chapter 3
An insurance contract may be voided if a misrepresentation found on the application is determined to be
Material
What qualifies as acceptance of an insurance contract offer?
An issued policy
Use of XYZ Insurance Company brochures, business cards, and rating guides is an example of
Apparent authority
Which of these is true regarding the exchange of consideration among parties involved in an insurance contract?
Can be unequal
Voluntarily terminating an insurance policy is also known as
Cancellation
The Insurer's obligation to pay a claim depends on whether the insured or beneficiary has complied with all policy conditions. This makes a policy a
Conditional contract
The payment of the first premium, the promise to pay a covered loss, and the agreement to abide by policy conditions are all examples of
Consideration
The courts will normally interpret a policy in favor of the insured when the meaning of the policy is not clear. This is because an insurance policy is a
Contract of adhesion.
An insurance application requires an applicant to make a full, accurate disclosure of the risk factor involved. Using this criteria, an insurance policy is considered what type of contract? Contract of utmost good faith.
Contract of utmost good faith.
Christopher is issued an insurance policy that contains an attached agreement which alters the terms of the policy. This attached agreement is called
Endorsement (sometimes called a rider)
The powers directly given to a producer in an agency contract are called
Express
XYZ Insurance Company gives direct authority to its producers to sell insurance through an agency contract, but nothing is states regarding the collection of premiums. Which authority grants the producer the right to collect premiums?
Implied authority
When must insurable interest exist for a life insurance contract to be valid?
Inception of the contract
In what ways are insurance policies said to be aleatory?
Involves the potential for the unequal exchange of value
Which of these do NOT indicate the presence of insurable interest in a life insurance contract?
Lifelong friendship
Which of the following situations would an insurance agent need to guard against liability for professional errors and omissions?
Making a recommendation to a potential insured to replace existing coverage
Which of the following relationships demonstrates insurable interest in the absence of economic interest?
Marriage Partners
Insurable interest involves what assumption?
One person benefits from another person's continued life
All of these statements correctly describe an aleatory contract EXCEPT
Only one party makes any kind of legally enforceable offer
An insured is entitled to coverage under a policy that a prudent person would expect it to provide. This principle is called:
Reasonable expectations
Ambiguities in insurance contracts are typically interpreted in favor of the insured. This rule is referred to as
Reasonable expectations.
Statements made by an insured on an accident and health insurance application are considered to be
Representations
When a producer acts within the scope of their contractual authority, which of the following is legally responsible for these actions?
The Insurer
What happens when an initial offer is answered with a counteroffer?
The initial offer is void
An arrangement where an individual is authorized to act on behalf of another person or company is established through.
The law of agency.
An insurance company's failure to enforce a contract's provision is called a
Waiver
Giving up a known right on a voluntary basis is called a
Waiver
During the application process, a statement made by an applicant that becomes part of the contract is considered to be a
Warranty
A contract is considered void in all of the following EXCEPT When consideration is unequal
When consideration is unequal
A producer working for an insurance company may be personally liable for
acts performed which are prohibited in the agency contract
An appointed producer's implied authority is derived from
express authority
Greg applies for insurance and makes a false statement on the application that will influence whether or not the insurer will accept the risk. Greg's false statement is called a
material misrepresentation
Under the Law of Agency, the principal is considered to be
the insurer.
An insurance company can be liable for a producer's unauthorized acts
when the agency contract is unclear concerning the authority given