L/H Chapter 2

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 Adhesion Unilateral Consideration

Aleatory

All of the following are considered to be typical characteristics describing the nature of an insurance contract, EXCEPT: Bilateral Unilateral Aleatory Adhesion

Bilateral

Insurance contracts are known as ___________ because certain future conditions or acts must occur before any claims can be paid. Consideration Unilateral Aleatory Conditional

Conditional

Which of the following consists of an offer, acceptance, and consideration? Warranty Estoppel Contract Representation

Contract

Which of these require an offer, acceptance, and consideration? Warranty Estoppel Contract Representation

Contract

Insurance policies are offered on a "take it or leave it" basis, which make them: Conditional contracts Aleatory contracts Unilateral contracts Contracts of adhesion

Contracts of adhesion

A life insurance policy would be considered a wagering contract WITHOUT: insurable interest premium payment agent soliciation constructive delivery

insurable interest

When third-party ownership is involved, applicants who also happen to be the stated primary beneficiary are required to have: all statements be warranties insurable interest in the proposed insured the agent complete a third-party application all those involved by family-related

insurable interest in the proposed insured

The Consideration clause of an insurance contract includes: the buyer's guide a summary of the coverage provided the named beneficiaries the schedule and amount of premium payments

the schedule and amount of premium payments

The part of a life insurance policy guaranteed to be true is called a(n): representation exclusion warranty waiver

warranty

A life insurance arrangement which circumvents insurable interest statutes is called: a contract of adhesion an indemnity contract key person insurance Investor-Originated Life Insurance

Investor-Originated Life Insurance

Which of these arrangements allows one to bypass insurable interest laws? Concealment Indemnity contract Contract of adhesion Investor-Originated Life Insurance

Investor-Originated Life Insurance

Stranger Originated Life Insurance (STOLI) has been found in violation of which of the following contractual elements? Consideration Competent Parties Offer/Acceptance Legal Purpose (Insurable Interest)

Legal Purpose (Insurable Interest)

Which of these is NOT a type of agent authority? Express Implied Principal Apparent

Principal

What is the consideration given by an insurer in the Consideration clause of a life policy? Promise to never cancel coverage Promise to pay a death benefit to a named beneficiary Promise to not raise premiums Promise to accept an insured's assignment of benefits

Promise to pay a death benefit to a named beneficiary

Statements made on an insurance application that are believed to be true to the best of the applicant's knowledge are called: Representations Considerations Warranties Guarantees

Representations

Which of the following BEST describes a warranty? Guarantees that an insurance company will pay a benefit Statement believed to be true to the best of one's knowledge Cannot be used to void the contract Statement guaranteed to be true

Statement guaranteed to be true

A policy of adhesion can only be modified by whom? The agent The applicant The primary beneficiary The insurance company

The insurance company

In an insurance contract, the insurer is the only party who makes a legally enforceable promise. What kind of contract is this? Subrogation Unenforceable Adhesion Unilateral

Unilateral

Life and health insurance policies are: Multi-lateral contracts Bilateral contracts Unilateral contracts Non-lateral contracts

Unilateral contracts

Which of these is considered a statement that is assured to be true in every respect? Estoppel Warranty Guarantee Representation

Warranty

AT what point does an informal contract become binding? When one party makes an invitation and the other makes an offer When an offer is made by one party and the other party reject the offer and makes a counteroffer When one party makes and offer and the other party accepts that offer When one party makes the required payment

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 to be valid? When the insured dies Within the incontestability period When the application is made Before the insured dies

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 adherence assimilation aleatory adhesion

adhesion

Which of these is NOT considered to be an element of an insurance contract? the offer acceptance negotiating consideration

negotiating

Insurance policies are considered aleatory contracts because: they are "take it or leave it" contracts both parties consent to the contract performance is conditioned upon a future occurrence the contract is voidable upon proof of fraud

performance is conditioned upon a future occurrence

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 The dissolved partnership E's family E's estate

F

Taking receipt of premiums and holding them for the insurance company is an example of: Commingling Misappropriation Theft Fiduciary responsibility

Fiduciary responsibility

In regards to representations or warranties, which of these statements is TRUE? Warranties are statements considered to be true to the best of the applicant's belief If material to the risk, false representations will void a policy Representations are statements guaranteed to be true in every respect If material to the risk, false representations will NOT void a policy

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

When must insurable interest exist for a life insurance contract to be valid? Inception of the contract Throughout the entire length of the contract When the insured dies During the contestable period

Inception of the contract

Who makes the legally enforceable promises in a unilateral contract? Beneficiary Insurance company Insured Applicant

Insurance company

If a contract of adhesion contains complicated language, to whom would the interpretation be in favor of? Insurer Beneficiary Reinsurer Insured

Insured