Legal Concepts and Contracts

All of the following are part of the consideration element of an insurance contract, EXCEPT:

Insurance contracts are unilateral. Only the insurer is legally upheld to performing the promises made in the policy. The correct answer is: The applicant's promises

Which of the following terms best describes the applicant's statements on an insurance application?

The applicant's statements on the application are representations, not warranties. The correct answer is: Representations

What are the basic elements of a legal contract?

There are four elements to a legal contract: agreement (offer and acceptance), consideration, competent parties and legal purpose. The correct answer is: Offer, acceptance, consideration, competent parties and legal purpose

What type contract is said to be, if...then?

A conditional contract is said to be, if'then because certain events must happen before it can be fully executed. The correct answer is: Conditional

In order to be valid, a contract must have:

A contract must have a legal purpose to be enforceable. The correct answer is: Legal purpose

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:

Second cousins are not considered to have an insurable interest in an insured - just on the basis that they are related. The correct answer is: Second cousins

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?

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. The correct answer is: Competent parties

All of the following statements are true regarding warranties, EXCEPT:

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. The correct answer is: Insureds are held to the principle of warranties.

Insurance contracts are conditional. Which of the following would be a characteristic of a conditional contract?

Conditional contracts are "if-then" contracts: if a loss occurs, then the insurance company will pay benefits. The correct answer is: If a loss occurs, then the insurance company will pay benefits.

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:

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 the coverage to take effect. The correct answer is: A counter-offer