Chapter 2 - Legal Concepts
Taking receipt of premiums and holding them for the insurance company is an example of:
Fiduciary responsibility.
Which of these is NOT a type of agent authority?
Principal
What 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.
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 the following BEST describes a warranty?
Statement guaranteed to be true
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
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
When must insurable interest be present in order for a life insurance policy to be valid?
At the time of application
All of the following are considered to be typical characteristics describing the nature of an insurance contract, EXCEPT
Bilateral
Insurance contracts are known as_________ because certain future conditions or acts must occur before any claims can be paid.
Conditional
Which of the following consist of an offer, acceptance, and consideration?
Contract
which of the following consists of an offer, acceptance, and consideration?
Contract
Insurance policies are offered on a "take it or leave it" basis, which makes them:
Contracts of Adhesion
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
In regards to representations or warranties, which of these statements is TRUE?
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
A life insurance policy would be considered a wagering contract WITHOUT:
Insurable Interest
Who makes the legally enforceable promises in a unilateral insurance policy?
Insurance company
If a contract of adhesion contains complicated language, to whom would the interpretation be in favor of?
Insured
A life insurance arrangement which circumvents insurable interest statues is called
Investor-Originated Life Insurance
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)
Which of these is NOT considered to be an element of an insurance contract
Negotiating
Insurance policies are considered aleatory contracts because
Performance is conditioned upon a future occurrence
A policy of adhesion can only be modified by whom?
The insurance company.
The consideration clause of an insurance contract includes
The schedule and amount of premium payments.
In an insurance contract, the insurer is the only party who makes a legally enforceable promise. What kind of contract is this?
Unilateral
Life and health insurance policies are
Unilateral contracts
The part of a life insurance policy guaranteed to be true is called a(n):
Warranty
Which of these is considered a statement that is assured to be true in every respect?
Warranty
at what point does an informal agreement become a binding contract?
When Consideration is provided by one of the parties to the contract
A contract where one party either accepts or rejects the terms of a contract written by another party is called a contract of
adhesion
