BU353 Final Exam Review Questions
1. There are four elements that must exist for a negligence suit to be successful. Describe
these four elements.
a) Legal duty - ex. Legal duty to stop at a traffic light
b) Breach of duty - what a reasonable person would have done
c) Proximate cause - foreseeability; injury occurred due to the defendant’s actions
d) Injury to plaintiff - must have suffered a loss
2. What is meant by the absolute liability law provision of the automobile policy? Who is
protected under this provision?
The liability of a wrongdoer’s automobile insurance company to pay someone harmed by the
wrongdoer, even if the wrongdoer has violated the terms of the insurance policy, for example, by
driving with an expired license. This is subject to a limit, usually $200,000, and the requirement that
the wrongdoer is in violation of the contract must reimburse the insurer.
3. What coverages are provided under Section I and Section II of the Homeowners
a) Section I – Property Coverages
Coverage A: Dwelling Building – Homeowner
Coverage B: Detached Private Structures (Homeowner only) - playground, shed, pool house
Coverage C: Personal Property - property you own, wear or use on premises
Coverage D: Additional Living Expenses
b) Section II – Liability Coverages
4. What tax benefits are provided by permanent life insurance policies?
Permanent life insurance is when the sum assured is due to be paid out at the end of the policy and
the policy accrues a cash value. The tax benefits are as follows:
- death benefits are not taxed
- no income tax paid on increases in cash value when the policy is in force
- if insured dies, returns are not taxed; if insured lives, tax is deferred until funds are received 5. CGL exclusions fall into three broad categories. List the three categories and provide
one example of each.
Commercial General Liability coverage is restricted by exclusions:
a) Things that cannot be covered - ex. War
b) Things that should be covered elsewhere - ex. Auto/boat liability
c) Trade Risk - ex. Faulty product
6. Compensatory damages are made up of two types of damages. Describe the two types
and provide an example of each.
Compensatory damages compensate the injured parties for loss:
a) Special damages - for monetary losses
b) General damages - for non-monetary losses
Punitive damages in comparison are meant to punish and deter.
7. Life Insurance is provided on a Term or Permanent Basis. What is the difference
between the two and why might a consumer choose one over the other?
Term insurance provides coverage for a specific period, such as 10, 15 or 20 years, and is renewable
after those terms are up. Permanent insurance, which includes whole life and universal life, is
designed to provide lifelong financial protection as long as the policy is in force.
Initially, term life premiums are generally lower than permanent life premiums. However, term life
premium typically increase upon each renewal while permanent life premiums stay the same.
With most types of permanent insurance, there is a savings component known as cash value; the
longer you pay into your policy, the more its cash value grows. You can choose to cash in or borrow
against your permanent life po