Chapter Exam 2: Legal Concepts

A contract where one party either accepts or rejects the terms of a contract written by another party is called a contract of

Adhesion

Insurance contracts are known as ____ because certain future conditions or acts must occur before any claims can be paid

Conditional

Insurance policies are offered on a "take it or leave it" basis, which make them:

Contracts of Adhesion

E and F are business partners. Each takes out a $500,000 life insurance policy on the other, naming himself as primary beneficiary. E and F eventually terminate their business, and four months later E dies. Although E was married with three children at the time of death, the primary beneficiary is still F. However, an insurable interest no longer exists. Where will the proceeds from E's life insurance policy be directed to?

F

Taking receipt of premiums and holding them for insurance company is an example of

Fiduciary responsibility

In regards to representations or warranties, which of these statements is TRUE?

If material to the risk, false representations will void a policy

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

Inception of the contract

When third-party ownership is involved, applicants who also happen to be the stated primary beneficiary are required to have

Insurable interest in the proposed insured

Who makes the legally enforceable promises in a unilateral insurance policy?

Insurance company

If a contract of adhesion contains complicated language, to whom would the interpretation be in favor of?

Insured

Which of these arguments allows one to bypass insurable interest laws?

Investor-Originated Life Insurance

Stranger Originated Life Insurance (STOLI) has been found to be in violation of which of the following contractual elements?

Legal Purpose (Insurable Interest)

What is the consideration given by an insurer in the Consideration clause of a life policy?

Promise to pay a death benefit to a named beneficiary

Which of the following BEST describes a warranty?

Statement guaranteed to be true

A policy of adhesion can only be modified by whom

The insurance company

A policy of adhesion can only be modified by whom?

The insurance company

In an insurance contract, the insurer is the only party who makes a legally enforceable promise. What kind of contract is this?

Unilateral

Which of these is considered a statement that is assured to be true in every respect?

Warranty

When must insurable interest be present in order for a life insurance policy be valid?

When the application is made

Which of the following consists of an offer, acceptance, consideration?

contract

Which of these require an offer, acceptance, and consideration?

contract

A life insurance policy would be considered a wagering contract WITHOUT:

insurable interest

Statements made on an insurance application that are believed to be true to the best of the applicant's knowledge are called

representations