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Corporate Finance
Why are the rules on the right to assign a property insurance contract different from the rules on the right to assign a life insurance contract?
Why are insurance contracts viewed as contracts of adhesion? If an insurer issues a contract that includes ambiguities that an insured challenges in court, how will the courts view the case?
What difference does it make to an insured if a false statement made by the insured is considered a warranty or a representation?
Explain the advantages of the incontestability clause in life insurance from society’s standpoint.
What are the advantages of using standardized insurance policies?
List and describe the different parts commonly found in an insurance policy.
Explain the reasons for including exclusions in an insurance policy.
What are the important differences between a valid contract, an invalid contract, and a voidable contract?
List the four elements of a valid contract. What is the legal result if only three of the four elements are present?
Why is legal capacity required to enter into a valid contract?
What is indemnity? Identify three ways the principle of indemnity is enforced in property insurance contracts.
Are there any exceptions to the rule that insurance contracts are contracts of indemnity, defined strictly?
Describe one difference between life insurance and property insurance in the requirement for insurable interest.
Does actual cash value equal fair market value?
How does subrogation prevent one from collecting twice for the same debt, or from the same insured injury?
Briefly, how does the tort liability system apply to automobile accidents?
What situations are covered by the medical expense protection part of the PAP? If an insured were struck by an auto while walking, would there be coverage under this provision?
Why do drivers need uninsured motorists insurance if they have purchased liability and property damage insurance?
Explain the difference between an uninsured and an underinsured motorist.
What are the insured’s major duties after a loss?
Do insureds have a right to demand replacement of parts damaged in a collision with parts from the original equipment manufacturer?
How does the legal doctrine of subrogation apply under the PAP?
Herb lends his auto to Emmy Lou. Emmy Lou has her own PAP with coverage identical to Herb’s. Emmy Lou runs over and injures a famous baseball player who recently signed a three-year $27 million
Herb runs a stop sign and collides with a parked car causing $4,000 of damage to each vehicle.
Herb’s daughter, Peggy Sue, strikes their home and their second car while learning how to drive. She is 16 years old and has a learner’s permit. Damage to Herb’s home is $30,000 and damage to
Explain the difference between primary and excess coverage in automobile insurance.
Several distinct categories of drivers are insured under the terms of the PAP. Identify three categories of drivers covered by the PAP and give examples of each category.
Explain whether each of the people described in the following scenario has coverage under Part A of the PAP and say why or why not: Bob, the named insured, is an auto mechanic. Bob and his wife,
Does the PAP provide coverage if a named insured drives a nonowned auto? What is the definition of a nonowned auto?
What are the four general areas of protection provided by Coverages A through D of the PAP?
Assume that an insured causes an automobile accident that injures five people and damages one auto. Assume that each of the injured parties successfully sues for $20,000. The damaged auto was worth
Why is damage to an insured’s own property excluded under Part A?
Identify other major categories of exclusions under Part A.
Describe some individuals who are protected by the HO contract who are parties to the contract. Distinguish between the “named insured” and other insureds. Describe some covered people who are
Why are limits placed on coin, stamp, and gun collections in the HO? Can this kind of property be insured?
Assume John Marshall owns a $150,000 home, which covers the replacement cost of the structure. (Ignore the deductible clause and consider just the coinsurance requirement.) If John purchased $120,000
If John purchased $100,000 of insurance, how much would he collect for a $40,000 loss? How much would he collect for a total loss?
Next, assume that John Marshall purchased $50,000 of insurance on his $150,000 home. How much would he collect for a partial loss of $40,000? How much would he collect for a total loss?
Now assume all the conditions of the loss settlement clause of the HO apply to the case. Assume that John has $100,000 coverage on his $150,000 house, which has been used for only one-eighth of its
Finally, given the same amount of coverage in the preceding question, if John’s home had been used for seven-eighths of its estimated useful life, how much would John collect for a $40,000 partial
Under the HO, will a theft loss in April mean less coverage available for a fire in July?
Bill’s house and all its contents are destroyed by a tornado. It takes six months to rebuild the home, and Bill’s additional living expenses amount to $12,000.Assume Bill Clanton owns the ISO
A neighbor’s eight-year old child accidentally releases the brakes on his family’s pick-up truck, sending it crashing into Bill’s home. Damage to the home amounts to $15,000. The truck is
Bill negligently starts a fire while cooking. His home and all the contents are a total loss. It costs Bill an additional $14,000 to live in a rental home while his house is being rebuilt.Assume Bill
List the four coverages found in Section 1 of the HO. Give an example of a loss covered by each section.
While playing golf, Bill’s ball hits another golfer in the head. Bill yelled a warning before the victim, Bob, was hit. Bob claims not to have heard the warning, and sues Bill for $60,000 in
While carrying his television to the basement, Bill drops it. It is a total loss (damage = $850).
List the two coverages found in Section 2 of the HO. Give an example of a loss covered by each section.
What is the relationship between the ordinance-or-law exclusion and building codes?
Why is the mortgage clause of the HO desirable from a lender’s viewpoint?
What is the difference between a “named perils” policy and an “open perils” policy?
Referring to the previous question, is one format always preferable over the other?
Why do property insurance policies contain exclusions? Illustrate your answer with examples from the HO.
Will an exclusion result in partial recovery?
List and explain the different categories of needs life insurance can fill in the event of a premature death. Separate your list into permanent and temporary needs.
Describe a second-to-die life insurance policy. What purpose does it serve?
Explain the purpose of life insurance in an estate plan.
Define the term split-dollar life insurance.
Explain the difference between the cross-purchase plan and the entity plan.
Does the federal income tax apply to life insurance death proceeds? Are there exceptions to the general rule?
When does the federal estate tax apply to life insurance proceeds?
Other than life insurance, what assets are available to most American families at death?
Identify the five steps in the life insurance planning process.
What are the advantages of saving for college through a Section 529 plan?
What purposes are served when businesses purchase life insurance for their employees?
Describe key employee life insurance.
What is a buy-and-sell agreement, and what role does life insurance play in such a plan?
What is the purpose of a will? What happens if a person dies without a valid will?
Define the term gross estate, and indicate how it differs from a taxable estate.
How does convertible term life insurance differ from renewable term life insurance?
Develop a set of family circumstances where traditional cash value, whole life insurance is the most appropriate type of policy to meet the consumer’s needs.
Why have many consumers found the savings aspect of whole life insurance policies useful?
For a healthy managed 27, rank the following policies in the order of their premium size, from largest to smallest:a. Continuous-premium whole lifeb. Ten-payment whole lifec. Single-premium whole
Describe some family circumstances where a consumer might logically choose to purchase a universal or variable life insurance policy.
Describe the advantages and disadvantages of buying term insurance and investing the difference.
Why does a whole life insurance policy require a larger premium than a term insurance policy?
What are the main differences between universal life insurance and traditional whole life insurance?
Explain the two different types of death benefit plans offered with universal life insurance.
How can a variable life insurance policy be operated like a universal or whole life insurance policy?
Describe the conversion privilege found in group life insurance. When is it useful?
List some of the differences between group and individual life insurance.
Identify the contractual rights that the owner of a life insurance policy may exercise.
Describe four different types of term insurance policies based on their potential time span.
Why are decreasing term policies frequently used to repay mortgage loans?
Explain why the renewability feature makes term insurance more attractive to some buyers.
Define the terms insured, owner, and beneficiary.
Describe the three typical nonforfeiture options. Why do insurers offer nonforfeiture options? Illustrate the three nonforfeiture options in the case of John Brahms, who currently has a policy with
Do insureds have a legal right to a loan secured by their cash value? Describe some circumstances when a policyholder loan provision is advantageous to the insured, but a disadvantage to the insurer.
What is an automatic premium loan?
Explain five different settlement options. Give an example where each alternative might be useful.
Describe the benefits provided by the guaranteed-insurability and waiver-of-premium options.
What are some objections to the double-indemnity option? What is the justification for this option?
Give the reasons for a life insurance policy containing each of the following provisions:a. Grace periodb. Reinstatementc. Incontestable claused. Entire-contract clausee. Misstatement-of-age clausef.
What is a lapsed life insurance policy? What are some possible causes of lapsing? Is a lapsed policy a problem or benefit to the insured? To the insurer?
Give some reasons why an insured might prefer to reinstate an existing policy rather than begin a new one.
Does the incontestable clause mean an insured always “gets away with” fraud against the insurer? Is the purpose of the incontestable clause to protect the insured from fraud? Does the
What will an insurer do if it learns that an applicant misstated his or her age on a life insurance application? Buster Brown knowingly tells the insurer his age is 28 when he is actually 38. What
Describe some of the differences between participating and nonparticipating life insurance. Which plan should a consumer purchase?
Are participating dividends guaranteed?
Identify four dividend options.
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