UGA RMIN 4000 Edmunds Test 3
Questions and Answers
Principle of Indemnity - Correct Answers -The insurer agrees to pay no more than the
actual amount of the loss
What does indemnity do for the insured? - Correct Answers -Puts them in the same
financial position they were in before
What is the purpose of the principle of indemnity? - Correct Answers -To prevent the
insured from profiting from a loss; To reduce moral hazard
4Exceptions to Principle of Indemnity - Correct Answers -Valued Policy, Valued Policy
Laws, Replacement Cost, Life Insurance
Valued Policy - Correct Answers -Pays the face amount insurance if a total loss occurs;
Ex: Jewelry, Fine Arts
Valued Policy Laws - Correct Answers -Law that requires payment of the face amount if
a total loss to real property occurs from specific perils (fire, et. al)
Point of Service (POS) Plan - Correct Answers --Hybrid of HMO and PPO.
-Typically structured as an HMO, but members can go outside of network for care.
-If patients see providers who are in the network, they pay little or nothing out of pocket.
-Deductibles and copayments are higher if patients see providers outside the network.
High Deductible Health Plan (HDHP) - Correct Answers --Plan that combines a high-
deductible health plan with a health savings account (HSA).
-A high-deductible health plan has an annual deductible that is substantially higher than
traditional plans.
IRS definition of High Deductible Health Plan 2023 - Correct Answers -• Min Deductible:
$1,500 individual / $3,000 family
• Max OPP: $7,500 individual / $15,000 family
Replacement Cost - Correct Answers -Current cost of restoring the damaged property
with new materials of like kind and quality, with no deduction for depreciation
Life Insurance - Correct Answers -Pays stated amount of policy to the beneficiaries
,Principle of Insurable Interest - Correct Answers -Insured/beneficiary must be in a
position to lose financially if a coverd loss occurs
4 Key Legal Principles of Insurance - Correct Answers -Principle of Indemnity, Principle
of Insurable Interest, Principle of Subrogation, Principle of Utmost Good Faith
Who are appraisals required by? - Correct Answers -Underwriter
What is Replacement Cost? - Correct Answers -The cost to replace property with an
item of like kind and quality (workmanship and materials); not the same as market value
or historical cost
Actual Cash Value - Correct Answers -replacement cost minus depreciation
What is indemnification based on in property insurance? - Correct Answers -Actual
Cash Value of the property at the time of loss
Principle of Insurable Interest - Correct Answers -The insured must be in a position to
lose financially if a covered loss occurs
What are the 3 points of the principle of Insurable Interest? - Correct Answers -Prevents
gambling on losses, reduces moral hazard, measure of the insured's loss
Examples of Insurable Interest - Correct Answers --Ownership of property (house, car)
-Potential legal liability (business owner)
-Secured creditors (mortgage company, auto lender)
-Contractual right (goods in transit)
When must an insurable interest exist in property insurance? - Correct Answers -At the
time of loss
When must an insurable interest exist in life insurance? - Correct Answers -At inception
of policy
Principle of Subrogation - Correct Answers -substitution of the insurer in place of the
insured for the purpose of claiming indemnity from a third party for a loss covered by
insurance
3 Examples of Subrogation - Correct Answers -- someone else hits your car
- your insurance company pays you for the damages to your vehicle
- your insurance company sues the other driver for reimbursement
3 reasons for subrogation - Correct Answers -1. Prevents an insured from collecting
twice (once from insurer, once from responsible party)
2. Holds the negligent party responsible for the loss
, 3. Reduces insurance claims costs (rates)
What does subrogation not apply to? - Correct Answers -Life Insurance
Can a beneficiary still sue negligent third parties for wrongful death? - Correct Answers -
Yes
Principle of Utmost Good Faith - Correct Answers -A higher degree of honesty is
imposed on both parties to an insurance contract than is imposed on parties to other
contracts
What are the 3 legal doctrines that the principle of utmost good faith is supported by? -
Correct Answers -1. Representations
2. Concealment
3. Warranty
Representations - Correct Answers -Statements made by the applicant for insurance
What are the 3 criteria for a misrepresentation to make a contract voidable? - Correct
Answers -1. Material
2. False
3. Relied on by the insurer
Concealment - Correct Answers -intentional failure of the applicant for insurance to
reveal a material fact to the insurer
A contract can be voided due to a concealment if: - Correct Answers -Concealed fact
was known by the insured to be material; Insured intended to defraud the insurer
Warranty (statement) - Correct Answers -A statement that becomes part of the
insurance contract and is guaranteed by the maker to be true in all respects
Warranty (Condition) - Correct Answers -A condition agreed to by an insured in order to
receive coverage
What happens in case of a violation of a warranty? - Correct Answers -The claim will be
denied
What is bad faith? - Correct Answers -law that allows lawsuits against insurance
companies for: improper denial of claims and improper delay of claims
What can bad faith damages do? - Correct Answers -Exceed policy limits
What do bad faith damages include? - Correct Answers -Attorney fees, Emotional
distress, Punitive damages
Questions and Answers
Principle of Indemnity - Correct Answers -The insurer agrees to pay no more than the
actual amount of the loss
What does indemnity do for the insured? - Correct Answers -Puts them in the same
financial position they were in before
What is the purpose of the principle of indemnity? - Correct Answers -To prevent the
insured from profiting from a loss; To reduce moral hazard
4Exceptions to Principle of Indemnity - Correct Answers -Valued Policy, Valued Policy
Laws, Replacement Cost, Life Insurance
Valued Policy - Correct Answers -Pays the face amount insurance if a total loss occurs;
Ex: Jewelry, Fine Arts
Valued Policy Laws - Correct Answers -Law that requires payment of the face amount if
a total loss to real property occurs from specific perils (fire, et. al)
Point of Service (POS) Plan - Correct Answers --Hybrid of HMO and PPO.
-Typically structured as an HMO, but members can go outside of network for care.
-If patients see providers who are in the network, they pay little or nothing out of pocket.
-Deductibles and copayments are higher if patients see providers outside the network.
High Deductible Health Plan (HDHP) - Correct Answers --Plan that combines a high-
deductible health plan with a health savings account (HSA).
-A high-deductible health plan has an annual deductible that is substantially higher than
traditional plans.
IRS definition of High Deductible Health Plan 2023 - Correct Answers -• Min Deductible:
$1,500 individual / $3,000 family
• Max OPP: $7,500 individual / $15,000 family
Replacement Cost - Correct Answers -Current cost of restoring the damaged property
with new materials of like kind and quality, with no deduction for depreciation
Life Insurance - Correct Answers -Pays stated amount of policy to the beneficiaries
,Principle of Insurable Interest - Correct Answers -Insured/beneficiary must be in a
position to lose financially if a coverd loss occurs
4 Key Legal Principles of Insurance - Correct Answers -Principle of Indemnity, Principle
of Insurable Interest, Principle of Subrogation, Principle of Utmost Good Faith
Who are appraisals required by? - Correct Answers -Underwriter
What is Replacement Cost? - Correct Answers -The cost to replace property with an
item of like kind and quality (workmanship and materials); not the same as market value
or historical cost
Actual Cash Value - Correct Answers -replacement cost minus depreciation
What is indemnification based on in property insurance? - Correct Answers -Actual
Cash Value of the property at the time of loss
Principle of Insurable Interest - Correct Answers -The insured must be in a position to
lose financially if a covered loss occurs
What are the 3 points of the principle of Insurable Interest? - Correct Answers -Prevents
gambling on losses, reduces moral hazard, measure of the insured's loss
Examples of Insurable Interest - Correct Answers --Ownership of property (house, car)
-Potential legal liability (business owner)
-Secured creditors (mortgage company, auto lender)
-Contractual right (goods in transit)
When must an insurable interest exist in property insurance? - Correct Answers -At the
time of loss
When must an insurable interest exist in life insurance? - Correct Answers -At inception
of policy
Principle of Subrogation - Correct Answers -substitution of the insurer in place of the
insured for the purpose of claiming indemnity from a third party for a loss covered by
insurance
3 Examples of Subrogation - Correct Answers -- someone else hits your car
- your insurance company pays you for the damages to your vehicle
- your insurance company sues the other driver for reimbursement
3 reasons for subrogation - Correct Answers -1. Prevents an insured from collecting
twice (once from insurer, once from responsible party)
2. Holds the negligent party responsible for the loss
, 3. Reduces insurance claims costs (rates)
What does subrogation not apply to? - Correct Answers -Life Insurance
Can a beneficiary still sue negligent third parties for wrongful death? - Correct Answers -
Yes
Principle of Utmost Good Faith - Correct Answers -A higher degree of honesty is
imposed on both parties to an insurance contract than is imposed on parties to other
contracts
What are the 3 legal doctrines that the principle of utmost good faith is supported by? -
Correct Answers -1. Representations
2. Concealment
3. Warranty
Representations - Correct Answers -Statements made by the applicant for insurance
What are the 3 criteria for a misrepresentation to make a contract voidable? - Correct
Answers -1. Material
2. False
3. Relied on by the insurer
Concealment - Correct Answers -intentional failure of the applicant for insurance to
reveal a material fact to the insurer
A contract can be voided due to a concealment if: - Correct Answers -Concealed fact
was known by the insured to be material; Insured intended to defraud the insurer
Warranty (statement) - Correct Answers -A statement that becomes part of the
insurance contract and is guaranteed by the maker to be true in all respects
Warranty (Condition) - Correct Answers -A condition agreed to by an insured in order to
receive coverage
What happens in case of a violation of a warranty? - Correct Answers -The claim will be
denied
What is bad faith? - Correct Answers -law that allows lawsuits against insurance
companies for: improper denial of claims and improper delay of claims
What can bad faith damages do? - Correct Answers -Exceed policy limits
What do bad faith damages include? - Correct Answers -Attorney fees, Emotional
distress, Punitive damages
