Chapter 2
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
Taking receipt of premiums and holding them for the insurance company is an example of?
Fiduciary responsibility
In regards to representations or warranties, which of these statements is TRUE?
If material to the risk, false representations will void a policy
When must insurable interest exist for a life insurance contract to be valid?
Inception of the contract
Who makes the legally enforceable promises in a unilateral insurance policy?
Insurance Company Also known as an adhesion contract
Which of these arrangements allows one to bypass insurable interest laws?
Investor-Originated Life Insurance
Which of these is NOT a type of agent authority?
Principal Agent authority is what an agent is authorized to do on behalf of his company. The three types of agent authority include express, implied, and apparent authority.
Which of the following BEST describes a warranty?
Statement guaranteed to be true
A policy of adhesion can only be modified by whom?
The insurance company. (A policy of adhesion is best described as a policy which only the insurance company can modify.)
When must insurable interest be present in order for a life insurance policy to be valid?
When the application is made
A life insurance policy would be considered a wagering contract WITHOUT?
insurable interest
When third-party ownership is involved, applicants who also happen to be the stated primary beneficiary are required to have
insurable interest in the proposed insured
Which of these is NOT considered to be an element of an insurance contract?
negotiating
Statements made on an insurance application that are believed to be true to the best of the applicant's knowledge are called?
representations
Which of these is considered a statement that is assured to be true in every respect?
warranty