Chapter 2 - Policy Provisions and Contract Law Quiz
Termination of an in-force insurance policy prior to the expiration date shown in the policy is known as
cancellation
An applicant knowingly fails to communicate information that would help an underwriter make a sound decision regarding coverage. This is an example of
concealment
What terms best describes the act of withholding material information that would be crucial to an underwriting decision?
concealment
Because an insurance policy is a legal contract, it must conform to the state laws governing contracts which require all of the following 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
Which of the following is a mandatory part of an insurance policy that varies with each individual policy?
declarations
The part of the policy that clarifies terms in the policy is the
definitions
The section of a policy that details what perils are not insured against and what persons are not insured is known as the
exclusions
Which of the following would be named on the declarations page of a property or liability policy?
first names insured
Persons covered under an insurance policy, whether named or not, are known as the
insureds
All of the following are conditions commonly found in the insurance policy EXCEPT
insuring agreement
The part of the contract that describes the covered perils and the nature of the coverage of the contractual agreement between the insurer and the insured is called the
insuring agreement
Untrue statements of the application unintentionally made by the insureds that, if discovered, would alter the underwriting decision of the insurance company, are called
material misrepresentations
The other Insurance provision that limits the liability of the insurer to a portion of the loss no greater than the amount the insurer bears to all the insurance covering the property is called
pro rata liability
A sworn written statement that must be furnished by the insured to the insurer before any loss under a policy can be paid is called
proof of loss
Before an insurer will pay any loss under a policy, what is usually required from the insured?
proof of loss
What type of information would be found in a policy's insuring agreement?
renewal dates
Which of the following would qualify as a competent party in an insurance contract?
the applicant has a prior felony conviction
Which of the following would NOT be considered a source of insurability information by an insurer?
the applicant's marital status
Which of the following protects consumers against the circulation of inaccurate or obsolete, personal or financial information?
the fair credit reporting act
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
Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract?
warranty
Which part of an insurance policy covers claims-related expenses, reasonable expenses incurred by an insured to protect damaged property from further loss, or defense expenses?
additional coverage
Which of the following clause is established the procedure for determining the amount of a loss when the insurer and the insured cannot agree on the value of property or amount of loss?
appraisal clause
The ABC Corporation has $100,000 of coverage on its building through insurance Company A, and $50,000 of identical coverage on the same building through Company B. Assuming coinsurance is not an issue, when a $24,000 loss occurs and the pro rata method is used, how much will each insurer pay?
Company A will pay $16,000; Company B will pay $8,000
An insurance contract must contain all of the following to be considered legally binding EXCEPT
beneficiary's consent
What is a material misrepresentation?
A statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company
The declarations page of the homeowners policy provides all of the following information EXCEPT
a statement that earthquake is not covered
For a contract to be enforced by law, the purpose of the contract must be
Legal and not against public policy
Which of the following is NOT a consideration in a policy?
The application given to a prospective insured
Which of the following is NOT an essential element of an insurance contract?
counteroffer