Contract Law

A person caught violating provisions regarding misrepresentation could be subject to

A fine up to $25,000

What is a material misrepresentation

A statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company

Which of the following best describes a misrepresentation

A statement intended to distract, mislead, or deceive a party to a contract

Insurance policy is

A written instrument in which a contract of insurance is set forth

Insurance policies are not drawn up through negotiations, and an insured has little to say about its provisions. What contract characteristic does this describe

Adhesion

An insured pays a $100 premium every month for his insurance coverage, yet the insurer promises to pay $10,000 for a covered loss. What characteristic of an insurance contract does this describe

Aleatory

In insurance, an offer is usually made when

An applicant submits an application to the insurer

Which of the following would be covered by contract law

An insured suing the insurer for failure to provide promised benefits

Which of the following would qualify as an implied warranty in an insurance contract

An oral representation by the applicant

Representations are written or oral statements made by the applicant which

Are considered true to the best of the applicant's knowledge

How is the premium in an insurance policy determined

By multiplying the rate by the number of units of insurance purchased

If found material for underwriting, a misrepresentation

Can void a contract

The act of revoking or terminating an insurance policy is called

Cancellation

A life insurance application is asking if the applicant has applied for any other life insurance within the past 6 months. The applicant states that he applied for $15,000 coverage from XYZ Co., but fails to mention the $150,000 coverage with DEF Co. The applicant is guilty of

Concealment

When applying for an individual life insurance policy, an applicant states that he went to the doctor for nausea, but fails to mention that he was also having severe chest pains. This is an example of

Concealment

An insurance contract requires that both the insured and the insurer meet certain conditions in order for the contract to be enforceable. What contract characteristic does this describe

Conditional

Because an insurance policy is a contract between the insurer and the insured, it must conform to the state laws governing contracts which require all of the following elements EXCEPT

Conditions

An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated

Consideration

An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated?

Consideration

Every expressed warranty made at or before the execution of a policy must be

Contained in and referred to in the policy or other document and signed by the insured

Contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis are classified as

Contracts of adhesion

Which of the following best describes the policy nonrenewal

Discontinuance of an insurance policy by the insured on the policy anniversary date

Which of the following best describes the aleatory nature of an insurance contract

Exchange of unequal values

Factual statements about the insured or the risk in an insurance policy are considered

Express warranty

When would a misrepresentation on the insurance application be considered fraud

If it is intentional and material

The key factor of representation that allows the injured party to rescind the contract is

If the representation is false in a material point

Representations in insurance contracts qualify as

Implied warranties

In determining how material a piece of information is to each party of a contract, the value is not determined by the event itself, but solely by which of the following

Influence this information would have in forming an estimate of the advantages or the disadvantages of the contract

According to the California Insurance Code, any agent violating the regulations relating to misrepresentation will be charged with a

Misdemeanor, a fine not to exceed $25,000, and/or a possible 1-year imprisonment

Concealment as defined by the California Insurance Code is

Neglect on the part of insured to communicate all information known to be material to the insurer

What other term is used to refer to unintentional torts

Negligence

What is a definition of a unilateral contract

One-sided: only one party makes an enforceable promise

During the grace period, the policyowner can

Pay a late premium without penalty

A contract between an insured and an insurance company which agrees to pay the insured for loss caused by specific events is

Policy

When may a representation be withdrawn

Prior to the issuance of the policy

The price of insurance for each exposure unit is known as

Rate

An intentional or unintentional concealment entitles the affected party to which of the following

Rescission of a contract

All of the following are reasons an insurer or an insured would have the right to rescind a policy EXCEPT

The amount of paid claims exceeds the premiums paid

Which of the following is NOT the consideration in a policy

The application given to a prospective insured

All of the following must be specified in an insurance policy EXCEPT

The financial rating of the insurer

An insured wants to transfer his personal insurance policy to a friend. Under what conditions would this be possible

The insured will need a written consent of the insurer

Which of the following does NOT need to be identified in an insurance policy

The insurer's financial rating

The importance of a misrepresentation is determined by

The materiality of a given concealment

In terms of parties to a contract, which of the following does NOT describe a competent party

The person must have at least completed secondary education

What is a wrongful act or the violation of someone's rights that leads to legal liability called

Tort

If only one party to an insurance contract has made a legally enforceable promise, what kind of contract is it

Unilateral

In insurance policies, the insured is not legally bound to any particular action in the insurance contract, but the insurer is legally obligated to pay losses covered by the policy. What contract element does this describe

Unilateral

When both parties to a contract must perform certain duties and follow rules of conduct to make the contract enforceable, the contract is

Conditional

All of the following information must be communicated in an insurance contract EXCEPT

Information the other party already knows

A life insurance policy has a legal purpose if both of which of the following elements exist

Insurable interest and consent

In forming an insurance contract, when does acceptance usually occur

When an insurer's underwriter approves coverage