Contract Law
A person caught violating provisions regarding misrepresentation could be subject to
A fine up to $25,000
What is a material misrepresentation
A statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company
Which of the following best describes a misrepresentation
A statement intended to distract, mislead, or deceive a party to a contract
Insurance policy is
A written instrument in which a contract of insurance is set forth
Insurance policies are not drawn up through negotiations, and an insured has little to say about its provisions. What contract characteristic does this describe
Adhesion
An insured pays a $100 premium every month for his insurance coverage, yet the insurer promises to pay $10,000 for a covered loss. What characteristic of an insurance contract does this describe
Aleatory
In insurance, an offer is usually made when
An applicant submits an application to the insurer
Which of the following would be covered by contract law
An insured suing the insurer for failure to provide promised benefits
Which of the following would qualify as an implied warranty in an insurance contract
An oral representation by the applicant
Representations are written or oral statements made by the applicant which
Are considered true to the best of the applicant's knowledge
How is the premium in an insurance policy determined
By multiplying the rate by the number of units of insurance purchased
If found material for underwriting, a misrepresentation
Can void a contract
The act of revoking or terminating an insurance policy is called
Cancellation
A life insurance application is asking if the applicant has applied for any other life insurance within the past 6 months. The applicant states that he applied for $15,000 coverage from XYZ Co., but fails to mention the $150,000 coverage with DEF Co. The applicant is guilty of
Concealment
When applying for an individual life insurance policy, an applicant states that he went to the doctor for nausea, but fails to mention that he was also having severe chest pains. This is an example of
Concealment
An insurance contract requires that both the insured and the insurer meet certain conditions in order for the contract to be enforceable. What contract characteristic does this describe
Conditional
Because an insurance policy is a contract between the insurer and the insured, it must conform to the state laws governing contracts which require all of the following elements EXCEPT
Conditions
An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated
Consideration
An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated?
Consideration
Every expressed warranty made at or before the execution of a policy must be
Contained in and referred to in the policy or other document and signed by the insured
Contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis are classified as
Contracts of adhesion
Which of the following best describes the policy nonrenewal
Discontinuance of an insurance policy by the insured on the policy anniversary date
Which of the following best describes the aleatory nature of an insurance contract
Exchange of unequal values
Factual statements about the insured or the risk in an insurance policy are considered
Express warranty
When would a misrepresentation on the insurance application be considered fraud
If it is intentional and material
The key factor of representation that allows the injured party to rescind the contract is
If the representation is false in a material point
Representations in insurance contracts qualify as
Implied warranties
In determining how material a piece of information is to each party of a contract, the value is not determined by the event itself, but solely by which of the following
Influence this information would have in forming an estimate of the advantages or the disadvantages of the contract
According to the California Insurance Code, any agent violating the regulations relating to misrepresentation will be charged with a
Misdemeanor, a fine not to exceed $25,000, and/or a possible 1-year imprisonment
Concealment as defined by the California Insurance Code is
Neglect on the part of insured to communicate all information known to be material to the insurer
What other term is used to refer to unintentional torts
Negligence
What is a definition of a unilateral contract
One-sided: only one party makes an enforceable promise
During the grace period, the policyowner can
Pay a late premium without penalty
A contract between an insured and an insurance company which agrees to pay the insured for loss caused by specific events is
Policy
When may a representation be withdrawn
Prior to the issuance of the policy
The price of insurance for each exposure unit is known as
Rate
An intentional or unintentional concealment entitles the affected party to which of the following
Rescission of a contract
All of the following are reasons an insurer or an insured would have the right to rescind a policy EXCEPT
The amount of paid claims exceeds the premiums paid
Which of the following is NOT the consideration in a policy
The application given to a prospective insured
All of the following must be specified in an insurance policy EXCEPT
The financial rating of the insurer
An insured wants to transfer his personal insurance policy to a friend. Under what conditions would this be possible
The insured will need a written consent of the insurer
Which of the following does NOT need to be identified in an insurance policy
The insurer's financial rating
The importance of a misrepresentation is determined by
The materiality of a given concealment
In terms of parties to a contract, which of the following does NOT describe a competent party
The person must have at least completed secondary education
What is a wrongful act or the violation of someone's rights that leads to legal liability called
Tort
If only one party to an insurance contract has made a legally enforceable promise, what kind of contract is it
Unilateral
In insurance policies, the insured is not legally bound to any particular action in the insurance contract, but the insurer is legally obligated to pay losses covered by the policy. What contract element does this describe
Unilateral
When both parties to a contract must perform certain duties and follow rules of conduct to make the contract enforceable, the contract is
Conditional
All of the following information must be communicated in an insurance contract EXCEPT
Information the other party already knows
A life insurance policy has a legal purpose if both of which of the following elements exist
Insurable interest and consent
In forming an insurance contract, when does acceptance usually occur
When an insurer's underwriter approves coverage