Chapter Exam - Legal Concepts

E and F are business partners. Each take out a $500K 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 (Insurable interest only needs to exist at the time of application)

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

Fiduciary responsibility

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

Legal Purpose (Insurable Interest)

Life and health insurance policies are:

Unilateral contracts

The part of a life insurance policy guaranteed to be true is called a(n):

Warranty

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

Warranty

At what point does an informal agreement become a binding contract?

When consideration is provided by one of the parties to the contract

Insurance contracts are known as <blank> because certain future conditions or acts must occur before any claims can be paid.

conditional

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

inception of the contract

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

insurable interest

When a 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

Which of these is NOT considered to be an element of an insurance contract?

negotiating

Insurance policies are considered aleatory contracts because

performance is conditioned upon a future occurence

All of the following are considered to be typical characteristics describing the nature of an insurance contract, EXCEPT:

Bilateral

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

Contract

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

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

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

Insured

A life insurance arrangement which circumvents insurable interest statutes is called:

Investor-Originated Life Insurance

Which of these is NOT a type of agent authority?

Principal

A policy of adhesion can only be modified by whom?

The insurance company

The Consideration clause of an insurance contract includes:

The schedule and amount of premium payments

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

Unilateral

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

When the application is made