RMIN 4000 Brown Exam 3 Questions and
Answers Graded A+
Principle of Indemnity - Correct answer-Insurer agrees to pay no more than the
actual amount of the loss; prevents insured from profiting from the loss
Replacement Cost (RC) - Correct answer-Cost to replace property with an item of
like kind and quality (similar workmanship and materials)
Actual Cash Value (ACV) - Correct answer-Replacement cost less depreciation
Market Value - Correct answer-Price buyer would be willing to pay in a free
market
Valued Policy - Correct answer-A policy that requires the face amount of insurance
if a total loss occurs (life insurance)
Valued Policy Law - Correct answer-Requires payment of the face amount of
insurance if a total loss to real property occurs from a peril specified in law; used
in some states
Principle of Insurable Interest - Correct answer-The insured/beneficiary must be in
a position to lose financially if a covered loss occurs
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, Examples of Insurable Interest - Correct answer-Ownership of property, potential
legal liability, secured creditors, contractual right
Principle of Subrogation - Correct answer-substitution of the insurer in place of the
insured for the purpose of claiming indemnity from a third-party loss covered by
insurance; prevents insured from collecting twice
Principle of Utmost Good Faith - Correct answer-A higher degree of honesty is
imposed on both parties to insurance contracts than is imposed on parties to other
contracts; supported by representations, concealment, and warranty
Representations - Correct answer-Statements made by the applicant for insurance;
contract is voidable if misrepresentation is material, false, and relied on by insurer
Concealment - Correct answer-Intentional failure of the applicant for insurance to
reveal a fact to the insurer; contract can be voided if concealed fact was known by
insured to be material or the insured intended to defraud the insurer
Warranty - Correct answer-A statement that becomes part of the insurance contract
and is guaranteed by the maker to be true in all respects; condition agreed to by an
insured to receive coverage
Bad Faith - Correct answer-Law that allows lawsuits against insurance companies
for improper denial or delay of claims
©COPYRIGHT 2025, ALL RIGHTS RESERVED 2
Answers Graded A+
Principle of Indemnity - Correct answer-Insurer agrees to pay no more than the
actual amount of the loss; prevents insured from profiting from the loss
Replacement Cost (RC) - Correct answer-Cost to replace property with an item of
like kind and quality (similar workmanship and materials)
Actual Cash Value (ACV) - Correct answer-Replacement cost less depreciation
Market Value - Correct answer-Price buyer would be willing to pay in a free
market
Valued Policy - Correct answer-A policy that requires the face amount of insurance
if a total loss occurs (life insurance)
Valued Policy Law - Correct answer-Requires payment of the face amount of
insurance if a total loss to real property occurs from a peril specified in law; used
in some states
Principle of Insurable Interest - Correct answer-The insured/beneficiary must be in
a position to lose financially if a covered loss occurs
©COPYRIGHT 2025, ALL RIGHTS RESERVED 1
, Examples of Insurable Interest - Correct answer-Ownership of property, potential
legal liability, secured creditors, contractual right
Principle of Subrogation - Correct answer-substitution of the insurer in place of the
insured for the purpose of claiming indemnity from a third-party loss covered by
insurance; prevents insured from collecting twice
Principle of Utmost Good Faith - Correct answer-A higher degree of honesty is
imposed on both parties to insurance contracts than is imposed on parties to other
contracts; supported by representations, concealment, and warranty
Representations - Correct answer-Statements made by the applicant for insurance;
contract is voidable if misrepresentation is material, false, and relied on by insurer
Concealment - Correct answer-Intentional failure of the applicant for insurance to
reveal a fact to the insurer; contract can be voided if concealed fact was known by
insured to be material or the insured intended to defraud the insurer
Warranty - Correct answer-A statement that becomes part of the insurance contract
and is guaranteed by the maker to be true in all respects; condition agreed to by an
insured to receive coverage
Bad Faith - Correct answer-Law that allows lawsuits against insurance companies
for improper denial or delay of claims
©COPYRIGHT 2025, ALL RIGHTS RESERVED 2
