******CA Life and Health Chapter 2: contract law multiple choice
During the grace period, the policyowner can A) Pay a late premium without penalty B) Return to the insurer for a full refund C) Add riders to the existing policy D) renew the policy without proof of insurability
A) Pay a late premium without penalty
Which of the following best defines an insurance policy? A) An endorsement or a modifying provision B) An agreement between the insurer and Department of insurance C) A written request to an insurance company for insurance coverage D) A contract between and insured and an insurer that guarantees payment for loss caused by a specific event
D) A contract between and insured and an insurer that guarantees payment for loss caused by a specific event
Which of the following best describes the aleatory nature of an insurance contract? A) only one of the parties being legally bound by the contract B) Ambiguities are interpreted in favor of the insured C) Policies are submitted to the insurer on a take-it-or-leave-it basis D) Exchange of unequal values
D) Exchange of unequal values
Factual statements about the insured or the risk in an insurance policy are considered A) Representations B) Implied warranty C) Material representations D) Express warranty
D) Express warranty
A person caught violating provisions regarding misrepresentation could be subject to A) A fine up to $25,000 B) Imprisonment in a county jail for up to 3 years C) A written warning from the commissioner D) A permanent suspension of license
A) A fine up to $25,000
According to the Code, how many separate requirements should an insurance policy have? A) 4 B) 6 C) 8 D) 10
B) 6
Which of the following best describes a misrepresentation? A) A statement that is not guaranteed to be true B) A statement intended to distract, mislead, or deceive a party to a contract C) A failure to disclose known facts D) An intentional omission of material information on part of the insured
B) A statement intended to distract, mislead, or deceive a party to a contract
Insurance policy is A) Any method used to transfer or avoid catastrophic risk B) A written instrument in which a contract of insurance is set forth C) A statement of insurable interest D) A verbal or written agreement between two parties to transfer risk
B) A written instrument in which a contract of insurance is set forth
When would a misrepresentation on the insurance application be considered fraud? A) Any misrepresentation is considered fraud B) If it is intentional and material C) Never: statements by the applicant are only representations D) When the application is incomplete
B) If it is intentional and material
A life insurance policy has a legal purpose if both of which of the following elements exist? A) Offer and counteroffer B) Policyowner and named beneficiaries C) Insurable interest and consent D) Underwriting and reciprocity
C) Insurable interest and consent
The price of insurance for each exposure unit is known as A) Insurable interest B) Premium C) Rate D) Consideration
C) Rate
What is the injured party entitled to receive if an intentional concealment is discovered? A) No less than $500 and no more than $5000 for compensatory damages B) $1000 for any compensatory damages C) Rescission of the policy D) Nothing. Only for intentional concealment is punishable
C) Rescission of the policy
Which of the following would qualifty as an implied warranty in an insurance contract? A) The applicant's signature B) Contract's legal purpose C) Statements in the policy D) An oral representation by the applicant
D) An oral representation by the applicant
The written instrument, in which a contract of insurance is set forth, is known as the A) Binding clause B) Insuring clause C) Right of agency D) Policy
D) Policy
When may a representation be withdrawn? A) At any time B) After the policy is issued C) Within the first 2 years of the policy D) Prior to the issuance of the policy
D) Prior to the issuance of the policy
Which of the following would qualify as a competent party in an insurance contract? A) The appicant is intoxicated at the time of the application B) The applicant is a 12-year old student C) The application is under the influence of a mind-impairing medication at the time of application D) The applicant has a prior felony convition
D) The applicant has a prior felony convition
When both parties to a contract must perform certain duties and follow rules of conduct to make the contract enforceable, the contract is A) Conditional B) Aleatory C) Personal D) Unilateral
A) Conditional
When both parties to a contract must perform certain duties and follow rules or conduct to make the contract enforceable, the contract is A) Conditional B) Aleatory C) Personal D) Unilateral
A) Conditional
Which of the following best describes the concept that the insured pays a small amount of premium for a large amount of risk in the part of the insurance company? A) Subrogation B) warranty C) Aleatory D) Adhesion
C) Aleatory
What is material misrepresentation? A) Any misstatement made by an applicant for insurance B) Any misstatement by the producer C) Concealment D) A statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company
D) A statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company
An insured stated on her application for life insurance stated that she had never had a heart attack, when in fact she had a series of minor heart attacks last year for which she sought medical attention. Which of the following will explain the reason a death benefit claim is denied? A) Estoppel B) Material misrepresentation C) Waiver D) Utmost good faith
B) Material misrepresentation
What other term is used to refer to unintentional torts? A) Breach of contract B) Negligence C) Hazard D) Peril
B) Negligence
The violation of a material warranty or other provision of a policy allows: A) Only the insured to rescind B) Only the insurer to rescind C) Both the insurer and the insured to rescind D) Neither the insurer nor the insured to rescind
C) Both the insurer and the insured to rescind
The failure to disclose known facts is known as A) Warranty B) Misstatement C) Concealment D) Fraud
C) Concealment
When applying for an individual life insurance policy, an applicant states that he went to the doctor for nausea, but fails to mention that he was also having chest pains. This is an example of A) Misrepresentation B) Fraud C) Warranty D) Concealment
D) Concealment
The act of revoking or terminating an insurance policy is called A) Cancellation B) Forfeiture C) Nonrenewal D) Lapse
A) Cancellation
An applicant knowingly fails to communicate information that would help an underwriter make a sound decision regarding coverage. This is an example of A) Concealment B) Waiver C) Fraud D) Breach of Warranty
A) Concealment
An agreement that is enforceable by law is known as a/an A) Contract B) Conditional receipt C) Adhesion D) Policy
A) Contract
What is an injured party entitled to receive if an intentional concealment is discovered? A) $1,000 for any compensatory charges B) Rescission of the policy C) Nothing. Only intentional concealment is punishable D) No less than $500 and no more than $5,000 for compensatory charges
B) Rescission of the policy
In addition to penalties, fines, and possible imprisonment for violating the provision relating to misrepresentation, the Commissioner May suspend the license of such person for a period up to A) 6 months B) 1 year C) 3 years D) 5 years
C) 3 years
Which of the following would qualify as an implied warranty in an insurance contract? A) Contract's legal purpose B) Statements in the policy C) An oral representation by the applicant D) The applicant's signature
C) An oral representation by the applicant
According to the California Insurance Code, any agent violating the regulations relating to misrepresentation will be charged with a A) Felony, a fine not to exceed $2,000 and a possible 2-5 year imprisonmnent B) Felony, a fine not to exceed $5,000, and a possible 2 year imprisonment C) Misdimeanor, a fine not to exceed $25,000, and/or a possible 1-year imprisonment D) Misdimeanor, a fine not to exceed $500, and a possible 1-year imprisonment
C) Misdimeanor, a fine not to exceed $25,000, and/or a possible 1-year imprisonment
In forming an insurance contract, when does acceptance usually occur? A) When an insurer delivers the policy B) When an insurer receives an application C) When an insured submits an application D) When an insurer's underwriter approves coverage
D) When an insurer's underwriter approves coverage
In insurance policies, the insured is not legally bound to any particular action in the insurance contract, but the insurer is legally obligated to pay losses covered by the policy. What contract element does this describe? A) Unidirectional B) Aleatory C) Conditional D) Unilateral
D) Unilateral
Which of the following is NOT a required element of an insurance contract? A) Competent parties B) Consideration C) Counteroffer D) Acceptance
C) Counteroffer
If found material for underwriting, a misrepresentation A) Does not affect either of the parties B) must have been in writing to affect a contract C) can void a contract D) May be withdrawn
C) can void a contract
Which of the following would qualify as an implied warranty in an insurance contract? A) Statements in the policy B) An oral representation by the applicant C) The applicant's signature D) Contract's legal purpose
B) An oral representation by the applicant
A life insurance application is asking if the applicant has applied for any other insurance within the past 6 months. The applicant states that he applied for $15,000 coverage from XYZ Co., but fails to mention the $150,000 coverage with DEF Co. The applicant is guilty of A) Warranty B) Concealment C) Misrepresentation D) Representation
B) Concealment
The key factor of representation that allows the insurer to rescind the contract is A) Representations are statements believed to be true and hold no legal consequences B) The promise or assurance of the representation C) If the representation is false in a material point D) That any misrepresentation is considered fraud
C) If the representation is false in a material point
In determining how material a piece of information is to each party of a contract, the value is not determined by the event itself, but solely by which of the following? A) Amount of information that has been previously disclosed through the inquiry process B) Truthfulness of such statements being made C) Influence this information would have in forming an estimate of the advantages or the disadvantages of the contract D) Interpretation that the seller places on such information in the agreement
C) Influence this information would have in forming an estimate of the advantages or the disadvantages of the contract
What is the definition of a unilateral contract? A) One author: the company wrote the contract; the insured must accept it as written. B) If one party party makes a condition, the other party can counteroffer C) One-sided: only one party makes an enforceable promise D) Two or more parties go into a contact understanding there may be an unequal exchange of value
C) One-sided: only one party makes an enforceable promise
All of the following are true regarding representations EXCEPT A) They may be made before or at the time of policy issue B) They may be oral or written C) They may be altered or withdrawn after the issuance of policy D) They are statements believed to be true
C) They may be altered or withdrawn after the issuance of policy
An insured pays a $100 premium every month for his insurance coverage, yet the insurer promises to pay $10,000 for a covered loss. What characteristic of an insurance contract does this describe? A) Good health B) Adhesions C) Conditional D) Aleatory
D) Aleatory
In insurance, an offer is usually made when A) The insurer approved the application and receives the initial premium B) The agent hands the policy to the policyholder C) An agents explains a policy to a potential applicant D) An applicant submits an application to the insurer
D) An applicant submits an application to the insurer
Which of the following would be covered by contract law? A) A consumer suing the manufacturer for a defective product B) neighbors suing each other for trespassing C) An employer suing an employee for spreading damaging rumors D) An insured suing the insurer for failure to provide promised benefits
D) An insured suing the insurer for failure to provide promised benefits
Representations are written or oral statements made by the applicant which A) Are guaranteed to be true B) Are found to be false after further investigation C) Are immaterial to the actual acceptability of the insurance contract D) Are considered true to the best of the applicant's knowledge
D) Are considered true to the best of the applicant's knowledge
How is the premium in an insurance policy determined? A) According to the number of dependents B) By dividing life expectancy by premium mode C) By subtracting interest from mortality D) By multiplying the rate by the number of units of insurance purchased
D) By multiplying the rate by the number of units of insurance purchased
An insurance contract requires that both the insured and the insurer meet certain conditions in order for the contract to be enforceable. What contract characteristics does this describe? A) Contingent B) Aleatory C) Unilateral D) Conditional
D) Conditional
Which of the following is NOT a type of information that needs to be gathered in order to determine the value of someone's life when using the needs approach? A) Outstanding debt B) Mortgages C) Expenses D) Estimated longevity
D) Estimated longevity
The key factor or representation that allows the injured party to rescind the contract is A) That any representation is considered fraud B) Representations are statements believed to be true and hold no legal consequences C) The promise or assurance of the representation D) If the representation is false in a material point
D) If the representation is false in a material point
In determining how a material piece of information is to each party of a contract, the value is not determined by the event itself, but solely by which of the following? A) Interpretation that the seller places on such information in the agreement B) Amount of information that has been previously disclosed through the inquiry process C) Truthfulness of such statements being made D) Influence this information would have in forming an estimate of the advantages or the disadvantages of the contract
D) Influence this information would have in forming an estimate of the advantages or the disadvantages of the contract
Because an insurance policy is a contract between the insurer and the insured, it must conform to the state laws governing contracts which require all of the following elements EXCEPT A) Competent parties B) Legal purpose C) Offer and acceptance D) Conditions
D) Conditions
Which of the following best describes the policy nonrenewal? A) Discontinuance of an insurance policy by the insured on the policy anniversary B) Return of the policy after a 10-day free look C) Voiding of a policy due to a misrepresentation on the application D) Revocation of one's insurance policy by the insurer
A) Discontinuance of an insurance policy by the insured on the policy anniversary
Kayla's husband died in a plane crash. She needs a new source of funding that will help put her child through daycare. Which of the following would be the best source? A) Life insurance proceeds B) State Education Waiver C) Viatical settlement D) Estate Conversation
A) Life insurance proceeds
An intentional or unintentional concealment entitles the affected party to which of the following? A) Rescission of a contract B) Estoppel C) Waiver of conealed condition D) Subtrogation of a contract
A) Rescission of a contract
All of the following are reasons an insurer or an insured would have the right to rescind a policy EXCEPT A) The amount of paid claims exceeds the premiums paid B) The violation of a material warranty C) When concealment is unintentional D) An intentional program omission in determining if a warranty is false
A) The amount of paid claims exceeds the premiums paid
Which of the following is NOT the consideration in a policy? A) The premium amount paid at the time of the application B) The promise to pay covered losses C) The application given to a prospective insured D) Something of value in exchanged between parties
C) The application given to a prospective insured
What is a wrongful act or the violation of someone's rights that leads to legal liability called? A) Peril B) Loss C) Tort D) Hazard
C) Tort
Every expressed warranty made at or before the execution of a policy must be: A) Considered implied by the insurer and covered in the policy B) considered accepted by the insured upon delivery of the policy C) Binding and specific for the initial policy period D) contained in an referred to in the policy or other document and signed by the insured
D) contained in an referred to in the policy or other document and signed by the insured
An insured wants to transfer his personal insurance policy to a friend. Under what conditions would this be possible? A) The insured can transfer the policy to his friends and then notify the insurer of the change B) The insured will need a written consent of the insurer C) It is impossible to transfer a policy D) The insured would have to surrender his policy to the insurer, and his friend could then ask you for it
B) The insured will need a written consent of the insurer
The importance of a misrepresentation is determined by A) Whether or not the policy is already issued B) The materiality of a given concealment C) The amount of money potentially lost D) The cost of investigation
B) The materiality of a given concealment
All of the following must be specified in an insurance policy EXCEPT A) The financial rating of the insurer B) The parties between whom the contract is made C) The risks insured against D) The period during which the insurance is in force
A) The financial rating of the insurer
In terms of parties to a contract, which of the following does NOT describe a competent party? A) The person must have at least completed secondary education B) The person must not be under the influence of drugs and alcohol C) The person must be of legal age D) The person must be mentally competent to understand the contract
A) The person must have at least completed secondary education
A contract between an insured and an insurance company which agrees to pay the insured for loss caused by specific events is A) A premium B) A guaranteed benefit C) A policy D) A rider
C) A policy
Insurance policies are not drawn up through negotiations, and an insured has little to say about its provisions. What contract characteristic does this describe? A) Conditional B) Personal C) Adhesion D) Unilateral
C) Adhesion
What term best describes the act of withholding material information that would be crucial to an underwriting decision? A) Leading B) Breach of warranty C) Concealment D) Withholding
C) Concealment
The proposed insured makes the premium payment on a new insurance policy. If the insured should die, the insurer will pay the death benefit to the beneficiary if the policy is approved. This is an example of what kind of contract? A) Personal B) Unilateral C) Conditional D) Adhesion
C) Conditional
All of the following information must be communicated in an insurance contract EXCEPT A) Information that is material even though it cannot be proven B) Information not requested by an agent and company, even if it's considered relevant C) Information the other party already knows D) Information that is material to the contract
C) Information the other party already knows
If only one party to an insurance contract has made a legally enforceable promise, what kind of contract is it? A) Conditional B) A legal (but unethical) contract C) Unilateral D) Adhesion
C) Unilateral
Concealment as defined by the California Insurance Code is A) Neglect on the part of insured to communicate all information known to be material to the insurer B) Failure to communicate information that should be known C) Statements based on the best knowledge and belief of the person giving the information D) Neglect on the part of the insured to communicate the information waived by the other party
A) Neglect on the part of insured to communicate all information known to be material to the insurer
An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated? A) Representation B) Adhesion C) Consideration D) Good Faith
C) Consideration
When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following? A) Contract of adhesion B) Acceptance C) Consideration D) Legal purpose
C) Consideration
Contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis are classified as A) Aleatory contracts B) Binding contracts C) Contracts of adhesion D) Unilateral contracts
C) Contracts of adhesion
Which of the following does NOT need to be identified in an insurance policy? A) a statement of insurance interest B) the first named insured C) the insurer's financial rating D) the stated periodic premium
C) the insurer's financial rating
Representations in insurance contracts qualify as A) Express warranties B) Misrepresentations C) Facts D) Implied warranties
D) Implied warranties