Podcast
Questions and Answers
What is a stockholder's interest in a corporation's property based on?
What is a stockholder's interest in a corporation's property based on?
- The company's dividends
- The total assets of the corporation
- His existing stock ownership (correct)
- The corporation's net income
How is insurable interest in property different from insurable interest in life?
How is insurable interest in property different from insurable interest in life?
- Property interest must exist when the loss occurs.
- Life interest is limited to the actual value of the interest.
- Property interest must exist at the time the policy takes effect.
- Life interest can exist without a legal basis. (correct)
What insurable interest does a mortgagor have on mortgaged property?
What insurable interest does a mortgagor have on mortgaged property?
- Only to the extent of the mortgage debt.
- None, as they are not the owner of the property.
- To the extent of the property's value. (correct)
- Only until the mortgage debt is paid in full.
Which statement regarding the mortgagee's insurable interest is true?
Which statement regarding the mortgagee's insurable interest is true?
What happens under a loss payable mortgage clause when the mortgagee is designated as the beneficiary?
What happens under a loss payable mortgage clause when the mortgagee is designated as the beneficiary?
In terms of beneficiaries, which statement is true for life insurance policies?
In terms of beneficiaries, which statement is true for life insurance policies?
Under what condition does a third party must have insurable interest when taking out life insurance?
Under what condition does a third party must have insurable interest when taking out life insurance?
What is required for a valid insurance assignment regarding property?
What is required for a valid insurance assignment regarding property?
Which of the following does NOT suspend the insurance despite a change of interest?
Which of the following does NOT suspend the insurance despite a change of interest?
In a consensual contract of insurance, what primarily leads to its perfection?
In a consensual contract of insurance, what primarily leads to its perfection?
If a policy includes a prohibition against alienation, what is the consequence of alienation?
If a policy includes a prohibition against alienation, what is the consequence of alienation?
Which situation allows a change of interest in insured property without suspending insurance?
Which situation allows a change of interest in insured property without suspending insurance?
What happens if an insurance application is submitted but not approved?
What happens if an insurance application is submitted but not approved?
What characterizes premiums in a contract of insurance?
What characterizes premiums in a contract of insurance?
What can lead to the suspension of insurance when a change in interest occurs?
What can lead to the suspension of insurance when a change in interest occurs?
Flashcards
Insurable Interest (Property)
Insurable Interest (Property)
Exists when the insurance policy is taken out and when the loss occurs. It is limited to the actual value of the interest in the property.
Insurable Interest (Life)
Insurable Interest (Life)
Exists at the time the policy is taken out and need not exist at the time of the loss. It can also be unlimited, except in life insurance by a creditor on a debtor.
Mortgagor Insurable Interest
Mortgagor Insurable Interest
An owner of mortgaged property has insurable interest up to the property's value, even if the mortgage equals that value.
Mortgagee Insurable Interest
Mortgagee Insurable Interest
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Loss Payable Clause
Loss Payable Clause
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Property Beneficiary
Property Beneficiary
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Life Beneficiary
Life Beneficiary
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Stockholder's Interest
Stockholder's Interest
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Change of Interest, Insurance Suspension
Change of Interest, Insurance Suspension
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Exceptions to Suspension (Insurance)
Exceptions to Suspension (Insurance)
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Contract of Insurance Perfection
Contract of Insurance Perfection
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Insurance Application Approval
Insurance Application Approval
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Insurance Premiums
Insurance Premiums
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Alienation Prohibition (Insurance)
Alienation Prohibition (Insurance)
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Study Notes
Insurable Interest
- Property: Limited to the actual value of the interest. Insurable interest must exist when the insurance takes effect and when the loss occurs, but need not exist in between.
- Life: Unlimited (except in creditor-issued life insurance). Insurable interest exists at the time the policy takes effect and need not exist at the time of loss. No requirement for a legal basis for expectation of benefit.
- Mortgagor: Holds insurable interest to the full value of the property, even if the mortgage equals that value.
- Mortgagee: Holds insurable interest up to the amount of the secured debt; this interest continues until the debt is paid.
- Loss Payable Clause: Mortgagor secures insurance and names mortgagee as beneficiary. Insurance covers the mortgagor's interest, and prior acts by mortgagor impacting the insurance can still affect the mortgagee. The mortgagee can perform acts required of the mortgagor.
Beneficiary and Assignee
- Property: Must have insurable interest.
- Life: If taken out by the insured, any beneficiary can be named, even without insurable interest. If taken out by a third party, the beneficiary must have insurable interest.
- Assignee: Must have insurable interest. Assignment must have insurer consent.
Change of Interest in Insured Property
- General Rule: A change in insured property ownership suspends insurance until both interests (property and insurance) vest in the same person.
- Exceptions:
- Change after the loss occurs.
- Change in one or more of several distinct things insured separately.
- Change via will or succession after death.
- Transfer from one partner/joint owner to others, if jointly insured.
- Policies crafted to benefit owners after an insured's interest is transferred.
- Prohibition on Alienation: If a policy specifically prohibits it, a transfer voids the contract.
Consent and Perfection
- Consent: Insurer consent usually needed for changes, since they consider the insured's qualifications. Necessary only for property transfers.
- Perfection: A contract forms when the insured and insurer agree. An application alone does not constitute a binding contract without approval.
Premiums
- Premiums are the consideration for the insurer's risk undertaking.
- A binding insurance contract generally requires premium payment.
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