Chapter 3: Legal Concepts of the Insurance Contract

When must Insurable interest exist for a life insurance contract to be valid? A. At the time of application B. Throughout the entire length of the contract C. When the insured dies D. During the Contestable period

A. At the time of the application

XYZ Insurance Company gives direct authority to its agents to sell insurance through an agency contract, but nothing is stated regarding the collection of premiums. Which authority grants the agent the right to collect premiums? A. Implied B. Apparent C. Express D. Assumed

A. Implied

Which of these do NOT indicate the presence of Insurable interest in a life insurance contract? A. Lifelong friendship B. Marriage C. Blood-related D. Co-owning a business

A. Lifelong friendship

In what way are insurance policies said to be aleatory? A. Only one party makes any kind of enforceable promise B. Involves the potential for the unequal exchange of value C. Contract is prepared by only one party D. Vagueness in a contract's wording is resolved in favor of the policyowner

B. Involves the potential for the unequal exchange of value

An arrangement where an individual is authorized to act on behalf of another person or company is sanctioned through A. Estoppel B. The law of agency C. The law of adhesion D. An aleatory contract

B. The law of agency

Which of these is true regarding the exchange of consideration among the parties involved in an insurance contract? A. Required to be in currency B. Must be equal C. Can be equal D. Must be certified by the state where transaction takes place

C. Can be equal

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 a(n) A. Warranty contract B. Aleatory contract C. Contract of adhesion D. Unilateral contract

C. Contract of adhesion

An insurance application requires an applicant to make a full, accurate disclosure of the risk factor involved. Using this criteria, an insurance policy is considered what type of contract? A. Aleatory contract B. Estoppel contract C. Contract of utmost good faith D. Unilateral contract

C. Contract of utmost good faith

Insurable interest involves what assumption? A. Insurable interest must exist during the entire life of the insured B. One person gains from the death of another person C. One person benefits from the continuation of another's life D. Insurable interest must only exist at the time of the insured's death

C. One person benefits from the continuation of another's life

The following are all elements of a legal contract EXCEPT A. Consideration B. Offer and acceptance C. Competent parties D. Recorded evidence

D. Recorded evidence