Legal Concepts

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

Investor-Originated Life Insurance Investor-originated life insurance (or IOLI), sometimes called stranger-originated life insurance (or STOLI) is used to circumvent state insurable interest statutes. This is done when an investor (or stranger) persuades an individual to take out life insurance specifically for the purpose of selling the policy to the investor. The investor compensates the insured and makes the premiums, then collects the death benefit when the insured dies.

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

Promise to pay a death benefit

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

Warranty

At what point does an informal contract become binding?

When one party makes an offer and the other party accepts that offer

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

When the application is made

What is a warranty?

a statement that is guaranteed to be true

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

bilateral

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

conditional

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

contract

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

contract

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

contract

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

fiduciary responsibility

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

insurable interest

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

A policy of adhesion can only be modified by whom?

insurance company

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

insured

Who makes the legally enforceable promises in a unilateral contract?

insurer

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 occurrence

Which of these is not a type of agent authority?

principle

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

representations

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

Life and health insurance policies are:

unilateral contracts

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

warranty

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 (In this situation, the proceeds from E's life insurance policy will go to F. Insurable interest only needs to exist at the time of application.)

Q purchases a $500,000 life insurance policy and pays $900 in premiums over the first six months. Q dies suddenly and the beneficiary is paid $500,000. This exchange of unequal values reflects which of the following insurance contract features?

Aleatory

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

Contracts of Adhesion

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

A life insurance arrangement which circumvents insurable interest statues is called

Investor originated life insurance (IOLI)