Asked by logan brockway on May 07, 2024
Verified
To prevent the use of the insurance policy for wagering purposes, the person who is to be indemnified under the contract must have:
A) good faith.
B) an insurable interest.
C) a binder.
D) a coinsurance clause.
Insurable Interest
A principle that requires an individual to have a legitimate financial or emotional stake in the preservation of the subject of insurance to obtain a policy.
Insurance Policy
A contract issued by an insurer to an insured, detailing the terms under which the insurer agrees to financially protect the insured against specific risks in exchange for premiums.
Indemnified
Protected against liability, loss, or damage, typically through a legal agreement where one party agrees to compensate another for any financial harm that arises.
- Identify the various types of insurance and the principles underlying coinsurance.
- Recognize the significance of insurable interest and legitimate defenses in insurance policies.
Verified Answer
JM
Jaskaran MalhiMay 10, 2024
Final Answer :
B
Explanation :
An insurable interest is necessary to prevent the insurance policy from being used for gambling or speculative purposes. The person who is to be indemnified must have a financial stake in the outcome of the insured event, such as ownership of the property or a legal obligation to protect it. Good faith refers to the honesty and fairness of the parties involved in the contract, but it is not directly related to insurable interest. A binder is a temporary contract that provides coverage until the full policy is issued, and a coinsurance clause is a provision that requires the policyholder to share in the losses up to a certain percentage. Neither of these options directly addresses the issue of wagering.
Learning Objectives
- Identify the various types of insurance and the principles underlying coinsurance.
- Recognize the significance of insurable interest and legitimate defenses in insurance policies.