East Mississippi Community College

ECON 2123

Chapter 36-INSURANCE

TRUE/FALSE

1)Insurance is a contract by which one party for a stipulated consideration promises to pay another party a sum of money on the destruction of, loss of, or injury to something in which the other party has an interest, or to indemnify that party for any loss or liability to which that party is subjected.

 

                                           

 

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

 

                                           

 

3. Generally, the terms broker and agent are synonymous because both work directly for the insurer.

 

                                           

 

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

 

                                           

 

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

 

                                           

 

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

 

                                           

 

7. 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.

 

                                           

 

8. 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.

 

                                           

 

9. The fact that a partnership is terminated after a life insurance policy is obtained by one partner on another invalidates the policy.

 

                                           

 

10. Any false statement in an application binds the insured.

                                           

 

11. When a statute requires that all terms of the insurance contract be included in the written contract, the insurer cannot claim that a provision not stated in the written contract was binding on the insured.

 

                                           

 

12. An insurer may cancel any contract of insurance by the insurer's unilateral act as long as the insurer gives advance written notice.

 

                                           

 

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

 

                                           

 

14. A contract of insurance is to be interpreted as it would be understood by a person with technical knowledge of the law or of insurance.

 

                                           

 

15. An ambiguity in an insurance policy is generally interpreted in favor of the insured.

 

                                           

 

16. Exceptions to coverage are generally strictly interpreted against the insurer.

 

                                           

 

17. 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.

 

                                           

 

18. 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.

 

                                           

 

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

 

                                           

 

20. Subornation is the right of a party secondarily liable to stand in the place of the creditor after making payment to the creditor and to enforce the creditor’s right against the party primarily liable in order to obtain indemnity from such primary party.

 

                                           

 

21. Commercial General Liability (CGL) policies apply to product liability cases, actions for wrongful

termination of employees, sexual harassment cases, damages caused by business advertising or employee dishonesty, and trademark infringement suits.

 

                                           

 

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

 

                                           

 

23. For the purposes of fire insurance, all fires that cause damage are considered hostile fires.

 

                                           

 

24. 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.

 

                                           

 

25. Fire insurance is a personal contract, and in the absence of statutory or contractual authorization, it cannot be assigned without the consent of the insurer.

 

                                           

 

26. A homeowner's policy commonly provides protection from losses caused by theft.

 

                                           

 

27. The coverage of the Personal Auto Policy (PAP) is limited to claims arising from the “use and operation” of an automobile.

 

                                           

 

28. For the purposes of Personal Auto Policy (PAP) coverage, an insured person “uses” an automobile by unloading groceries from the car while it is parked in the garage.

 

                                           

 

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

 

                                           

 

30. 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 claim that in obtaining the policy, the insured had been guilty of misrepresentation, fraud, or any other conduct that would entitle it to avoid the contract of insurance.