Chapter 2: Contract Law Quiz

C. Exchange of something of value by both parties

1. In an insurance contract, consideration refers to: A. Legal capacity B. Exchange of unequal value by either party C. Exchange of something of value by both parties D. An act by one party in exchange for a promise by the other

C. The insurer's financial rating

7. Which of the following does NOT need to be identified in an insurance policy? A. The stated periodic premium B. A statement of insurable interest C. The insurer's financial rating D. The first named insured

C. Negligence

9. Which of the following terms refers to an unintentional tort? A. Peril B. Hazard C. Negligence D. Materiality

B. Insurable interest and consent

10. A life insurance policy has a legal purpose if both of which of the following elements exist? A. Offer and counteroffer B. Insurable interest and consent C. Policyowner and named beneficiary D.Underwriting and reciprocity

B. Statement that must be true

2. In insurance contracts, a warranty is a: A. Product verification B. Statement that must be true C. Policy benefits D. Statement believe to be true

C. Beneficiary's consent

3. An insurance contract must contain all of the following elements to be considered legally binding EXCEPT: A. Offer and acceptance B. Competent parties C. Beneficiary's consent D. Consideration

B. If it is intentional and material

4. When would a misrepresentation on the insurance application be considered fraud? A. When the application is incomplete B. If it is intentional and material C. Any misrepresentation is consider fraud D. Never; statements by the applicant are only representations

A. Agent

5. Who acts on behalf of the principal? A. Agent B. Insurer C. Insured D. The state

B. Exchange of unequal values

6. Which of the following best describes the aleatory nature of an insurance contract? A. Ambiguities are interpreted in favor of the insured B. Exchange of unequal values C. Only one of the parties being legally bound by the co D. Policies are submitted to the insurer on a "take it or leave it" basis

B. Rate

8. The price of insurance for each unit of exposure is known as: A. Premium B. Rate C. Consideration D. Insurable interest