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

Replacement cost coverage pays what it actually costs to replace damaged property with new property of similar kind and quality, without subtracting depreciation.

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

The insuring agreement is the core promise of the policy, describing what the insurer agrees to pay for and under what circumstances.

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

Concurrent causation occurs when a loss has multiple contributing causes, at least one covered and one excluded, creating disputes over whether the policy applies.

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

After the incontestability period (typically two years), the insurer loses the right to void the policy or deny claims based on misrepresentations made on the original application.

Question 5

In insurance law, 'waiver' occurs when:

Accepted Answer

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

Answer

Waiver is the voluntary and intentional relinquishment of a known right by the insurer, which can prevent the insurer from later asserting that right to deny a claim.

Insurance Practice Test

Insurance Practice Test

Insurance Insurance Contracts & Policy Interpretation 3