chapter 3

An insurance contract may be voided if a misrepresentation found on the application is determined to be

Material

What qualifies as acceptance of an insurance contract offer?

An issued policy

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

Apparent authority

Which of these is true regarding the exchange of consideration among parties involved in an insurance contract?

Can be unequal

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 a policy a

Conditional contract

The payment of the first premium, the promise to pay a covered loss, and the agreement to abide by policy conditions are all examples of

Consideration

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

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? Contract of utmost good faith.

Contract of utmost good faith.

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

Endorsement (sometimes called a rider)

The powers directly given to a producer in an agency contract are called

Express

XYZ Insurance Company gives direct authority to its producers to sell insurance through an agency contract, but nothing is states regarding the collection of premiums. Which authority grants the producer the right to collect premiums?

Implied authority

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

Inception of the contract

In what ways are insurance policies said to be aleatory?

Involves the potential for the unequal exchange of value

Which of these do NOT indicate the presence of insurable interest in a life insurance contract?

Lifelong friendship

Which of the following situations would an insurance agent need to guard against liability for professional errors and omissions?

Making a recommendation to a potential insured to replace existing coverage

Which of the following relationships demonstrates insurable interest in the absence of economic interest?

Marriage Partners

Insurable interest involves what assumption?

One person benefits from another person's continued life

All of these statements correctly describe an aleatory contract EXCEPT

Only one party makes any kind of legally enforceable offer

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

Reasonable expectations

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

Reasonable expectations.

Statements made by an insured on an accident and health insurance application are considered to be

Representations

When a producer acts within the scope of their contractual authority, which of the following is legally responsible for these actions?

The Insurer

What happens when an initial offer is answered with a counteroffer?

The initial offer is void

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 contract's provision is called a

Waiver

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

Waiver

During the application process, a statement made by an applicant that becomes part of the contract is considered to be a

Warranty

A contract is considered void in all of the following EXCEPT When consideration is unequal

When consideration is unequal

A producer working for an insurance company may be personally liable for

acts performed which are prohibited in the agency contract

An appointed producer's implied authority is derived from

express authority

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 a

material misrepresentation

Under the Law of Agency, the principal is considered to be

the insurer.

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

when the agency contract is unclear concerning the authority given