Chapter 1

Question 1

Insurable interest

Answer 1

An interest in the subject of an insurance policy that is not unduly remote and that would cause the interested party to suffer financial loss if an insured event occurred.

Question 2

Contract of indemnity

Answer 2

A contract in which the insurer agrees, in the event of a covered loss, to pay an amount directly related to the amount of the loss.

Question 3

Joint owners/tenants

Answer 3

Two or more persons each having a full interest in the property. Each tenant has an insurable interest to the full extent of the property value.

Question 4

Tendency by the entirety

Answer 4

A joint tenancy between husband and wife.

Question 5

Tenancy in common

Answer 5

A concurrent ownership of property, in equal or unequal shares, by two or more joint tenants who lack survivorship rights.

Question 6

Life tenant (life estate)

Answer 6

A person entitled to exclusive possession of real property and to all income philander produces for the duration of that person’s or someone else’s life; terminates on the death of the life tenant and does not pass to his or her estate.

Question 7

Sole proprietorship

Answer 7

A form of business in which one person owns the business assets and is personally liable for the business’s debts.

Question 8

Partnership

Answer 8

A for-profit business entity jointly owned by two or more persons who share ownership and profits (or losses), although not necessarily on an equal basis.

Question 9

Corporate veil

Answer 9

A doctor and that insulates the assets of the owners of the corporation in case the corporation goes bankrupt. The corporations owners, the stockholders, are not personally liable for the corporation’s debts.

Question 10

Limited liability company

Answer 10

A form of business entity that provides its owners with the limited liability of a Corporation and the tax advantages of a partnership.

Question 11

Tenant (LESSEE)

Answer 11

Someone who pays to use, possess, or occupy property belonging to another.

Question 12

Bailee

Answer 12

The party temporarily possessing the personal property in a bailment.

Question 13

Consignee

Answer 13

The person or organization that receives property being transported by a carrier.

Question 14

Common carriers

Answer 14

Airlines, railroads, or trucking companies that furnish transportation to any member of the public seeking their offered services.

Question 15

Guardian

Answer 15

A person appointed by a probate court to safeguard and distribute the estate assets for a minor’s or incompetent’s benefit.

Question 16

Trustee

Answer 16

Someone who has the legal title to a property but is responsible that it be used, handled, and transferred solely for the benefit of the beneficiary.

Question 17

Security interest

Answer 17

An interest in property real or personal that allows the property to be sold on default to satisfy the debt for which the security interest was given.

Question 18

Mortgage

Answer 18

An interest in land created by a written document that provide security for the payment of a debt.

Question 19

Mortgagee

Answer 19

A lender in a mortgage arrangement, such as a bank or another financing institution.

Question 20

Loss payee

Answer 20

A party entitled to share in whatever loss payment and insured receives.

Question 21

Lien

Answer 21

A creditor’s legal right or interest in another’s property, usually lasting until satisfaction of the specific debt or duty that the lien secures.

Question 22

Mechanic’s lien

Answer 22

A lien, granted by law to anyone who repairs a specific piece of property, that secures payment for the repairs.

Question 23

Tax lien

Answer 23

A type of lien held by local, state, and federal governments through operation of law in the amount of unpaid taxes and interest.

Question 24

Judgment lien

Answer 24

A lien, in favor of the holder of a judgment, that attaches to the property of the one who owes the judgment.

Question 25

Purchase money security interest

Answer 25

A type of security interest that gives the holder priority in foreclosure over subsequent lien holders or general creditors.

Question 26

Assignee

Answer 26

The individual or entity to whom properties, rights, or interests have been transferred.

Question 27

Real property

Answer 27

Tangible property consisting of land, all structures permanently attached to the land, and whatever is growing on the land.

Question 28

Personal property

Answer 28

All tangible or intangible property that is not real property.

Question 29

Coinsurance

Answer 29

An insurance-to-value provision in many property insurance policies providing that if the property is underinsured, the amount that an insurer will pay for a covered loss is reduced.

Question 30

Fixture

Answer 30

Any personal property affixed to real property in such a way as to become part of the real property.

Question 31

Trade fixtures

Answer 31

Fixtures and equipment that may be attached to a building during a tenant’s occupancy, with the intention that they be removed when the tenant leaves.

Question 32

Improvements and betterments

Answer 32

Alterations or additions made to the building at the expense of an insured who does not own the building and who cannot legally remove them.

Question 33

Direct physical loss

Answer 33

A loss that is physical (not just financial) and results immediately from the occurrence.

Question 34

Burden of proof

Answer 34

In a trial, the duty of a party to prove that the fax it claims are true.

Question 35

Fire

Answer 35

The rapid oxidation of combustible material, releasing heat and flame. Without flame there is no fire, for insurance purposes.

Question 36

Friendly fire

Answer 36

A fire that stays in its intended place, such as a fire in a fireplace.

Question 37

Hostile fire

Answer 37

A fire that leaves its intended place, such as a spark that escapes a fireplace and sets the carpet on fire.

Question 38

Vandalism

Answer 38

Willful and malicious damage to or destruction of property.

Question 39

Collapse

Answer 39

An abrupt falling down or caving in of a building with the result that the building or any part of the building cannot be occupied for its intended use.

Question 40

Moral hazard

Answer 40

A condition that increases the likelihood that a person will intentionally cause or exaggerate a loss.

Question 41

Morale hazard

Answer 41

A condition of carelessness or indifference that increases the frequency or severity of loss.

Question 42

Concurrent causation (concurrent causation doctrine)

Answer 42

A legal doctrine stating that if a loss can be attributed to two or more independent and current causes–one or more excluded by the policy and one covered–then the policy covers the loss.