before a loss occurred best describes

    • Insurable interest

    • The principle of indemnity

    • Replacement cost

    • Market value

    Correct Answer
    A. The principle of indemnity
    Explanation
    The principle of indemnity refers to the concept of an insurance policy providing compensation to an insured individual that is equal to the amount of their loss, in order to restore them to the same financial condition they were in before the loss occurred. This principle ensures that the insured is not left in a worse financial position after experiencing a loss, and helps to mitigate the impact of the loss on their overall financial well-being.

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  • 5. 

    Which of the following would be considered a competent party for purposes of entering into an insurance contract?

    • An inebriated person

    • Someone under the influence of drugs

    • An individual who has the flu

    • An insane individual

    Correct Answer
    A. An individual who has the flu
    Explanation
    An individual who has the flu would be considered a competent party for purposes of entering into an insurance contract. While being sick with the flu may affect their ability to make decisions or understand the terms of the contract, it does not necessarily render them legally incompetent. Competency to enter into a contract is determined by the individual's mental capacity at the time of entering into the agreement, and having the flu does not automatically disqualify someone from being considered competent.

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  • 6. 

    Which of the following provisions lists the coverage limit provided by an insurance policy and its cost?

    • Declaration page

    • Insuring agreement

    • Conditions

    • Exclusion

    Correct Answer
    A. Declaration page
    Explanation
    The declaration page of an insurance policy lists the coverage limit provided by the policy and its cost. It is a summary of the policy that includes important information such as the insured's name, policy number, effective dates, and details about coverage limits and premiums. The declaration page serves as a quick reference for policyholders to understand the key terms and conditions of their insurance coverage.

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  • 7. 

    With regard to binders, which of the following statements is CORRECT?

    • A binder may be oral or written

    • A binder is not usually valid for more than 90 days

    • A binder may be cancelled by the insured with 2 days' notice

    • Binders are valid for 15 days after the policy is issued

    Correct Answer
    A. A binder may be oral or written
    Explanation
    A binder may be oral or written, meaning that it can be established through a verbal agreement or a written document. This flexibility allows for the insurance coverage to be put in place quickly, even before the actual policy is issued. It provides temporary coverage until the formal policy is finalized.

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  • 8. 

    Which of the following is most closely related to the concept of insurable interest?

    • Loss Valuation

    • The theory of indemnity

    • Actual cash value

    • Replacement cost principle

    Correct Answer
    A. The theory of indemnity
    Explanation
    Insurable interest is the concept that an individual or entity must have a financial or legal interest in the insured property or person in order to purchase an insurance policy. The theory of indemnity, which is the principle that insurance is meant to compensate the insured for the actual amount of their loss, is closely related to the concept of insurable interest. Both concepts emphasize the need for a direct financial stake in the insured property or person in order to justify the purchase of insurance.

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  • 9. 

    Answers to specific questions on an insurance application that are guaranteed to be true best defines

    • Representations

    • Mis represenations

    • Concealments

    • Warranties

    Correct Answer
    A. Warranties
    Explanation
    Warranties refer to specific statements made by the applicant on an insurance application that are guaranteed to be true. Unlike representations, which are statements believed to be true to the best of the applicant's knowledge, warranties are assured to be accurate. Misrepresentations, on the other hand, are false statements made by the applicant, while concealments involve the intentional withholding of information. Therefore, the correct answer is warranties.

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  • 10. 

    All of the following are duties or responsibilities of an insurance producer EXCEPT

    • Evaluating client needs

    • Collecting premiums and settling small losses

    • Leaving a "Notice to the Applicant" with a new client

    • Evaluating an insured's financial condition

    Correct Answer
    A. Evaluating an insured's financial condition
    Explanation
    An insurance producer has various duties and responsibilities, including evaluating client needs, collecting premiums and settling small losses, and leaving a "Notice to the Applicant" with a new client. However, evaluating an insured's financial condition is not typically a duty or responsibility of an insurance producer. This task is usually performed by underwriters or financial analysts who assess the financial stability and risk profile of the insured.

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  • Current Version
  • Sep 05, 2024
    Quiz Edited by
    ProProfs Editorial Team
  • Oct 30, 2011
    Quiz Created by
    Sarahjean197
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