Chapter 3 Legal Concepts

What qualifies as acceptance of an insurance contract offer?

An Issued Policy

An appointed producers implied authority is derived from

Express Authority

Which element of a contract constitutes a definite and unqualified proposal by one party to another?

Offer-A proposal of contract terms by one party to another is an called an offer.

Which situation would not require the insured's consent when a life insurance policy is issued?

Policy purchased by a parent for a minor child

An insurance company's failure to enforce a contract's provision is called a

Waiver

Voluntarily terminating an insurance policy is also known as

cancellation

Ambiguities in insurance contracts are typically interpreted in favor of the insured. This rule is referred to as

Reasonable expectations- "Reasonable expectations" is a legal principle that reinforces the rule that ambiguities in insurance contracts should be interpreted in favor of the policyholder.

Which of these is true regarding the exchange of consideration among parties involved in an insurance contract?

Can be equal

Christopher is issued an insurance policy that contains an attached agreement which alters the terms of the policy. This attached agreement is called a(n)

Endorsement- An endorsement is a written form attached to an insurance policy that alters the policy's coverage, terms, or conditions. Sometimes called a rider.

An agreement is reached when an insurance contract is formed. Which of the following is NOT considered to be an element of an agreement?

Equity-Agreement in an insurance contract includes all of these (Meeting of the Minds, Offer, Acceptance) EXCEPT "Equity".

XYZ Insurance Company gives direct authority to its producers to sell insurance through an agency contract, but nothing is stated regarding the collection of premiums. Which authority grants the producer the right to collect premiums?

Implied Authority-Implied authority is authority not specifically granted to the agent in the agency contract.

What happens when an initial offer is answered with a counteroffer?

Initial offer is void

Which of the following relationships demonstrates insurable interest in the absence of economic interest?

Marriage Partners- Insurable interest may exist in marriage partners while absent of an economic interest.

An insured is entitled to coverage under a policy that a prudent person would expect it to provide. This principle is called

Reasonable Expectations- Reasonable expectations is a concept that states that the insured is entitled to coverage under a policy that a sensible and prudent person would expect it to provide

During the application process, a statement made by an applicant that becomes part of the contract is considered to be a(n)

Representation-Statements made by the applicant are considered to be representations, or true to the best of the applicants knowledge.

Statements made by an insured on an accident and health insurance application are considered to be

Representations-

Under the Law of Agency, the principal is considered to be

The insurer-According to the Law of Agency, the insurer is considered to be the principal.

Giving up a known right on a voluntary basis is called a(n)

Waiver-Waiver is defined as the intentional and voluntary giving up of a known right.

An insurance application requires an applicant to make a full, accurate disclosure of the risk factor involved. Using this criteria, an insurance policy is considered what type of contract?

Contract of utmost good faith-A contract of utmost good faith is a minimum standard that requires both the buyer and seller in a transaction to act honestly toward each other and to not mislead or withhold critical information from one another.

An arrangement where an individual is authorized to act on behalf of another person or company is established through

The Law of Agency- An agency is a situation where an agent has the power to represent and act for another person or company.

The following are all elements of a valid contract EXCEPT

Written Evidence A valid contract requires consideration, offer and acceptance, and competent parties

A producer working for an insurance company may be personally liable for

acts performed which are prohibited in the agency contract-A producer of an insurer would be personally liable when the producer performs an act which is prohibited in the agency contract.