Chapter 3

Which statement is CORRECT when describing a contract of adhesion?

Contract may be accepted or rejected by the insured (With a contract of adhesion, a contract may be accepted or rejected by the insured.)

Which of the following is NOT a requirement of a contract?

Equal consideration is required between parties (Equal consideration between parties is NOT a requirement of a contract.)

When handling premiums for an insured, an agent is acting in which capacity?

Fiduciary (An agent who is acting as an insurance agent, broker, solicitor, life agent accident and health, or bail agent acts in fiduciary capacity when handling premiums or return premiums for an insured.)

Reasonably necessary acts that an agent must perform for carrying out his/her expressly authorized duties are covered by an agent's

Implied Authority (Implied authority is the unwritten authority that is not expressly granted, but which the agent is assumed to have in order to transact the business of the insurer.)

Restoring an insured to the same condition as before a loss is an example of the principle of

Indemnity (Making an insured whole restoring them to the same condition as before a loss is an example of the principle of indemnity.)

Which of the following contracts is defined as "one that restores an injured party to the condition that was present before the loss"?

Indemnity contract (A contract that restores an injured party to the condition that was present before the loss is an indemnity contract.)

Which principle is accurately described with the statement "Insureds are entitled to recover an amount NOT greater than the amount of their loss"?

Indemnity​ (Insureds are entitled to recover an amount NOT greater than the amount of their loss under the principle of indemnity.)

What does the insurance term "indemnity" refer to?

Make whole (Contracts of indemnity attempt to return the insured to their original financial position, or "made whole".)

Which of the following statements correctly describes a contract of indemnity?

One party is restored to the same financial position the party was in before the loss occurred (A contract of indemnity is a contract in which one party is restored to the same financial position the party was In before the loss occurred.)

Which of the following is NOT required in the content of a policy?

Probability of a loss (The probability of loss is not required in the content of a policy.)

If a material warranty violation on the part of the insured is found, what recourse does an insurer have?

Rescind the policy (A warranty in insurance is a statement made by the applicant that is guaranteed to be true in every respect. It becomes part of the contract and, if found to be untrue, can be grounds for revoking the contract.)

Which course of action is the insurer entitled to when deliberate concealment is committed by the insured?

Rescinding the contract (Intentional concealment committed by the insured entitles the insurance company to void the policy.)

A contract requires

an offer and acceptance of the contract terms (A contract requires an offer and acceptance of the contract terms.)

A unilateral contract is one in which

only one party (the insurer) makes any kind of legally enforceable promise (Insurance contracts are unilateral. This means that only one party (the insurer) makes any kind of enforceable promise.)

Express power given to an agent in an agency agreement is

the authority to represent the insurer (Express authority is granted by means of the agent's contract, which is the insurer's appointment of the agent to act on its behalf.)