
Insurance Principles and Contracts Quiz

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Other
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Professional Development
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Hard
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16 questions
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1.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
What is the role of estoppel in insurance contracts?
To allow insurers to increase premiums without notice
To enable insureds to cancel policies at will
To prevent insurers from denying claims if they induced reliance
To allow insurers to change policy terms unilaterally
Answer explanation
Estoppel prevents insurers from denying claims if they have induced reliance by the insured. This principle ensures that insurers cannot backtrack on their commitments when the insured has acted based on the insurer's representations.
2.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
What is the significance of an aleatory contract in insurance?
It guarantees a profit for the insured
It ensures equal exchanges between parties
It involves unequal exchanges where premiums may exceed or fall short of claims
It allows for automatic policy renewal
Answer explanation
An aleatory contract in insurance involves unequal exchanges, where the premiums paid by the insured may exceed or fall short of the claims made. This uncertainty is a key characteristic of insurance contracts.
3.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
What does the principle of indemnity ensure in an insurance contract?
The insurer profits from a claim
The insured receives double the claim amount
The insured's pre-loss financial position is restored
The insured profits from a claim
Answer explanation
The principle of indemnity ensures that the insured is compensated only to the extent of their loss, restoring their pre-loss financial position without allowing them to profit from a claim.
4.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
What is a contract of adhesion?
A contract that can be easily modified by the insured
A standardized insurer-drafted form with a take-it-or-leave-it choice
A contract that allows for negotiation between parties
A contract that is voidable by the insurer
Answer explanation
A contract of adhesion is a standardized form created by the insurer, offering a take-it-or-leave-it choice to the insured, meaning the terms cannot be negotiated.
5.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
What is the consequence of fraud in an insurance contract?
The contract is voided and may lead to criminal penalties
The insurer must pay the claim
The contract is upheld with a penalty
The insured receives a warning
Answer explanation
Fraud in an insurance contract typically results in the contract being voided, meaning the insurer is not obligated to pay claims. Additionally, it may lead to criminal penalties for the fraudulent party.
6.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
What is the significance of 'reasonable expectations' in insurance contracts?
It allows insurers to deny claims based on technicalities
It ensures courts honor an insured's reasonable expectations of coverage
It permits insureds to modify policy terms
It guarantees coverage for all risks
Answer explanation
The significance of 'reasonable expectations' in insurance contracts is that it ensures courts honor an insured's reasonable expectations of coverage, protecting them from unexpected denials based on technicalities.
7.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
What constitutes the 'consideration' in an insurance contract?
The insured's personal information
The insurer's underwriting guidelines
The insured's premium and the insurer's promise to indemnify
The insurer's marketing materials
Answer explanation
In an insurance contract, 'consideration' refers to what each party provides. The insured pays a premium, and in return, the insurer promises to indemnify against covered losses, making this the correct choice.
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