Policy Provisions and Contract Law

In insurance, an offer is usually made when A. The insurer approves the application and receives the initial premium. B. The agent hands the policy to the policyholder. C. An agent explains a policy to a potential applicant. D. An applicant submits an application to the insurer.

An applicant submits an application to the insurer.

In return for premium, an insurance company must A. Use standardized tables of coverage for specific risks to be excluded from coverage. B. Give the insurer valuable consideration. C. Be fair in underwriting and pay covered losses. D. Provide the insured with coverage adequate for all potential losses.

Be fair in underwriting and pay covered losses

Because an insurance policy is a legal contract, it must conform to the state laws governing contracts which require all of the following elements EXCEPT A. Offer and acceptance B. Conditions C. Consideration D. Legal Purpose

Conditions

Which of the following is NOT an essential element of an insurance contract? A. Agreement B. Legal Purpose C. Counteroffer D. Consideration

Counteroffer

Untrue statements on the application unintentionally made by insureds that, if discovered, would alter the underwriting decision of the insurance company, are called A. Common errors. B. Material misrepresentations. C. Fraudulent statements. D. Warranties.

Material misrepresentations

A sworn written statement that must be furnished by the insured to the insurer before any loss under a policy can be paid is called A. Notice of claim. B. Claim report. C. Binder. D. Proof of loss.

Proof of loss

Before an insurer will pay any loss under a policy, what is usually required from the insured? A. A binder B. A claims-made form C. Proof of loss D. Notice of claim

Proof of loss

What is a material misrepresentation? A. Any misstatement by the producer B. Concealment C. A statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company D. Any misstatement made by an applicant for insurance

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

The declarations page of the homeowners policy provides all of the following information EXCEPT A. A statement that earthquake damage is not covered. B. The amount of premium charged for each coverage. C. The insured's address. D. What deductible amount applies to each loss covered by the policy.

A statement that earthquake damage is not covered.

Representations are written or oral statements made by the applicant that are A. Found to be false after further investigation. B. Immaterial to the actual acceptability of the insurance contract. C. Considered true to the best of the applicant's knowledge. D. Guaranteed to be true.

Considered true to the best of the applicant's knowledge.

All of the following are found in the declarations section of a policy EXCEPT the A. Limits of insurance. B. Exclusions. C. Policy premiums. D. Name of the insured.

Exclusions

Duties of the insurer found in property policy conditions include all of the following EXCEPT A. Return any premiums to the insured. B. Notify the insured in the event of financial difficulty. C. Pay covered losses. D. Provide advance notice of cancellation.

Notify the insured in the event of financial difficulty.

All of the following are considered parts of the policy structure EXCEPT A. Conditions. B. Provisions. C. Exclusions. D. Insuring clause.

Provisions

Under the professional liability loss settlement provision, what must an insurer do before offering to pay a claimant to settle a claim? A. Cancel the insured's policy B. Refuse new business C. Get the insured's consent D. Sue the claimant

get the insured's consent

Persons covered under an insurance policy, whether named or not, are known as the A. Named insureds. B. First named insureds. C. Additional insureds. D. Insureds.

insureds

All of the following are conditions commonly found in the insurance policy EXCEPT A. Insuring agreement. B. Cancellation and nonrenewal. C. Subrogation. D. Appraisal.

insuring agreement, pay attention to words like *conditions*