Indemnity

Which rider pays an additional amount if the insured dies as a result of an accident?

1. A.Cost of living riderA cost of living rider adjusts coverage to keep pace with inflation. It responds to changes in purchasing power, not to the manner of death.
2. B.Guaranteed insurability riderThis rider secures the right to purchase more coverage later without new underwriting. It expands future options rather than adding anything to a claim arising from an accident.
3. C.Waiver of premium riderWaiver of premium keeps a policy in force when the insured becomes disabled. It changes who carries the cost of the policy, not the size of the death benefit.
4. D.Accidental death benefit riderCorrect - it adds a benefit for accidental death.

Why: The accidental death benefit rider (often double indemnity) pays extra when death is accidental.

The accidental death benefit rider (sometimes called double indemnity) pays...

1. A.An additional benefit if death results from an accidentCorrect — the rider pays extra for accidental death.
2. B.A portion of the benefit early if the insured is terminally illThat is the accelerated death benefit rider.
3. C.Extra coverage purchasable later without underwritingThat is the guaranteed insurability rider.
4. D.The premiums if the insured becomes disabledThat is the waiver of premium rider.

Why: The accidental death benefit rider pays an additional amount — often equal to the face amount — if the insured dies as a result of an accident. Death from illness or natural causes does not trigger it.

Ivor is killed by a negligent driver. His life insurer pays the full 500,000 dollar death benefit to his widow, then asks its counsel whether it can step into her shoes and recover that 500,000 dollars from the driver liability insurer. What is the answer, and why?

1. A.Yes, but only up to the amount by which the death benefit exceeds the widow proven economic lossLife insurance does not measure economic loss at all, so no such comparison is made.
2. B.No; subrogation belongs to contracts of indemnity, and life insurance is a valued contract paying a stated sum rather than measuring a lossCorrect. Without an indemnity measure there is no subrogation right in life insurance.
3. C.No; subrogation is available only where the policy expressly reserves it, and most life policies do notThe bar is structural rather than a drafting choice. A valued contract has no indemnity measure to subrogate.
4. D.Yes; any insurer that pays a claim caused by a third party acquires subrogation rights by operation of lawSubrogation arises from the indemnity principle, not automatically from paying any claim.

Why: No. SUBROGATION is a feature of contracts of INDEMNITY, where the insurer promises to restore an actual measured loss and is therefore entitled to pursue the party who caused it, so the insured is not paid twice for the same loss. Life insurance is a VALUED contract: the insurer promises a stated sum on the occurrence of the insured event, without measuring the economic loss the death caused. Because there is no indemnity measure, there is nothing to subrogate. The widow may pursue the negligent driver for wrongful death independently, and the life insurance recovery does not reduce that claim.

A customer's certificate is torn and partially illegible, though the customer knows exactly where it is and it has not been lost. Does this certificate's physical condition affect its status for good delivery, and how does this situation differ from a lost certificate?

1. A.A mutilated certificate is treated identically to a lost certificate, requiring the same affidavit of loss and indemnity bond process regardless of the fact that its location is known.Wrong. A mutilated certificate is not treated identically to a lost certificate; its own surrender-and-replace process applies instead.
2. B.A mutilated certificate has no effect on good delivery status as long as the customer can still identify which security and how many shares it represents from memory.Wrong. A mutilated certificate does affect good delivery status regardless of the customer's ability to describe it from memory.
3. C.A mutilated certificate must simply be taped or otherwise physically repaired by the customer before it can be delivered, with no need to involve the transfer agent at all.Wrong. Self-repair by the customer does not resolve the issue; the transfer agent must be involved in a proper replacement process.
4. D.A mutilated certificate fails good delivery due to its physical condition, distinct from a lost certificate's problem of location; rather than an affidavit of loss, a mutilated certificate typically requires its own replacement process with the transfer agent based on surrendering the damaged original, since its whereabouts are known but its physical condition itself is defective.Correct. A mutilated certificate is a distinct physical-condition problem, addressed through its own surrender-and-replace process.

Why: A lost certificate and a mutilated certificate present two different problems. A lost certificate raises the question of where the original actually is and whether it might resurface, which is exactly what the affidavit-of-loss and indemnity bond process is designed to address. A mutilated certificate's location is known -- the customer has the damaged item in hand -- but its physical condition itself is defective, which calls for its own replacement process built around surrendering the damaged original to the transfer agent, not the loss-specific process meant for a certificate that cannot be located at all.