Chapter 2 - Legal Concepts - Quiz

E and F are business partners. Each takes out of $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 exist. Where will proceeds from E's life insurance policy be directed to? A: F B: The dissolved partnership C: E's family D: E's estate

A: F Insurable interest only needs to exist at the time of application

Which of these is considered a statement is considered a statement that is assured to be true in every respect? A: Estoppel B: Warranty C: Guarantee D: Representation

B: Warranty

Q purchases a $500,000 life insurance policy and pays $900 in premiums over the first 6 months. Q dies and the beneficiary is paid $500,000. This exchange of unequal values reflects which of the following insurance contract features? A: Aleatory B: Adhesion C: Unilateral D: Consideration

A: Aleatory

All of the following are considered to be typical characteristics describing the nature of an insurance contract, EXCEPT: A: Bilateral B: Unilateral C:Aleatory D:Adhesion

A: Bilateral Unilateral, Aleatory, Adhesion are all special features of insurance contracts. Bilateral is not

What is the consideration given by an insurer in the Consideration clause of a life policy A: Promise to never cancel coverage B: Promise to pay a death benefit to named beneficiary C: Promise to not raise premiums D: Promise to accept an insured's assignment of benefits

B: Promise to pay a death benefit to named beneficiary

A life insurance arrangement which circumvents insurable interest status is called A: a contract of adhension B:an indemnity contract C:key person insurance D: Investor-Originated Life Insurance

D: Investor-Originated Life Insurance (LOLI) is used to circumvent (tranh xa) state insurable interest status. This is doen when an investor (or stranger) persuades (thuyet phuc) an individual to take out life insurance specifically for the purpose of selling the policy to the investor. The investor compensates (boi thuong) the insured and makes the premiums, then collects the death benefit when the insured dies.

A policy of adhesion can only be modified by who A: The agent B: The applicant C: The primary beneficiary D: The insurance company

D: The insurance company A policy of adhesion is best described as a policy which only the insurance company can modify

When must insurable interest exist for a life insurance contract to be valid A: Inception of the contract B: Throughout the entire length of the contract C: When the insured dies D: During the contestable period

A: Inception of the contract

A life insurance policy would be considered wagering contract WITHOUT A: Insurable interest B: Premium Payment C: Agent solicitation D: Constructive delivery

A: Insurable interest For example, Spouses would typically have insurable interest on each other's life. Childhood friends typically would not have insurable interest on each other's life. An employer may have insurable interest on a key employee's life

When third-party ownership is involved, applicants who also happen to be the stated primary beneficiary are required to have A: All statements be warranties B: insurable interest in the proposed insured C: the agent complete a third-party application D: all those involved be family-related

B: insurable interest in the proposed insured In third-party ownership, an applicant who is also the stated primary beneficiary must have an insurable interest in the proposed insured.

Insurance policies are considered aleatory contracts because A: they are "take it or leave it" contracts B:

C: ... beneficiary in the future

Which of these require an offer, acceptance, and consideration A: Warranty B: Estoppel C: Contract D: Representation

C: Contract Offer, acceptance, and consideration are all elements of a contract

Which of these is NOT considered to be an element of an insurance contract A: the offer B: acceptance C: Negotiating D: Consideration

C: Negotiating

At what point does an informal contract become binding A: When one party makes an invitation and the other makes an offer B:When an offer is made by one party and the other rejects the offer and makes a counteroffer C: When one party makes an offer and the other party accepts the offer D:When one party makes the required payment

C: When one party makes an offer and the other party accepts the offer An informal contract becomes binding when one party makes an offer and the other party accepts that offer

Which of these is NOT a type of agents authority A: Express B:Implied C:Principal D:Apparent

C:Principal. Agent authority is what a gent is authorized to do on behalf (thay mat) of his company

Life and health insurance policies are: A: Multi-lateral contracts B:Bilateral contracts C:Unilateral contracts D:Non-lateral contracts

C:Unilateral contracts Because one party makes promise, and the other party can only accept by performance

Which of these arrangements allows one to bypass (circumvent) insurable interest laws A: Concealment B: Indemnity contract C: Contract of adhesion D: Investor-Originated Life Insurance

D: Investor-Originated Life Insurance Sometimes called stranger-Originated Life Insurance (or STOLI) is used to circumvent state insurancable statutes.

What is warranty A: Guarantees that an insurance company will pay a benefit B:is is statement believed to be true to the best of one's knowledge (Representation) C: cannot be used to void the contract D: is a statement guaranteed to be true

D: is a statement guaranteed to be true

The consideration clause of an insurance contract includes: A: the buyer's guide B: a summary of the coverage provided C: the named beneficiaries D: the schedule and amount of premium payments

D: the schedule and amount of premium payments The Consideration clauses of a Life or Health policy includes the schedule and amount of premium payments

If a contract of adhesion complicated language, to whom would the inter-presentation be in favor of? A: Insurer B: Beneficiary C:Reinsurer D:Insured

D:Insured In a contract of adhesion, any confusing language would be in the favor of the insured

Stranger Originated Life Insurance (STOLI) has been found to be in violation of which of the following contractual elements A: Consideration B: Competent Parties C: Offer/Acceptance D:Legal Purpose (Insurable Interest)

D:Legal Purpose (Insurable Interest) STOLI arrangement is used to circumvent state insurable statutes