Chapter 2 part 3
Competent parties " All parties to a contract must be of legal competence. This means that all parties must be of a legal age, mentally capable of understanding the terms of the contract, and not influenced by drugs or alcohol."
All parties to a contract must be of a legal age, mentally capable of understanding the terms of the contract, and not influenced by drugs or alcohol. Which of the following elements of a legal contract is described?
Legal purpose
In order to be valid, a contract must have:
Conditional " A conditional contract is said to be, if'then because certain events(death, sickness) must happen before it can be fully executed."
Insurers make a promise to pay benefits in the future in the case of death or sickness, what type contract is this?
Offer, acceptance, consideration, competent parties and legal purpose
What are the basic elements of a legal contract?
Conditional
What type contract is said to be, if...then?
Representations " The applicant's statements on the application are representations, not warranties."
Which of the following terms best describes the applicant's statements on an insurance application?
Because the insurer writes the contract, to which the insured must adhere
Why are life and health insurance contracts said to be contracts of adhesion?
Unilateral contract
Question text Insurance contracts are one-sided. Which of the following terms best describes this?
Second cousins " are not considered to have an insurable interest in an insured - just on the basis that they are related."
Insurable interest requires that an individual have a valid concern for the well being of the person insured. In a life policy insurable interest can be present in all of the following, EXCEPT:
A counter-offer " When the insurer issued Joyce's policy with a higher premium, the insurer made a counter-offer. Joyce must agree to pay the extra premium in order for "
Joyce applies for a health insurance policy. When the agent delivers the policy to Joyce, an additional premium is required to account for Joyce's medical conditions. Joyce must agree to pay the additional premium before the policy is effective. The insurer has made: ?
The applicant's promises " Insurance contracts are unilateral. Only the insurer is legally upheld to performing the promises made in the policy."
All of the following are part of the consideration element of an insurance contract, EXCEPT: ?
Insureds are held to the principle of warranties. " Warranties are statements that are guaranteed to be true and are part of the legal contract. Insurers are held to the principle of warranties, not insureds. Breach of warranty is grounds for voiding an insurance contract."
All of the following statements are true regarding warranties, EXCEPT: ?
Invitation to offer
Which of the following is not required in a legal contract?
Counter-offer " The insurer made a counter-offer by proposing coverage with a modified premium than what was applied for. If Janice agrees to the terms of the modified coverage by paying the additional premium, then acceptance will occur and the policy will be in effect."
Janice applies for a life insurance policy. She submits the application with the initial premium for $100,000 whole life. The agent returns the policy with a higher premium and hazardous occupation exclusion. What has the insurer made?
If a loss occurs, then the insurance company will pay benefits.
Insurance contracts are conditional. Which of the following would be a characteristic of a conditional contract?
The insurer "Only the insurer is legally bound to perform the promises stated in the policy. John can stop paying premiums at any time. This is why insurance contracts are unilateral."
John purchases a life insurance policy for his wife Jean. Which of the following best describes who is legally bound to the policy's promise of benefits?