Chapter Three: More Legal Concepts

A health insurance contract may be any of the following types of contracts, EXCEPT:

A Valued Contract In the case of a valued contract as in life insurance, the value is set before the claim occurs. A health insurance contract can be any of those listed but a valued contract. The loss is not defined before it occurs.

Timothy is trying to understand the difference between a warranty and a representation. He is concerned that he might inadvertently give a false statement on his insurance application. A representation is:

Any statement made is true to the best of the applicant's recollection, but facts may not be exact A representation is a statement that the applicant provides that is true to the best of their knowledge. An example of how this might work is when he/she can't remember the exact date he/she might have seen a doctor. He/she might say they were at the doctor last November, but it was, in fact, last October. This will not materially affect the outcome of an underwriting decision or the payment of a claim.

Benefits under a life insurance policy are provided through which of the following methods?

Cash Payment & Valued Life insurance benefits are based on a cash payment of the face amount stipulated in the policy. Valued policies - pay a stated amount. Both are correct.

The insurer does not include the suicide exclusion on Bob's policy. Bob commits suicide three months later, and the insurer refuses to pay the death benefit. Which of the following terms describes the insurer's inability to reclaim a waived right, and consequently the insurer's duty to pay the death benefit?

Estoppel Estoppel prevents an insurer from reclaiming a forfeited right.

LMO Insurer is incorporated in New Hampshire, conducts business in all of the Eastern Seaboard states and in Germany. How is LMO Insurer classified in New York?

Foreign An insurer's domicile of incorporation is the state or district in which it became an incorporated company. A foreign insurer is any insurer that conducts business in a state or district in which it wasn't incorporated. LMO Insurer is incorporated in New Hampshire, so it is a foreign insurer in New York.

____________ is an intentional misrepresentation or concealment of material fact made by one party in order to cheat another party out of something that has economic value.

Fraud Fraud is an intentional misrepresentation or concealment of material fact made by one party in order to cheat another party out of something that has economic value.

Insurance contracts are conditional. Which of the following would be a characteristic of a conditional contract?

If a loss occurs, then the insurance company will pay benefits. Conditional contracts are "if-then" contracts: if a loss occurs, then the insurance company will pay benefits.

Judy purchases a life insurance policy for her brother, James. The insurance agent, Jacob, uses Judy's premiums to pay his credit card bill. Who has committed fraud?

Jacob Jacob is guilty of fraud because he embezzled Judy's premiums.

Which legal interpretation is represented by the following: roadside assistance is provided in an automobile policy, so it is reasonable for the insured to expect that the insurer will cover the cost of changing a flat tire?

Reasonable expectations Reasonable expectations means that the insured can reasonably expect that the insurer will provide coverage as indicated in the insurance policy even if every detail regarding the coverage is not stated.

Another term that means to void an insurance policy is:

Recission Rescission: insurance contracts may be voided if one or more parties to the contract commit a material misrepresentation or concealment.

Jude completes an application for a health insurance policy. His statements on the application were made to the best of his knowledge and are:

Representations The statements made by an applicant made to the best of his knowledge are representations, not warranties. Only the insurer is held to the standard of warranties.

Jude completes an application for a health insurance policy. His statements on the application were made to the best of his knowledge and are:

Representations The statements made by an applicant to the best of their knowledge are representations, not warranties. Only the insurer is held to the standard of warranties.

All of the following statements are true regarding subrogation, EXCEPT:

Subrogation applies primarily to life and health insurance, and seldom to property and casualty insurance. Subrogation primarily applies to property and casualty, and seldom to life and health insurance. Subrogation is the right of the insurer to assume the rights of the insured and sue the responsible third party for damages inflicted upon the insured.

What is the consequence for an applicant who makes an unintentional misrepresentation on a life insurance policy?

The insurer will pay the death benefit as long as the misrepresentation is not material to the risk. The insurer will not void the policy, and is liable to pay the death benefit as long as the applicant's misrepresentation is not material to the risk insured.

Which of the following terms is best defined as voluntarily surrendering a known right?

Waiver Waiver is the voluntary and intentional surrender of a known right.