Chapter 3 Legal Concepts of the Insurance Contract

Who is responsible for assembling the policy forms for insureds? State Insurance Departments NAIC Insurance carriers Insurance producers

Insurance carriers

What makes an insurance policy a unilateral contract? Only the insured pays the premium Only the insured can change the provisions Only the insurer is legally bound Only the insured is legally bound

Only the insurer is legally bound

Bob and Tom start a business. Since each partner contributes an important element to the success of the business, they decide to take life insurance policies out on each other, and name each other as beneficiaries. Eventually, they retire and dissolve the business. Bob dies 12 months later. The policies continue in force with no change. Both partners are still married at the time of Bob's death. In this situation, who will receive Bob's policy proceeds? Tom's spouse Bob's estate Bob's spouse Tom

Tom

According to life insurance contract law, insurable interest exists when any business relationship exists at the time of application at the time of death only when determined by a judge

at the time of application

All of the following are elements of an insurance policy EXCEPT definitions other insurance claim forms conditions

claim forms

Intentional withholding of material facts that would affect an insurance policy's validity is called a(n) estoppel concealment adhesion misrepresentatio

concealment

In an insurance contract, the element that shows each party is giving something of value is called offer acceptance consideration purpose

consideration

In order for a contract to be valid, it must be filed with the state be signed and witnessed by an attorney be in writing contain an offer and acceptance

contain an offer and acceptance

The power given to an individual producer that is not specifically addressed in his/her contract is considered what type of authority? discreet apparent implied express

implied

Ambiguities in an insurance policy are always resolved in favor of the insured producer insurer underwriter

insured

In a life or health insurance contract, "consideration" would be the 1) offer and acceptance 2) premium only 3) statements made in the application and the premium 4) statements made in the application only

statements made in the application and the premium

Legal purpose is a term used in contract law meaning there must be an offer and acceptance the contract must be aleatory there must be legal reasons for entering into the contract the contract must be a contract of adhesion

there must be legal reasons for entering into the contract

Which of the following is an example of the insured's consideration? Insurer's promise to pay benefits A paid premium Legal purpose Intent

A paid premium

The term which describes the fact that both parties of a contract may NOT receive the same value is referred to as Apparent Estoppel Aleatory Unilateral

Aleatory

The deeds and actions of a producer indicate what kind of authority? Express Apparent Implied Conditional

Apparent

Which of the following BEST describes a conditional insurance contract? A contract that requires certain conditions or acts by the insured individual A contract that has the potential for the unequal exchange of consideration for both parties A contract where one party "adheres" to the terms of the contract A contract where only one party makes any kind of enforceable contract

A contract that requires certain conditions or acts by the insured individual

What is implied authority defined as? Authority given in writing to an agent in the agency agreement Authority that is not specifically given to an agent in the agency contract, but that an agent can reasonably assume to carry out his/her duties Authority given to handle claims and process payments Authority given to an agent to act outside the scope of the agency agreement

Authority that is not specifically given to an agent in the agency contract, but that an agent can reasonably assume to carry out his/her duties

Insurable interest does NOT occur in which of the following relationships? Sister and brother Parent and children Business partners Business owner and business client

Business owner and business client

Which type of clause describes the following statement: "We have issued the policy in consideration of the representations in your applications and payment of the first-term premium". Premium clause Consideration clause Adhesion clause Contestability clause

Consideration clause

______ is NOT an element of a valid contract. Legal Consideration Competent parties Countersignature

Countersignature

The authority granted to a licensed producer is provided via the producer's apparent authority written contract Law of Agency Principal Capacity

Law of Agency

Which contract element is insurable interest a component of? Competent parties Offer and acceptance Consideration Legal purpose

Legal purpose

A professional liability for which producers can be sued for mistakes of putting a policy into effect is called fiduciary bond errors and omissions fiduciary trust errors and oversights

errors and omissions

When the principal gives the agent authority in writing, it's referred to as express authority implied authority apparent authority imposed authority

express authority

According to the principle of Utmost Good Faith, the insured will answer questions on the application to the best of their knowledge and pay the required premium, while the insurer will deal fairly with the insured and it's underwriting issuance of the policy promises made legal reserve

promises made

What are an applicant's statements concerning occupation, hobbies, and personal health history regarded as? warranty guarantee representation collateral

representation

Under a contract of adhesion, there is the potential for an unequal exchange of value the insurer's obligations are dependent upon certain acts of the insured individual the terms must be accepted or rejected in full only one party makes any kind of enforceable promise

the terms must be accepted or rejected in full

In an insurance contract, the insurer is the only party legally obligated to perform. Because of this, an insurance contract is considered voidable conditional aleatory unilateral

unilateral