Questions: Question 9 (1 point) Page 9 of 15 Which of the following is a fundamental purpose of the principle of indemnity? to require deductibles in all property insurance policies to reduce moral hazard to minimize physical hazards to settle property insurance losses on a replacement cost basis Previous Page Next Page Page 9 of 15 Submit Quiz 8 of 15 questions saved

The answer is: to reduce moral hazard.

Explanation:

• To require deductibles in all property insurance policies: This is not a fundamental purpose of the principle of indemnity. Deductibles are used to share risk between the insurer and the insured, but they are not directly related to indemnity.

• To reduce moral hazard: Correct. The principle of indemnity aims to prevent the insured from profiting from a loss, thereby reducing the incentive for moral hazard, which is the risk that the insured might intentionally cause a loss or act carelessly because they have insurance coverage.

• To minimize physical hazards: While minimizing physical hazards is important in insurance, it is not directly related to the principle of indemnity. Physical hazards are more about the conditions that increase the likelihood of a loss.

• To settle property insurance losses on a replacement cost basis: This is a method of settling claims, but it is not the fundamental purpose of the principle of indemnity. Indemnity is about restoring the insured to their financial position prior to the loss, not necessarily replacing items at current market value.