Insurance Insurance Contracts & Policy Interpretation

Question 1

What is the principle of 'utmost good faith' (uberrimae fidei) in insurance contracts?

Accepted Answer

It requires both parties to disclose all material facts relevant to the insurance contract

Answer

Utmost good faith requires both the insurer and insured to honestly disclose all material facts that could affect the contract terms.

Question 2

Which element is NOT required for a valid insurance contract?

Accepted Answer

A government-issued license number for the insured

Answer

Valid insurance contracts require offer/acceptance, consideration, legal purpose, and competent parties — a government-issued license number is not a required contract element.

Question 3

After paying a claim, what does 'subrogation' allow an insurer to do?

Accepted Answer

Pursue recovery from a third party responsible for the loss

Answer

Subrogation gives the insurer the legal right to step into the insured's shoes and seek reimbursement from the at-fault third party.

Question 4

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:

Accepted Answer

Occurrence policy

Answer

An occurrence policy covers losses that happen during the policy period, even if the claim is submitted years after expiration.

Question 5

What is an 'endorsement' in an insurance policy?

Accepted Answer

A written modification that changes the terms of the original policy

Answer

An endorsement (also called a rider) is a written amendment attached to the policy that modifies its terms, coverage, or conditions.

Insurance Practice Test

Insurance Practice Test

Insurance Insurance Contracts & Policy Interpretation