2 - Legal Concepts

All of the following are considered to be typical characteristics describing the nature of an insurance contract, EXCEPT: bilateral unilateral aleatory adhesion

Bilateral

Which of these require an offer, acceptance, and consideration?

Contract

Insurance policies are offered on a "take it or leave it" basis, which make them: -Conditional Contracts -Aleatory Contracts -Unilateral Contracts -Contracts of Adhesion

Contracts of Adhesion

E and F are business partners. Each takes out a $500,000 life insurance policy on the other, naming himself as primary beneficiary. E and F eventually terminate their business, and four months later E dies. Although E was married with three children at the time of death, the primary beneficiary is still F. However, an insurable interest no longer exists. Where will the proceeds from E's life insurance policy be directed to?

F

When must insurable interest exist? -inception of the contract -throughout the entire length of the contract -when the insured dies -during the contestable period

Inception of contract

If a contract of adhesion contains complicated language, to whom would the interpretation be in favor of?

Insured

Which of the following BEST describes a warranty?

Statement guaranteed to be true

Which of these is considered a statement that is assured to be true in every respect?

Warranty

A contract where one party either accepts or rejects the terms of a contract written by another party is called a contract of -adherence -assimilation -aleatory -adhesion

adhesion

Insurance contracts are known as ____ because certain future conditions or acts must occur before any claims can be paid. -consideration -unilateral -aleatory -conditional

conditional

Taking receipt of premiums and holding them for the insurance company is an example of

fiduciary responsibility

When third-party ownership is involved, applicants who also happen to be the stated primary beneficiary are required to have: -all statements be warranties -insurable interest in the proposed insured -the agent complete a third-party application -all those involved be family-related

insurable interest in the proposed insured

A policy of adhesion can only be modified by whom?

insurance company

A policy of adhesion can only be modified by whom? -the agent -the applicant -the primary beneficiary -insurance company

insurance company

Who makes the legally enforceable promises in a unilateral contract?

insurance company

Which of these is NOT considered to be an element of an insurance contract? offer acceptance negotiating consideration

negotiating

Insurance policies are considered aleatory contracts because

performance is conditioned upon a future occurrence

What is the consideration given by insurer in Consideration clause of a life policy? -promise to never cancel coverage -promise to pay death benefit to a named beneficiary -promise to not raise premiums -promise to accept an insured's assignment of benefits

promise to pay death benefit to named beneficiary

Life and health insurance policies are:

unilateral contracts

The part of a life insurance policy guaranteed to be true is called a(n):

warranty

Q purchases a $500,000 life insurance policy and pays $900 in premiums over the first six months. Q dies suddenly and the beneficiary is paid $500,000. This exchange of unequal values reflects which of the following insurance contract features? -aleatory -adhesion -unilateral -consideration

Aleatory

In regards to representations or warranties, which of these statements is TRUE? -warranties are statements considered to be true to the best of the applicant's belief -if material to the risk, false representations will void a policy -representations are statements guaranteed to be true in every respect -if material to the risk, false representations will NOT void a policy

If material to the risk, false representations will void a policy

A life insurance policy would be considered a wagering contract WITHOUT: -insurable interest -premium payment -agent solicitation -constructive delivery

Insurable interest

Which of these arrangements allows one to bypass insurable interest laws?

Investor-Originated Life Insurance

A life insurance arrangement which circumvents insurable interest statutes is called: -contract of adhesion -indemnity contract -key person insurance -Investor-Originated Life Insurance

Investor-Originated life insurance

Stranger Originated Life Insurance (STOLI) has been found to be in violation of which of the following contractual elements? -consideration -competent parties -offer/acceptance -legal purpose (insurable interest)

Legal Purpose (Insurable Interest)

In an insurance contract, the insurer is the only party who makes a legally enforceable promise. What kind of contract is this?

Unilateral

When must insurable interest be present in order for a life insurance policy to be valid? -when the insured dies -within the incontestability period -when the application is made -before the insured dies

When application made

At what point does an informal agreement become a binding contract? -When one party makes an invitation and the other makes an offer -When an offer is made by one party and the other party rejects the offer and makes a counteroffer -When one party makes an offer and the other party accepts that offer -When consideration is provided by one of the parties to the contract

When consideration is provided by one of the parties to the contract

Which of these is NOT a type of agent authority? express implied principal apparent

principal

Insurance policies are considered aleatory contracts because: -they are "take it or leave it" contracts -both parties consent to the contract -performance is conditioned upon a future occurrence -the contract is voidable upon proof of fraud

performance is conditioned upon a future occurrence

Statements made on an insurance application believed to be true to best of applicant's knowledge are called:

representations

The Consideration clause of an insurance contract includes: -the buyer's guide -a summary of the coverage provided -the named beneficiary -the schedule and amount of premium payments

schedule and amount of premium payments