Chapter Exam - Legal Concepts

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 contracts are aleatory in that the amount the insured will pay in premiums is unequal to the amount that the insurer will pay in the event of a loss

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

Contract

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

Investor-Originated Life Insurance Investor-originated life insurance (or IOLO), sometimes called stranger-oriented 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 oriented life insurance (STOLI) has been found to be in violation of which of the following contractual elements?

Legal purpose (insurable interest)

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

contract

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

fiduciary responsibility

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

if material to the risk, false representations will void a policy

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

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

insured

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

promise to pay a death benefit to a named beneficiary

A policy of adhesion can only be modified by whom?

the insurance company

life and health insurance polices are ____ contracts

unilateral contracts they are unilateral contracts because one party makes a promise, and the other party can only accept by performance

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

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

when must insurable interest be present in order for a life insurance policy ti be valid?

when the application is made