Chapter 2

Which of the following statements is incorrect regarding consideration in a property and casualty contract?

Statements the agent makes in the agent report are part of the insurer's consideration

Which principle holds that both parties to an insurance contract have a responsibility to be honest and truthful to the other?

Utmost good faith

An insurance binder can provide temporary insurance coverage while an application is being underwritten. Which of the following statements is incorrect regarding binders?

A binder expires when the initial premium is paid

Insurance binders are an important part of the application process. Which of the following is CORRECT about binders?

A binder is a temporary insurance agreement

Soon after June pays her initial premium on a auto policy, her she totals her car. She received a claims check for $25,000 on a car that she paid $20,000 for. This represents what characteristic of an insurance contract?

Aleatory

With an insurance contract, the uncertainty of events can lead to unequal financial results for the two parties. This means that insurance is what kind of contract?

Aleatory

In a legal situation, any wording that is ambiguous (confusing) in an insurance contract will be interpreted as favorable to the policyholder, not for the insurer. This describes a(n):

Contract of adhesion.

One week ago, Joe accidentally ran off the road and clipped 3 of Farmer John's fence posts. Hidden by small print located in the middle of an obscure paragraph in John's lengthy auto policy was one sentence that stated accidents occurring on dirt roads would not be covered. Which of the following would probably be most helpful in getting Joe's claim paid?

Insurance policies are contracts of adhesion

Legally, the voluntary relinquishment of a known right is called:

a waiver.

Jane fails to reveal a DUI while completing her application for auto insurance. Jane is guilty of:

concealment.

Insureds must accept the insurance contract as written by the insurance company when purchasing insurance. This type of contract is referred to as a(n):

contract of adhesion.

A deliberate misrepresentation for financial gain or profit which causes another person to suffer damages is:

fraud.

A false statement of fact is called:

misrepresentation.

In completing an application for auto coverage, Joe told his agent that he had not received any speeding tickets in the last 5 years. In truth, Joe received a ticket 2 years ago. Joe is guilty of:

misrepresentation.

Statements made by an applicant in an application for insurance are generally considered to be:

representations.

With insurance contracts, the term "consideration" means:

the premiums that you have pay to your insurance company, and the statements made in the application. the insurance company promises to pay in accordance with the terms of the contract.