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Chapter 19: Insurance Law
1. The insurer agrees to pay the insured for loss suffered by the beneficiary.
2. Standard policy and forms of fire insurance may be modified by an insurable interest.
3. Most life insurance policies contain exemptions that excuse the insurer from paying the death benefit in
defined circumstances.
4. Pre-existing conditions is an insurance term used to describe when a property is uninsurable due to its run
down or severely damaged condition.
5. No-fault insurance requires that parties to an automobile accident be indemnified by their own insurance
company.
6. The grace period is the time between when a claim is filed and the payment is received.
7. A primary care physician is needed to approve most health services in both HMOs (health maintenance
organization) and PPOs (preferred provider organization).
8. The face value of a policy is the stated minimum amount that could be paid if the harm a person is insured
against occurs.
9. Fire insurance coverage can be modified by policy attachments called endorsements.
10. An incontestability clause is usually included in a life insurance policy.
11. When an insurance company makes payment for a loss to the party that suffered it, the insurance company
is said to
A. benefit the loss.
B. endorse the loss.
12. The stated maximum amount of money that can be paid on an insurance policy is the
A. benefit.
B. endorsement.
13. The type of insurance that covers structural loss due to rain, hail, earthquake, and windstorm is
C. inland marine.
D. social.
14. Liability insurance would be classified as a form of
C. inland marine insurance.
D. social insurance.
15. Insurance providing protection against claims of parties who suffer injury or other loss as a result of
negligence committed by the insured would be
A. fidelity insurance.
B. inland marine insurance.
16. A fire insurance clause that requires the insured to maintain coverage equal to a certain percentage of the
total current value of the insured property is
C. an omnibus clause.
D. an exclusion clause.
17. A hostile fire is
A. a fire started by accident or negligence.
B. a fire started by a deliberate act uncontrolled by the insured.
18. Automobile insurance coverage indemnifying insureds for damage to their own vehicles is
A. collision.
B. comprehensive.
19. A life insurance clause prohibiting the insurer from refusing to perform due to misrepresentation or fraud
after the policy has been in effect for one or two years is
A. an endorsement.
B. an exclusion.
20. The primary source for social insurance coverage in the country is the
A. Federal Insurance Contributions Act.
B. Retirement, Survivors', Disability, and Health Insurance Act.
21. Stan and Maureen own a company that creates, manufactures, and sells software programs designed to help
cities and municipalities prepare, organize, and maintain their budgets. What could they purchase to provide
coverage against financial loss caused by a dishonest employee?
C. fraud endorsement
D. coinsurance
22. Devon purchased a type of insurance that will pay his wife a set amount in the event of his death. This type
of insurance is known as
A. casualty insurance.
B. beneficiary insurance.
23. Medicare
C. provides medical coverage only for the injured passengers of the other auto.
D. both a and c.
24. Emma just purchased automobile insurance. The portion of Emma's automobile insurance that protects her
vehicle if it should collide with her next door neighbor's tree is
A. comprehensive coverage.
B. negligence coverage.
25. Manny and Austin own a three-story office building, Stonewall Towers. If the building were damaged or
destroyed, they could sustain a loss. This potential to sustain loss is known as
A. damage potential.
26. Theft insurance, automobile insurance, and disability insurance are all examples of what type of insurance?
C. endowment
D. none of these
27. Mackenzie would like to purchase life insurance in which the premiums will not increase over her lifetime,
but she also would like the option of being able to borrow against the life insurance policy. What should she
buy?
A. whole life
B. straight life
28. Gayla is moving from Nashville, Tennessee, to Salt Lake City, Utah. She will rent a trailer to transport her
personal belongings. What type of insurance will Gayla need to purchase to cover the loss to her personal
property while it is being transported across the United States?
C. liability insurance
D. both b and c
29. Sue Anne owns several pieces of expensive jewelry. These items typically are not covered in a standard
homeowner's policy. What can she purchase that will modify her homeowner's insurance to meet her special
insurance needs?
A. endorsement
B. coinsurance
30. Which of these statements regarding social insurance is not true?
C. Social Security retirement checks can begin at age 62.
D. Unemployment compensation, although federally funded, is controlled by individual states.
31. Arthur purchases automobile insurance on his car. The policy states that he will be compensated for any
harm resulting from an automobile accident. In other words, the insurance company will "make good" his loss
by ____________________ Arthur.
32. Celia recently purchased a seagoing yacht. Before she takes the vessel out into open waters, she should
purchase ____________________ insurance.
33. The type of insurance that provides protection against loss in the event of being involved in an automobile
accident with a driver who has no insurance is called ____________________ coverage.
34. Dwayne insured his vehicle with Mutual Insurance of America. After his recent automobile accident
Dwayne was paid for the loss he suffered. As the monetary recipient Dwayne is known as a(n)
____________________.
35. The written contract for insurance that Katana receives from her insurance company is known as a(n)
____________________.
36. Elisa's standard homeowner's insurance policy will not pay in the event of loss or damage as a result of
flooding. This exception to her policy in known as a(n) ____________________.
37. If Joaquin wants to purchase relatively inexpensive life insurance coverage on himself until his son
graduates college in four years, he will probably buy a(n) ____________________ life insurance policy.
38. ____________________ is a clause in a fire insurance policy that requires the insured to maintain coverage
equal to a certain percentage of the total current value of the insured property.
39. The type of insurance that provides protection against loss in the event of being involved in an automobile
accident with a driver who has insurance but the coverage of which is not sufficient to pay for the full damage
amount is called ____________________ coverage.
40. ____________________ insurance requires that parties to an automobile accident be indemnified by their
own insurance company regardless of who is at fault.
41. George needed to borrow Manuel's truck to haul his lawn mower to be repaired. On the way to town, he ran
a stop sign and hit another vehicle in the intersection. Manuel's truck was totaled. Whose insurance company is
liable, George's or Manuel's? Explain your answer.
42. Darron and Octavio are partners who own and operate a successful charter airline business. Both are
certified and fully licensed pilots with a combined 30 years of flying experience. The success of the business is
contingent on both partners’ experience and contribution to the business. In order to protect themselves from
financial loss due to a plane accident or death of one of the partners, what type of insurance should they
purchase? Please explain your choices.
Answers will vary. In order to protect themselves from financial loss due to accident or collision involving any
