Quizzes-Law 10-Fall 2012

 

Chapter 51 Insurance Law Quiz

A1. Dhani is the beneficiary of a life insurance policy on Elmo’s life obtained

from Famed Insurance Company. The insured under this policy is

a. Dhani.

b. Elmo.

c. Famed.

d. the agent or broker through whom the policy was obtained.

 

 

A2. Bret obtains a fire insurance policy on his rental house with Continental

Insurance Company. Like all insurance, this policy is an arrangement

for

a. avoiding the assumption of responsibility.

b. predicting a potential loss based on unknown factors.

c. shifting the imposition of liability.

d. transferring and allocating risk.

 

 

A3. Grace applies for a homeowners’ insurance policy on her house with

Heroic Insurance Company through Ian, a broker. In this transaction,

Ian is

a. an agent for both parties.

b. Grace’s agent, and not Heroic’s agent.

c. Heroic’s agent, and not Grace’s agent.

d. not an agent.

 

A4. International Foods Corporation insures its real and personal property,

as well as the lives of its key employees, to protect its financial interest

should some event undermine its security. This is

a. risk management.

b. risk pooling.

c. risky.

d. risqué.

 

A5. Chocolate Gourmet Company obtains an insurance policy to protect

against losses incurred by the firm as a result of being held liable for personal

injuries or property damage sustained by others. This is

a. casualty insurance.

b. fire insurance.

c. life insurance.

d. title insurance.

 

CHAPTER 49: INSURANCE 513

A6. Investors Commercial Property Corporation obtains an insurance policy

that protects against any losses incurred as a result of existing claims

against or liens on certain property at the time of its purchase. This is

a. casualty insurance.

b. fire insurance.

c. life insurance.

d. title insurance.

 

A7. Dale and Ernie are partners who own and operate Cluck’n Hut, a chain

of fast food restaurants. Their partnership obtains insurance on the

owners’ lives. This is

a. casualty insurance.

b. fidelity insurance.

c. key-person insurance.

d. liability insurance.

 

 

A8. Grover is an accountant with the firm of Hall & Associates, which obtains

insurance from Interstate Insurance, Inc, on Grover’s life. Grover

dies. The proceeds of the policy belong to

a. Grover’s heirs.

b. Hall & Associates.

c. Interstate Insurance.

d. the state.

 

 

A9. EZ Rentals Company wants to insure the equipment that it rents to the

public. To obtain insurance, EZ must have an insurable interest in the

property

a. at any time.

b. at the time a loss occurs.

c. at the time a policy is obtained.

d. continuously from the time a policy is obtained to the time a loss

occurs.

 

A10. For Diana to obtain an insurance policy on Eden Farm, including its

crops, equipment, and livestock, she must have an insurable interest in

the property that exists

a. at any time.

b. at the time a policy is obtained.

c. at the time a loss occurs.

d. continuously from the time a policy is obtained to the time a loss

occurs.

 

 

A11. Bob applies to City Insurance Company for insurance. City issues a policy,

but later discovers that Bob’s application includes several misstatements.

Most likely, these misstatements can

a. affect the coverage under the policy but cannot void the policy.

b. bind Bob but cannot affect the coverage.

c. not bind Bob or affect the policy.

d. void the policy.

 

 

A12. Ginny obtains a health insurance policy for her family from Hope

Insurance Company. The policy includes an incontestability clause.

Under such a clause, after a policy has been in force for two or three

years

a. Ginny cannot contest Hope’s insurable interest.

b. Ginny cannot contest Hope’s refusal to pay a claim under the

policy.

c. Hope cannot contest Ginny’s eligibility for continued coverage.

d. Hope cannot contest Ginny’s statements in the application.

 

 

A13. Rolling Transport & Storage Corporation wants to insure its warehouse

to obtain the maximum possible recovery for the lowest possible premium.

To obtain the maximum recovery under a coinsurance clause, the

percentage of the value of the property that should be insured is

a. 80 percent.

b. 90 percent.

c. 100 percent.

d. 120 percent.

 

 

A14. Boyce obtains from Capital Insurance Company a policy that provides

that if the parties cannot agree on the amount of a loss covered by the

policy, an estimate of the value by an impartial third party can be demanded.

This is

a. an antilapse clause.

b. an arbitration clause.

c. an appraisal clause.

d. an incontestability clause.

 

 

A15. General Allied Company obtains insurance policies with Hy-Rate

Insurance, Inc., and Ideal InsurCo against the risk of loss of General’s office

building in a fire. Each policy includes a multiple-insurance clause.

A fire partially destroys the building. General can collect from Hy-Rate

a. all of the loss.

b. half of the loss.

c. its proportionate share of the loss to the total amount of insurance.

d. none of the loss.

 

 

A16. Dag obtains from Excel Insurance Company a policy that provides that

Dag has thirty days after a premium’s due date to pay it before the policy

will be canceled. This is

a. an antilapse clause.

b. an arbitration clause.

c. an appraisal clause.

d. an incontestability clause.

 

A17. Kerin obtains a property insurance policy for her art collection from

Lawton Insurance Company. Lawton can cancel the policy

a. at any time.

b. only at the end of a period for which a premium has been paid.

c. only if Lawton no longer has an insurable interest in the property.

d. only on advance written notice.

ANSWER: A PAGE: 1016 TYPE: N

NAT: AACSB Reflective AICPA Legal

 

A18. Edy obtains a homeowners’ insurance policy with First Source

Insurance Company. First State can cancel the policy

a. if Edy appears as a witness in a case against First Source.

b. if Edy fails to pay the premiums.

c. if Edy makes changes that add to the home’s value.

d. under no circumstances.

 

 

A19. Speedy Shipping Corporation applies to TransInsurance Company for a

fire insurance policy on Speedy’s warehouse. On the application, Speedy

misrepresents the age of the property to obtain a lower premium. When a

fire soon destroys the warehouse, TransInsurance can

a. deny payment, because a fire destroyed Speedy’s warehouse.

b. deny payment, because of Speedy’s fraud in the application.

c. not deny payment, because a fire destroyed Speedy’s warehouse.

d. not deny payment, because the application is not part of the policy.

 

 

A20. Lila obtains a life insurance policy with no cash surrender value and

names her son Maurice as the beneficiary. This is

a. casualty insurance.

b. decreasing-term life insurance.

c. health insurance.

d. term life insurance.