Insurance Insurance Contracts & Policy Interpretation 3

Question 1

'Replacement Cost Value' (RCV) coverage differs from Actual Cash Value (ACV) in that RCV:

Accepted Answer

Pays the cost to repair or replace property without deducting for depreciation

Answer

Pays only the depreciated value of the lost or damaged property

Answer

Is always less expensive than ACV coverage

Answer

Only applies to commercial property insurance policies

Question 2

The 'insuring agreement' in an insurance policy:

Accepted Answer

Describes the insurer's promise to pay covered losses and the scope of coverage provided

Answer

Lists all parties and situations excluded from coverage under the policy

Answer

States only the conditions the insured must meet to maintain coverage

Answer

Outlines the insured's procedural rights to dispute a denied claim

Question 3

'Concurrent causation' in insurance refers to a situation where:

Accepted Answer

A loss results from two or more causes acting together, with at least one covered and one excluded

Answer

Two separate insurers cover the same risk at the same time

Answer

A policyholder files duplicate claims with multiple insurers for the same loss

Answer

Coverage automatically extends across consecutive policy periods

Question 4

An 'incontestability clause' in a life insurance policy means that:

Accepted Answer

After a specified period (usually 2 years), the insurer cannot void the policy based on misrepresentations in the application

Answer

The insurer can never deny a claim for any reason after issue

Answer

The insured cannot cancel the policy once it has been issued

Answer

Premium amounts cannot be increased during the policy period

Question 5

In insurance law, 'waiver' occurs when:

Accepted Answer

The insurer voluntarily relinquishes a known contractual right to deny or limit coverage

Answer

The insured voluntarily gives up a known right under the policy

Answer

Both parties mutually agree to cancel the policy before its expiration date

Answer

The insured transfers policy benefits to a designated third party

Question 6

The 'principle of indemnity' in insurance states that:

Accepted Answer

Insurance should restore the insured to the same financial position they were in before the loss, no better and no worse

Answer

The insured should be able to profit from an insurance claim for damaged property

Answer

Insurers must pay the full policy limit for every covered loss regardless of actual damage

Answer

All insured parties in a group policy must share losses equally

Question 7

What does 'assignment' of an insurance policy mean?

Accepted Answer

The policyholder transfers their rights and interests under the policy to another party

Answer

The insurer transfers its underwriting risk to a reinsurance company

Answer

The insured designates a beneficiary to receive death benefits upon death

Answer

The insurer assigns a specific claims adjuster to investigate a reported loss