Chapter 2

Statements made by an applicant which are recorded on an application are considered representations and not warranties. Which of the following best describes a warranty? 1. A statement or condition that the applicant represents to be absolutely true 2. A failure to disclose a material fact 3. Any statement made by the applicant as part of the insurance contract 4. A statement that the contract is in accordance with state law

1. A statement or condition that the applicant represents to be absolutely true

Each of the following elements must be included in a contract in order for it to be legal, EXCEPT: 1. Agreement 2. An exclusion section 3. Consideration 4. Legal capacity

2. An exclusion section

Intentional deception can most closely be associated with which of the following terms? 1. Concealment 2. Fraud 3. Misrepresentation 4. Falsification

2. Fraud

Which of the following statements best describes the concept of waiver? 1. It provides for an unequal exchange of benefits 2. It involves the voluntary abandonment of a known right 3. If any ambiguities exist, they will be decided in favor of the party that has not contributed to the contract language 4. It involves a professional responsibility during the handling of insurer funds

2. It involves the voluntary abandonment of a known right

An insurance company refuses to pay a legitimate claim that is covered by an insurance contract. This means that the insurer has violated which of the following? 1. The contract of adhesion principal 2. Its promise 3. Good faith 4. The legal purpose of the policy

2. Its promise

There are two parties involved in an insurance contract. Which of the following has the right to determine the language or wording to be included in the contract? 1. The insured 2. The insurer 3. The policyowner 4. The consumer

2. The insurer

An insurer which issues an insurance contract after accepting an incomplete application may have engaged in which of the following: 1. Representation 2. Waiver 3. Declaratory judgment 4. Estoppel

2. Waiver

Statements made on an application for insurance are representations and not warranties. Which of the following best defines a warranty? 1. Any statement made by the applicant as part of the insurance contract 2. A failure to disclose a material fact on an application for insurance 3. A statement or condition that the applicant represents to be absolutely true

3. A statement or condition that the applicant represents to be absolutely true

Which element of an insurance contract requires that the proposed insured be competent and possess the capacity to enter into a contract? 1. Competent intent 2. Consideration 3. Legal capacity 4. Legal purpose

3. Legal capacity

Which of the following will occur if an application for insurance includes some unanswered questions and the policy is still issued? 1. The owner must pay a higher premium 2. The insurer will request a warranty from the policyowner 3. The insurer has waived the right to require an answer to the questions 4. The contract will be void

3. The insurer has waived the right to require an answer to the questions

2. Which of the following best illustrates the doctrine of reasonable expectations? 1. An insurer pays a claim that is covered in the policy 2. A producer misappropriates premiums paid by a client 3. An adjuster determines what a reasonable loss would be 4. A judge orders payment for a claim even though the contract clearly excludes coverage

4. A judge orders payment for a claim even though the contract clearly excludes coverage

The promise that an insurer provides to a policyowner in a health insurance policy best describes which of the following? 1. Warranty 2. Waiver 3. Estoppel 4. Consideration

4. Consideration

An insurance contract is not enforceable unless it includes a valid agreement. Which of the following indicates that an acceptance of an offer has occurred? 1. The payment of a death claim 2. Submission of the application 3. The underwriting of the application 4. Policy issuance

4. Policy issuance

The insured's consideration in a life insurance contract is the: 1. Premiums paid 2. Promise to pay 3. Warranties attached to the policy 4. Premiums paid and statements made

4. Premiums paid and statements made