Legal concepts
Insurance contracts are known as ____ because certain future conditions or acts must occur before any claims can be paid.
Conditional Because certain future conditions or acts must occur before any claims can be paid, insurance contracts are known as conditional.
Which of the following consists of an offer, acceptance, and consideration?
Contract
Which of these require an offer, acceptance, and consideration?
Contract Offer, acceptance, and consideration are all elements of a contract.
Insurance policies are offered on a "take it or leave it" basis, which make them
Contracts of adhesion
When must insurable interest exist for a life insurance contract to be valid?
Inception of the contract
Which of these is NOT a type of agent authority?
Principal Agent authority is what an agent is authorized to do on behalf of his company. The three types of agent authority include express, implied, and apparent authority.
Which of the following BEST describes a warranty?
Statement guaranteed to be true
A policy of adhesion can only be modified by whom?
The insurance company. (A policy of adhesion is best described as a policy which only the insurance company can modify.)
In an insurance contract, the insurer is the only party who makes a legally enforceable promise. What kind of contract is this?
Unilateral Insurance contracts are unilateral. This means that only one party (the insurer) makes any kind of enforceable promise.
When must insurable interest be present in order for a life insurance policy to be valid?
When the application is made
A contract where one party either accepts or rejects the terms of a contract written by another party is called a contract of
adhesion
All of the following are considered to be typical characteristics describing the nature of an insurance contract, EXCEPT:
bilateral
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
Who makes the legally enforceable promises in a unilateral contract?
insurance company
If a contract of adhesion contains complicated language, to whom would the interpretation be in favor of?
insured
Which of these is NOT considered to be an element of an insurance contract?
negotiating
The Consideration clause of an insurance contract includes:
the schedule and amount of premium payments
Which of these arrangements allows one to bypass insurable interest laws?
Investor-Originated Life Insurance
Stranger Originated Life Insurance (STOLI) has been found to be in violation of which of the following contractual elements?
Legal Purpose (Insurable Interest)
What's 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.
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
Taking receipt of premiums and holding them for the 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
Statements made on an insurance application that are believed to be true to the best of the applicant's knowledge are called:
representations Statements made on an insurance application that are believed to be true to the best of the applicant's knowledge are called representations.
Which of these is considered a statement that is assured to be true in every respect?
warranty
A life insurance arrangement which circumvents insurable interest statues is called:
Investor-Originated Life Insurance
E and F are business partners. Each takes out a $500,000 life insurance policy on the other, naming himself as primary beneficiary. E and F eventually terminate their business, and four months later E dies. Although E was married with three children at the time of death, the primary beneficiary is still F. However, an insurable interest no longer exists. Where will the proceeds from E's life insurance policy be directed to?
F (insurable interest only needs to exist at the time of application)
Life and health insurance policies are:
Unilateral contracts. (Life and health insurance policies are considered unilateral contracts because one party makes a promise, and the other party can only accept by performance.)
The part of a life insurance policy guaranteed to be true is called a(n)
Warranty Warranties are statements that are considered literally true. A warranty that is not literally true in every detail, even if made in error, is sufficient to render a policy void.
At what point does an informal agreement become a binding contract?
When consideration is provided by one of the parties to the contract