Insurance Contracts & Policy Interpretation Flashcards
7 cards from real Insurance practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Insurance Contracts & Policy Interpretation flashcards as text
'Replacement Cost Value' (RCV) coverage differs from Actual Cash Value (ACV) in that RCV:
Answer: Pays the cost to repair or replace property without deducting for depreciation
Replacement cost coverage pays what it actually costs to replace damaged property with new property of similar kind and quality, without subtracting depreciation.
The 'insuring agreement' in an insurance policy:
Answer: Describes the insurer's promise to pay covered losses and the scope of coverage provided
The insuring agreement is the core promise of the policy, describing what the insurer agrees to pay for and under what circumstances.
'Concurrent causation' in insurance refers to a situation where:
Answer: A loss results from two or more causes acting together, with at least one covered and one excluded
Concurrent causation occurs when a loss has multiple contributing causes, at least one covered and one excluded, creating disputes over whether the policy applies.
An 'incontestability clause' in a life insurance policy means that:
Answer: After a specified period (usually 2 years), the insurer cannot void the policy based on misrepresentations in the application
After the incontestability period (typically two years), the insurer loses the right to void the policy or deny claims based on misrepresentations made on the original application.
In insurance law, 'waiver' occurs when:
Answer: The insurer voluntarily relinquishes a known contractual right to deny or limit coverage
Waiver is the voluntary and intentional relinquishment of a known right by the insurer, which can prevent the insurer from later asserting that right to deny a claim.
The 'principle of indemnity' in insurance states that:
Answer: Insurance should restore the insured to the same financial position they were in before the loss, no better and no worse
The principle of indemnity ensures that insurance compensates only for actual financial loss, preventing the insured from gaining a financial profit from a covered claim.
What does 'assignment' of an insurance policy mean?
Answer: The policyholder transfers their rights and interests under the policy to another party
Assignment allows a policyholder to transfer their contractual rights and benefits under the policy to another person or entity, typically requiring insurer consent for property and casualty policies.