Insurance Contracts & Policy Interpretation Flashcards
7 cards from real Insurance practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Insurance Contracts & Policy Interpretation flashcards as text
What is the principle of 'utmost good faith' (uberrimae fidei) in insurance contracts?
Answer: It requires both parties to disclose all material facts relevant to the insurance contract
Utmost good faith requires both the insurer and insured to honestly disclose all material facts that could affect the contract terms.
Which element is NOT required for a valid insurance contract?
Answer: A government-issued license number for the insured
Valid insurance contracts require offer/acceptance, consideration, legal purpose, and competent parties — a government-issued license number is not a required contract element.
After paying a claim, what does 'subrogation' allow an insurer to do?
Answer: Pursue recovery from a third party responsible for the loss
Subrogation gives the insurer the legal right to step into the insured's shoes and seek reimbursement from the at-fault third party.
A policy that covers claims arising from incidents that occurred during the policy period, regardless of when the claim is filed, is known as a:
Answer: Occurrence policy
An occurrence policy covers losses that happen during the policy period, even if the claim is submitted years after expiration.
What is an 'endorsement' in an insurance policy?
Answer: A written modification that changes the terms of the original policy
An endorsement (also called a rider) is a written amendment attached to the policy that modifies its terms, coverage, or conditions.
Which provision outlines the conditions under which an insurer has the right to terminate coverage?
Answer: Cancellation and nonrenewal provision
The cancellation and nonrenewal provision specifies the conditions, notice requirements, and procedures for terminating the policy.
What does 'pro-rata cancellation' of an insurance policy mean?
Answer: The unearned premium is refunded based on the exact unused days of the policy period
Pro-rata cancellation refunds the unearned premium calculated exactly based on the remaining days of coverage without any penalty charge.