Chapter 3: Legal Concepts

Which situation would not require the insured's consent when a life insurance policy is issued?

A policy is purchased by a parent for a minor child.

Voluntarily terminating an insurance policy is also known as?

Cancellation

The insurer's obligation to pay a claim depends on whether the insured or beneficiary has complied with all policy conditions. This makes the policy an?

Conditional Contract

The courts will normally interpret a policy in favor of the insured when the meaning of the policy is not clear. This is because an insurance policy is an?

Contact of adhesion

Christopher is issued an insurance policy that contains an attached agreement which alters the terms of the policy. This attached agreement is called an?

Endorsement

An insurance contact may be voided is a misrepresentation found on the application is determined to be?

Material

When must insurable interest exists for a life insurance contract to be valid?

Inception of the contract

In what way are insurance policies said to be aleatory?

Involves the potential for the unequal exchange of value

Greg applies for insurance and makes a false statement on the application that will influence whether or not the insurer will accept the risk. Greg's false statement is called an?

Material misrepresentation

An agent whose actions exceed the authority granted by contract is?

Not backed by the insurer

Which element of a contract constitutes a definite and unqualified proposal by one party to another?

Offer

Insurable interest involves what assumption?

One person benefits from another person's continued life.

Ambiguities in insurance contracts are typically interpreted in favor of the insured. This rule is referred to as

Reasonable expectations

An insured is entitled to coverage under a policy that a prudent person would expect it to provide. This principle is called?

Reasonable expectations

What is the insurer responsible for when a producer is acting within the scope of authority granted in the agency contract?

Responsible for acts by the producer that are authority only.

An arrangement where an individual is authorized to act on behalf of another person or company is established through?

The law of agency

An insurance company's failure to enforce a contact's provision is called an?

Waiver

Giving up a known right on a voluntary basis is called an?

Wavier

A contract is considered void in all of the following situations EXCEPT?

When consideration is unequal

An insurance company can be liable for a producer's unauthorized acts?

When the agency contact is unclear concerning the authority given

Use of XYZ Insurance Company brochures, business cards, and rating guides is an example of

apparent authority

An appointed producer's implied authority is derived from

express authority

The unwritten authority given to a producer to carry out necessary incidental acts of the agency agreement is called

implied authority

What qualifies as acceptance of an insurance contract offer?

An issued policy