Chapter Exam (2) - Legal Concepts of the Insurance Contract

When must insurable interest be present in order for a life insurance policy to be valid? a.) When the insured dies b.) Within the incontestability period c.) When the application is made d.) Before the insured dies

c.) When the application is made

Which of these is NOT considered to be an element of an insurance contract? a.) the offer b.) acceptance c.) negotiating d.) consideration

c.) negotiating

Insurance policies are considered aleatory contracts because a.) they are "take it or leave it" contracts b.) both parties consent to the contract c.) performance is conditioned upon a future occurrence d.) the contract is voidable under proof of fraud

c.) performance is conditioned upon a future occurrence

A life insurance policy would be considered a wagering contract WITHOUT: a.) insurable interest b.) premium payment c.) agent solicitation d.) constructive delivery

a.) insurable interest

Which of these require an offer, acceptance, and consideration? a.) Warranty b.) Estoppel c.) Contract d.) Representation

c.) Contract

At what point does an informal contract become binding? a.) When one party makes an invitation and the other makes an offer b.) When an offer is made by one party and the other party rejects the offer and makes a counteroffer c.) When one party makes an offer and the other party accepts that offer d.) When one party makes the required payment

c.) When one party makes an offer and the other party accepts that offer

The part of a life insurance policy guaranteed to be true is called a(n): a.) representation b.) exclusion c.) warranty d.) waiver

c.) warranty

Insurance policies are offered on a "take it or leave it" basis, which make them: a.) Conditional Contracts b.) Aleatory Contracts c.) Unilateral Contracts d.) Contracts of Adhesion

d.) Contracts of Adhesion

Taking receipt of premiums and holding them for the insurance company is an example of: a.) Commingling b.) Misappropriation c.) Theft d.) Fiduciary Responsibility

d.) Fiduciary Responsibility

If a contract of adhesion contains complicated language, to whom would the interpretation be in favor of? a.) Insurer b.) Beneficiary c.) Reinsurer d.) Insured

d.) Insured

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? a.) F b.) the dissolved partnership c.) E's family d.) E's estate

a.) F

Statements made on an insurance application that are believed to be true to the best of the applicant's knowledge are called: a.) representations b.) consideration c.) warranties d.) guarantees

a.) representations

In regards to representations or warranties, which of these statements is TRUE? a.) Warranties are statements considered to be true to the best of the applicant's belief b.) If material to the risk, false representations will void a policy c.) Representations are statements guaranteed to be true in every respect d.) If material to the risk, false representations will NOT void a policy

b.) If material to the risk, false representations will void a policy

Who makes the legally enforceable promises in a unilateral insurance policy? a.) Beneficiary b.) Insurance company c.) Insured d.) Applicant

b.) Insurance company

What is the consideration given by an insurer in the Consideration clause of a life policy? a.) Promise to never cancel coverage b.) Promise to pay a death benefit to a named beneficiary c.) Promise to never raise premiums d.) Promise to accept an insured's assignment of benefits

b.) Promise to pay a death benefit to a named beneficiary

Which of these is considered a statement that is assured to be true in every respect? a.) Estoppel b.) Warranty c.) Guarantee d.) Representation

b.) Warranty

When third-party ownership is involved, applicants who also happen to be the stated primary beneficiary are required to have: a.) all statements be warranties b.) insurable interest in the proposed insured c.) the agent complete a third-party application d.) all those involved to be family-related

b.) insurable interest in the proposed insured

Which of the following consists of an offer, acceptance, and consideration? a.) Warranty b.) Estoppel c.) Contract d.) Representation

c.) Contract

Which of these is NOT a type of agent authority? a.) Express b.) Implied c.) Principal d.) Apparent

c.) Principal

Life and health insurance policies are: a.) Multilateral contracts b.) Bilateral contracts c.) Unilateral contracts d.) Non-lateral contracts

c.) Unilateral contracts

The Consideration clause of an insurance contract includes: a.) the buyer's guide b.) a summary of the coverage provided c.) the named beneficiaries d.) the schedule and amount of premium payments

d.) the schedule and amount of premium payments

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? a.) Aleatory b.) Adhesion c.) Unilateral d.) Consideration

a.) Aleatory

All of the following are considered to be typical characteristics describing the nature of an insurance contract, EXCEPT: a.) Bilateral b.) Unilateral c.) Aleatory d.) Adhesion

a.) Bilateral

When must insurable interest exist for a life insurance contract to be valid? a.) Inception of the contract b.) Throughout the entire length of the contract c.) When the insured dies d.) During the contestable period

a.) Inception of the contract

A life insurance arrangement which circumvents insurable interest statutes is called: a.) a contract of adhesion b.) an indemnity contract c.) key person insurance d.) Investor-Originated Life Insurance

d.) Investor-Originated Life Insurance

Which of these arrangements allows one to bypass insurable interest laws? a.) concealment b.) indemnity contract c.) contract of adhesion d.) Investor-Originated Life Insurance

d.) Investor-Originated Life Insurance

Stranger Originated Life Insurance (STOLI) has been found to be in violation of which of the following contractual elements? a.) Consideration b.) Competent Parties c.) Offer/Acceptance d.) Legal Purpose (Insurable Interest)

d.) Legal Purpose (Insurable Interest)

A policy of adhesion can only be modified by whom? a.) The agent b.) The applicant c.) The primary beneficiary d.) The insurance company

d.) The insurance company

In an insurance contract, the insurer is the only party who makes a legally enforceable promise. What kind of contract is this? a.) Estoppel b.) Aleatory c.) Adhesion d.) Unilateral

d.) Unilateral

Insurance contracts are known as ____ because certain future conditions or acts must occur before any claims can be paid. a.) consideration b.) unilateral c.) aleatory d.) conditional

d.) conditional

What is a warranty? a.) guarantees that an insurance company will pay a benefit b.) is a statement believed to be true to the best of one's knowledge c.) cannot be used to void the contract d.) is a statement guaranteed to be true

d.) is a statement guaranteed to be true