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Exam 18: Insurance and Guarantee

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Question 21

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Why it is important for a contract of guarantee to be in writing and signed by the guarantor?

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Since there is usually a lapse of time b...

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Question 22

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Milton, who is 19 years old, purchased a car but found that he was in a position of having to pay extremely high insurance rates. As a way of avoiding those high payments he had a Bill of Sale made out to his father and had the car registered in his father's name. His father took out an owner's policy from All Risk Insurance Limited. As later revealed, Milton's father never paid for the vehicle and Milton remained the true owner and operator. Then later, when Milton was involved in an accident, the claim was submitted by the father (since the policy was in his name). Upon discovering the true state of affairs, the insurance company refused to pay for damage caused by the accident. What legal basis would the insurance company have to refuse to pay the claim?

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Milton's father will suffer no loss as a...

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Question 23

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Judy purchased a property and built a building on it at a cost of $200,000. She purchased fire insurance on the building in the sum of $150,000. A fire caused $150,000 damage to the building. Under normal circumstances would Judy be able to recover the full amount of the loss? Give reasons for your answer.

Both Provincial and Federal governments regulate the insurance industry. What are the main purposes of insurance statutes?

When does a life insurance policy become effective?

Donna owns a commercial building which has a small retail shop, three offices, and a small warehouse. Each unit is rented out to a different company. She has taken out a standard fire insurance policy for the appraised value of the building. On July 1st the building and its contents are destroyed by fire. The cause of the fire was never determined. Which of the following is TRUE?

Comprehensive general accident insurance for business is NOT likely to cover

The concept of subrogation applies to the liability of a guarantor under a loan guarantee. Under the concept of subrogation:

Dennis applied for a policy of life insurance and one of the questions on the medical questionnaire asked: "Have you ever been hospitalized?" Dennis answered truthfully that he had been hospitalized in 1993 to have his tonsils out and in 1996 to have his appendix out. The life insurance policy was issued. Sixteen months later Dennis died of a heart attack and the insurance company discovered that he had been hospitalized in 1985 due to a mild heart attack. The beneficiary of the life insurance policy applied for the death benefit claiming quite correctly that Dennis had been truthful in the application, but the insurance company refused to pay the death benefit. What legal basis does the insurance company have for refusing to pay?

Define the term "insurable interest" and state the effect on the insured where they do not have an insurable interest.

While Stella was in Hong Kong, a loan came due that she had guaranteed. The creditor, a kindly old man, extended the due date on the loan for thirty days, interest free. Did this action by the creditor discharge Stella from her obligation?

To be entitled to the proceeds of an insurance policy, a person must have an economic interest in the property that is the subject- matter of the insurance policy.

Regarding property insurance,

The act of forbearance of some deed at the request of the guarantor is usually consideration to the guarantor in a contract of guarantee?

In May, farmer Smith sold one of his tractors to farmer Jones for $26,000. Smith received $6,000 down and a 7% note payable (for $20,000) to be paid on October 15th. In need of cash, farmer Smith brought the note to his bank for discounting. The bank gave cash less 5% for the note, whereas farmer Smith endorsed the note in favour of the bank. Farmer Smith performed an act of

Joe obtains a loan from a bank and his wife, Mary gives a personal guarantee as security. The guarantee is expressed as being a continuing guarantee. Two months later Joe also obtains a line of credit from the same bank. This time Mary does not sign a guarantee. Mary is happy because she believes that the bank will not come after her if Joe defaults on the line of credit. Is Mary's belief true or false?

This type of insurance includes both professional and business categories, the former referred to as malpractice insurance:

Co- insurance is a technique used by insurance companies to

Nancy missed a payment on her signature loan to Pacific Bank. The bank threatened to bring her to court unless she could pledge some assets or find someone to be a guarantor. Nancy's friend Lynn agreed to sign as guarantor if Nancy wouldn't tell Lynn's husband. In response to Lynn's promise, what is the necessary consideration for the guarantee?

Where certain terms are changed in a policy, the document that records the changes is not an endorsement.