CU - Certified Underwriter Insurance Policies and Contracts Questions and Answers

Question 1

An insurance policy is considered an aleatory contract because it is characterized by which of the following?

Accepted Answer

An unequal exchange of value between the insurer and the insured.

Answer

The insured must accept the policy terms as written by the insurer.

Answer

Both parties must disclose all material facts with complete honesty.

Answer

The policyholder must have a financial stake in the insured item or person.

Question 2

A prospective policyholder fails to disclose a pre-existing medical condition on a life insurance application. The underwriter approves the policy based on the information provided. If the insured dies from this undisclosed condition shortly after the policy is issued, the insurer can most likely deny the claim based on a breach of which legal principle?

Accepted Answer

Utmost Good Faith

Answer

Insurable Interest

Answer

Contract of Adhesion

Answer

The Principle of Indemnity

Question 3

Because an insurance policy is a contract of adhesion, how are ambiguities in the policy language typically interpreted by a court?

Accepted Answer

In favor of the party that did not write the contract.

Answer

According to the underwriter's original intent.

Answer

Equally between the insurer and the insured.

Answer

In favor of the party that drafted the contract.

Question 4

An underwriter for an auto insurer is reviewing a new application. The agent's report indicates the applicant has a new, high-performance sports car, but the application was submitted for a family sedan, resulting in a much lower quoted premium. By issuing the policy as requested despite the conflicting information, the insurer may be prevented from later denying a claim based on the misrepresentation due to the doctrine of:

Accepted Answer

Waiver

Answer

Subrogation

Answer

Concealment

Answer

Adverse Selection

Question 5

Which of the following best illustrates the principle of insurable interest?

Accepted Answer

A business owner purchasing a life insurance policy on a key employee whose death would cause a significant financial loss to the company.

Answer

An individual purchasing an insurance policy on their neighbor's house as a speculative investment.

Answer

An insurance company paying a claim for a loss that is not explicitly covered in the policy declarations.

Answer

An applicant answering all questions on an insurance application truthfully and completely.

Question 6

An insurance policy's conditions section outlines the:

Accepted Answer

Duties and responsibilities of the insured after a loss occurs.

Answer

Specific perils that are not covered under the policy.

Answer

Fundamental promises made by the insurer to the insured.

Answer

Identity of the insured, the property covered, and the policy limits.