Chapter 3 test

The payment of the first premium, the promise to pay a covered loss, and the agreement to abide by policy conditions are all examples of A. consideration B. legal C. purpose D. representation E. acceptance

A. Consideration

Which of these do NOT indicate the presence of Insurable interest in a life insurance contract? A. Lifelong friendship B. Marriage C. Blood-related D. Co-owning a business

A. Lifelong friendship

During the application process, a statement made by an applicant that becomes part of the contract is considered to be a(n) A. Warranty B. Representation C. Waiver D. Exclusion

A. Warranty

The following are all elements of a valid contract EXCEPT A. consideration B. offer and acceptance C. competent parties D. written evidence

D. Written evidence

The unwritten authority given to a producer to carry out necessary incidental acts of the agency agreement is called A. implied authority B. express authority C. apparent authority D. acknowledged authority

A. implied authority

What qualifies as acceptance of an insurance contract offer? A. A declined policy B. An issued policy C. The application and initial premium D. The initial premium only

B. An issued policy

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)..? A. Extension B. Endorsement C. Sanction D. Restriction

B. Endorsement

In what way are insurance policies said to be aleatory? A. Only one party makes any kind of enforceable promise B. Involves the potential for the unequal exchange of value C. Contract is prepared by only one party D. Vagueness in a contract's wording is resolved in favor of the policyowner

B. Involves the potential for the unequal exchange of value

Under the Law of Agency, the principal is considered to be A. the producer B. The insurer C. The plan administrator D. The insured

B. The insurer

A contract is considered void in all of the following situations EXCEPT A. When one party is a minor B. When consideration is unequal C. When consideration is incomplete D. When agreement cannot be reached between parties

B. When consideration is unequal

Ambiguities in insurance contracts are typically interpreted in favor of the insured. This rule is referred to as A. Subrogation B. Reasonable expectations C. Insurable interest D. Adhesion

B.Reasonable Expectations

All of these statements correctly describe an aleatory contract EXCEPT A. a legal wager is considered an aleatory contract B. potential unequal exchange of value for both parties C. only one party makes any kind of legally enforceable offer D. element of chance is involved

C. only one party makes any kind of legally enforceable offer

An insured is entitled to coverage under a policy that a prudent person would expect it to provide. This principle is called A. Adhesion B. Reasonable sensibility C. Reasonable expectations D. Insurable interest

C. reasonable expectations

An agreement is reached when an insurance contract is formed. Which of the following is NOT considered to be an element of an agreement? A. Meeting of the minds B. Offer C. Acceptance D. Equity

D. Equity

What is the insurer responsible for when a producer is acting within the scope of authority granted in the agency contract? A. All actions by the producer B. Not responsible for any acts by the producer C. Responsible for acts that involve misrepresentation only D. Responsible for acts by the producer that are authority only

D. Responsible for acts by pro that are authority only