Which of the Following Statements Best Reflects the Concept Behind

question 91

Multiple Choice

Which of the following statements best reflects the concept behind the rule of indemnity?

• A) If a large number of people are exposed to the same risk, a predictable number of losses will occur during a given period of time.
• B) If a written contract exists between the insured and an insurance company, the insured is entitled to receive the maximum amount stated in the contract in the event of a loss.
• C) If an insurance company's premiums generate excess funds, these excess funds must be returned to the policyholders in the form of dividends or reductions in future premiums.
• D) An insured person cannot collect more than the actual loss from an insurable risk.

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Definitions:

Real Authority

The actual power given to an agent or representative to act on behalf of another person or entity in legal or business matters.

Apparent Authority

The appearance or assumption of authority based on the actions or statements of the principle, leading a third party to believe that an agent has the authority to act.

Sole Proprietorship

A Sole Proprietorship is a type of business entity that is owned and run by one individual, with no distinction between the business and the owner, making the owner personally liable for the debts of the business.

Legal Person

An individual or organization capable of bearing legal rights and obligations, including the ability to enter into contracts and sue or be sued.