CHAPTER 37—PRINCIPLES OF INSURANCE Key
1. Which of the following best defines insurance?
2. The party agreeing to compensate a person for a certain loss is known as the _____.
3. The danger of a loss of, or injury to, property, life, or anything else, is called a _____.
4. A company in which policyholders are the members and owners and correspond to the stockholders in a
stock company is known as a(n) ______.
5. James mortgaged his house and received a certain amount of money in return as a loan. However, he repaid
half the loan in six months. Which of the following is likely to be true in this scenario, at the present moment?
6. Which of the following best defines concealment?
7. An oral or written misstatement of a material fact by the insured prior to the finalization of a contract is called
a _____.
8. Which of the following best defines subrogation?
9. Insurance contracts must specify the particular risks being transferred from one party to another.
10. The maximum amount that the insurer agrees to pay in case of a loss is known as the face of the policy.
11. A “binder” on an insurance policy is a clause added to another contract to limit the base contract.
12. A stock insurance company is a corporation for which the original investment was made by stockholders.
13. A minor who wishes to disaffirm is bound on insurance contracts.
14. A creditor has insurable interest in the life of the debtor beyond the extent of the debt.
15. A bailee has an insurable interest in the property bailed to the extent of possible loss.
16. A partner does not have an insurable interest to the extent of the possible loss in the property owned by a
firm.
17. A willful failure to disclose pertinent information by the insured is known as subrogation.
18. Untrue statements or unfulfilled promises by the insured permit the insurer to declare the policy void.
19. Either party to an insurance contract may claim the benefit of a violation of the contract by the other party.
20. Explain subrogation.