1. Insurable Interest Valuation Indemnity Legal Liability
A possibility of financial loss resulting from the ownership of property is known as:
Insurable Interest
Valuation
Indemnity
Legal Liability

2. A possibility of financial loss resulting from the ownership of property is known as:
Insurable Interest – the insured must have an interest in the subject matter of his or her policy
Valuation - The process of estimating what an item is worth
Indemnity – restoration to approximate previous condition; no more, no less
Legal Liability - covers a third party who has been damaged by a policyholder

3. A possibility of financial loss resulting from the ownership of property is known as:
Insurable Interest – the insured must have an interest in the subject matter of his or her policy
Valuation - The process of estimating what an item is worth
Indemnity – restoration to approximate previous condition; no more, no less
Legal Liability - covers a third party who has been damaged by a policyholder

4. In 2005, Jeff's car suffered $8230 damage to his car in an accident
In 2005, Jeff's car suffered $8230 damage to his car in an accident. He received $8230 from his insurance company and $4000 from the other driver. By receiving a profit, Jeff could be in violation of:
the principle of indemnity
the principle of profit and loss
the principle of financial status
the principle of financial restoration

5. In 2005, Jeff's car suffered $8230 damage to his car in an accident
In 2005, Jeff's car suffered $8230 damage to his car in an accident. He received $8230 from his insurance company and $4000 from the other driver. By receiving a profit, Jeff could be in violation of:
the principle of indemnity - receiving a gain from a loss
the principle of profit and loss - doesn't exist
the principle of financial status = NIIT (not an insurance term)
the principle of financial restoration = NIIT

6. In Piedmont, last year, a festival goer falls on Trina breaking her phone. Trina's insurance company pays her $1000 for the phone. The festival goer is apologetic and tells here he'll replace it whatever the cost. So Trina orders a $1500 phone and gives the bill to the festival goer. What principle did Trina Violated?
the principle of profit and loss
the principle of financial status
the principle of indemnity
the principle of financial restoration

7. How Can insurance companies afford to pay for and individual’s catastrophic loss?
the insurer will only pay up to the amount already collected for each insured
The insurer will deny claims if it doesn’t have enough money in the bank.
The insured collects premiums from our policyholders and pools them to pay the claims of the few
The insured puts each insured’s premium payment into an interest-bearing account, which is then use to pay for that insured’s claims, if they occur.

8. How Can insurance companies afford to pay for and individual’s catastrophic loss?

9. How can insurance companies afford to pay for an individual’s catastrophic loss?
the insurer will only pay up to the amount already collected from each insured
the insurer will deny claims if it doesn’t have enough money in the bank.
the insured collects premiums from our policyholders and pools them to pay the claims of the few
the insured puts each insured’s premium payment into an interest-bearing account, which is then use to pay for that insured’s claims, if they occur.
an insurer collects premiums from a large number of policyholders into a pool, known as a reserve. Insurers know that, chances are, only a small percentage of those policyholders will actually experience a loss.

10. What is a reserve, in insurance terms?
A set of rules governing how the insurance industry should work
A pool of collected premiums that the insurer sets aside to pay claims
The amount of revenue that the insurer sets aside to pay employee salaries
A group of policyholders who pay into the same pool of premiums

11. What is a reserve, in insurance terms?
A set of rules governing how the insurance industry should work -
A pool of collected premiums that the insurer sets aside to pay claims
The amount of revenue that the insurer sets aside to pay employee salaries
A group of policyholders who pay into the same pool of premiums
an insurer collects premiums from a large number of policyholders into a pool, known as a reserve

12. What is a reserve, in insurance terms?
A set of rules governing how the insurance industry should work
A pool of collected premiums that the insurer sets aside to pay claims
The amount of revenue that the insurer sets aside to pay employee salaries
A group of policyholders who pay into the same pool of premiums

13. Which of the following best defines premium?
A legally enforceable agreement between parties
A legal agreement providing temporary evidence of insurance until the policy is issued
Transfer of risk of financial loss from one party to another
The fee paid by the insured in exchange for an insurance policy

14. Which of the following best defines premium?
A legally enforceable agreement between parties -Contract
A legal agreement providing temporary evidence of insurance until the policy is issued – Certificate of Insurance
Transfer of risk of financial loss from one party to another - insurance
The fee paid by the insured in exchange for an insurance policy – (bill paid = Premium)

15. Which of the following best defines premium?
A legally enforceable agreement between parties
A legal agreement providing temporary evidence of insurance until the policy is issued
Transfer of risk of financial loss from one party to another
The fee paid by the insured in exchange for an insurance policy

16. Which of the following best describes insurance?
A legally enforceable agreement between parties
An economic device used to protect against the risk of unforeseen and extraordinary financial loss
Transfer of risk of financial loss from one party to another
Restoration to the previous financial condition, no more, no less

17. Which of the following best describes insurance?
A legally enforceable agreement between parties [contract]
An economic device used to protect against the risk of unforeseen and extraordinary financial loss [Insurance]
Transfer of risk of financial loss from one party to another – Not the BEST definition
Restoration to the previous financial condition, no more, no less – [indemnity]

18. Which of the following best describes insurance?
A legally enforceable agreement between parties
An economic device used to protect against the risk of unforeseen and extraordinary financial loss
Transfer of risk of financial loss from one party to another
Restoration to the previous financial condition, no more, no less

19. An offeree may legally reject a contract offer by any of the following means, EXCEPT:
Proposing a new offer
Asking for clarification or additional information
Explicitly rejecting the offer
Accepting the offer on one condition

20. A contract may be terminated by:
Rejection by offeree
Time lapse
Revocation by offeror
Termination by law
Either party dies or becomes disabled
Performance of contract becomes illegal after the offer
Subject matter is destroyed
Asking for more information is NOT a legal rejection

21. An offeree may legally reject a contract offer by any of the following means, EXCEPT:
Proposing a new offer
Asking for clarification or additional information
Explicitly rejecting the offer
Accepting the offer on one condition

22. A legally binding contract where the risk of financial loss is transferred in exchange for premiums is called:
The principle of indemnity
An insurance policy
A reserve
A claim

23. A legally binding contract where the risk of financial loss is transferred in exchange for premiums is called:
The principle of indemnity – getting exactly what you had
An insurance policy – a type of a contract
A reserve – The reserve of premiums should always be enough to pay for individual claims.
A claim - If a policyholder does experience a covered loss, she can ask the insurer to pay for it by filing a claim.

24. A legally binding contract where the risk of financial loss is transferred in exchange for premiums is called:
The principle of indemnity – getting exactly what you had
An insurance policy – a type of a contract
A reserve – The reserve of premiums should always be enough to pay for individual claims.
A claim - If a policyholder does experience a covered loss, she can ask the insurer to pay for it by filing a claim.

25. Which of the following is not a requirement for a legally binding contract?
It must be a notarized document
Both parties must bring something of value
There must be a legal purpose
There must be a mutual consent

26. Which of the following is not a requirement for a legally binding contract?
4 classification of a legal contract
Consent
Consideration
Competent parties
Legal purpose

27. Which of the following is not a requirement for a legally binding contract?
It must be a notarized document
Both parties must bring something of value
There must be a legal purpose
There must be a mutual consent

28. Which of the following best defines insurer?
An individual or organization that pays premiums in exchange for protection
A legally binding contract in which the insurance company agrees to pay for specified losses in exchange for premiums
A company group or government agency offering financial protection
Transfer of the risk of financial loss from one party to another

29. INSURED - An individual or organization that pays premiums in exchange for protection
INSURANCE CONTRACT - A legally binding contract in which the insurance company agrees to pay for specified losses in exchange for premiums
INSURER - A company, group, or government agency offering financial protection
INSURANCE - Transfer of the risk of financial loss from one party to another

30. Which of the following best defines insurer?
An individual or organization that pays premiums in exchange for protection
A legally binding contract in which the insurance company agrees to pay for specified losses in exchange for premiums
A company, group, or government agency offering financial protection
Transfer of the risk of financial loss from one party to another

31. Which of the following refers to being restored to the financial condition you were in before a loss?
Subrogation
Restoration
Indemnification
Estopple

32. Which of the following refers to being restored to the financial condition you were in before a loss?
Subrogation - Subrogation is the transfer of rights that allows insurers to recover their losses after claim of the insured is settled
Restoration - Common options:
Restore limits to original level
Loss does not reduce limits at all
Total loss payout ends policy coverage and excess premiums returned to insured
Indemnification - This principle assumes that an insured, who has suffered a loss, should only be restored to the approximate financial condition that existed prior to the loss, no better and no worse.
Estopple - “Estoppel” is a legal doctrine that prevents or “stops” a party from contradicting its own previous actions, if those actions have been reasonably relied upon by another party.

33. Which of the following refers to being restored to the financial condition you were in before a loss?
Subrogation
Restoration
Indemnification
Estopple

34. Trina just purchased an insurance policy for her cabin from Post Insurance which of the following would be a reason this policy may not be legally binding? ​
Trina has been diagnosed with schizophrenia by a doctor
Trina paid her first premium when she and her agent agreed on a policy, but she is waiting for the policy documents to be prepared so she can sign them
Trina turned 20 last week
Trina has an outstanding warrant for a DUI

35. Trina just purchased an insurance policy for her cabin from Post Insurance which of the following would be a reason this policy may not be legally binding? ​
The “elements of a valid or legal contract” are likely to be included on your state licensing exam. An easy way to remember them is by using the mnemonic “CLOC”:
C - Competent Parties/Capacity to Contract
L - Legal Purpose
O - Offer and Acceptance
C - Consideration

36. Trina just purchased an insurance policy for her cabin from Post Insurance which of the following would be a reason this policy may not be legally binding? ​
Trina has been diagnosed with schizophrenia by a doctor
Trina paid her first premium when she and her agent agreed on a policy, but she is waiting for the policy documents to be prepared so she can sign them
Trina turned 20 last week
Trina has an outstanding warrant for a DUI

37. If covered by an insurance policy an insured may be indemnified for all of the following except:
Home remodels
Rental cars
Hotel bills
Property repairs

38. If covered by an insurance policy an insured may be indemnified for all of the following except:
Home remodels
Rental cars
Hotel bills
Property repairs
Indemnity - once the repair or replacement is complete, the insurer will indemnify the insured for the rest of the cost.
For example, if Jack runs a red light and hits Sue's car, Jack's liability insurance will indemnify Sue for the damages and injuries caused by Jack's negligence.

39. If covered by an insurance policy an insured may be indemnified for all of the following except:
Home remodels – improvement
Rental cars – covered by insurance
Hotel bills – cover by insurance
Property repairs – cover by insurance

40. Indemnification may include all of the following except:
Payment for pain and suffering
Payment for repairs to property
Reimbursement for rental car costs
Reimbursement for hotel costs

41. Indemnification may include all of the following except:
Payment for pain and suffering – punitive damages
Payment for repairs to property – covered loss – upfront costs
Reimbursement for rental car costs – covered loss – upfront costs
Reimbursement for hotel costs – covered loss – upfront costs

42. Indemnification may include all of the following except:
Payment for pain and suffering
Payment for repairs to property
Reimbursement for rental car costs
Reimbursement for hotel costs