Chapter 3

Which of the following statements about authority is NOT correct?

Express authority is determined by a principal's conduct.

Which of the following statements regarding the utmost good faith in insurance contracts is CORRECT?

Most state insurance laws consider statements made in an application for an insurance policy to be representations, not warranties.

A life insurance policy paid $500,000 to a beneficiary and the total premiums paid were $2500. Which of the following terms defines this type of contract?

aleatory

An insurer is considered competent if it

is licensed or authorized by the state with a certificate of authority

All statements on an application are considered to be

representations

An insurance company has how many years to challenge the validity of a life insurance contract

two

With life and health contracts, when must an insurable interest exist?

At the inception of the policy

"An insurance contract is prepared by one party, the insurer, rather than by negotiation between the contracting parties." Which of the following statements explains this characteristic of insurance contracts?

The insurance contract is a contract of adhesion.

Which of the following statements describes an insurable interest?

The policy owner must expect to suffer a loss when the insured dies or becomes disabled.

Which of the following terms is used for the voluntary relinquishment of a known right?

Unilateral

Which of the following statements regarding insurable interest is NOT correct?

A policy obtained by a person without an insurable interest in the insured can be enforced.

The authority that an insurer gives to its agent by means of the agent's contract is known as

express authority

Which of the following statements describe the parol evidence rule?

A written contract cannot be changed by oral evidence.

Which of the following is a distinguishing element of an insurance contract?

Conditional

Competent parties who can enter into insurance contracts are

all of the above