XCEL Chapter 3: Legal Concepts of the Insurance Contract

An insurance contract may be voided if a misrepresentation found on the application is determined to be

Material

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

A policy is purchased by a parent for a minor child

Use of XYZ Insurance Company brochures, business cards, and rating guides is an example of

Apparent authority

An appointed producer's implied authority is derived from

Express authority

When must insurable interest exist for a life insurance contract to be valid?

Inception of the contract

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

Initial offer is void

Which of the following situations would an insurance agent need to guard against liability for professional errors and omissions?

Making a recommendation to a potential insured to replace existing coverage

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

Offer

All of these statements correctly describe an aleatory contract EXCEPT

Only one party makes any kind of legally enforceable offer

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

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

Waiver

What qualifies as acceptance of an insurance contract offer?

An issued policy

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

Consideration

The powers directly given to a producer in an agency contract are called

Express

The unwritten authority given to a producer to carry out necessary incidental acts of the agency agreement is called

Implied authority

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

In what way are insurance policies said to be aleatory?

Involves the potential for the unequal exchange of value

Insurable interest involves what assumption?

One person benefits from another person's continued life

What is the insurer responsible for when a producer is acting within the scope of authority granted in the agency contract?

Responsible for acts by the producer that are authority only

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

The law of agency

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

Warranty

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)

Endorsment

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