Legal Concepts
Statements made on an insurance application that are believed to be true to the best of the applicant's knowledge are called
"Representations". Statements made on insurance application that are believed to be trued to the best of the applicant's knowledge are called representations.
The Consideration clause of an insurance contract includes:
"the schedule and amount of premium payments". The Consideration clause of Life or Health policy includes the schedule and amount of premium payments
Warranty
A warranty is a statement made by the applicant that is guaranteed to be true
"If material to the risk, false representations will void a policy"
In insurance, false representations will void a policy if they are material to the risk
What is the consideration given by an insurer in the Consideration clause of a life policy?
Promise to pay a death benefit to a named beneficiary
A policy of adhesion can only be modified by whom?
The insurance company. (A policy of adhesion is best described as a policy which only the insurance company can modify.)
Life and health insurance polices are
Unilateral contracts. Life and health insurance policies are considered unilateral contracts because one party makes a promise and the other party can only accept by performance.
The part of a life insurance policy guaranteed to be true is called a(n)
Warranty - warranties are statement that are considered literally true. A warranty that is not literally true in every detail, even if made in error, is sufficient to render a policy void.
At what point does an informal agreement become a binding contract?
When consideration is provided by one of the parties to the contract. Consideration must be given in order to make a contract legally binding
A life insurance policy would be considered a wagering contract WITHOUT
insurable interest
When third-party ownership is involved, applicants who also happen to be the stated primary beneficiary are required to have
insurable interest in the proposed insured
Insurance policies are offered on a "take it or leave it" basis, which make them:
"Contracts of Adhesion". Because insurance policies are offered on a "take it or leave it" basis, they are referred to as Contracts of Adhesion.
If a contract of adhesion contains complicated language, to whom would the interpretation be in favor of?
"Insured", In a contract of adhesion, any confusing language would be interpreted int eh favor of the insured.
A life insurance arrangement which circumvents insurable interest statutes is called
investor-originated life insurance (or IOLI) is used to circumvent stat insurable interest statutes. This is done when an investor (or a stranger) persuades an individual to take out life insurance specifically for the purpose of selling the policy to the investor. The investor compensates the insured and makes the premiums, then collects the death benefit when the insured dies.
All of the following a considered to be typical characteristics describing the nature of an insurance contract, EXCEPT: - Bilateral, Unilateral, Aleatory, Adhesion
Bilateral; Unilateral, aleatory, and adhesion are all special features of insurance contracts. Bilateral is not.
A contract where one party either accepts or rejects the terms of a contract written by another party is called a contract of
Adhesion, A contract of Adhesion is a contract offered intact to one party by another under circumstances requiring the second party to accept or reject the contract in total without having the opportunity to bargain over the wording. Insurance policies are contracts of adhesion and, as such are construed strictly against the party writing them (ie the insurer)
When must insurable interest exist for a life insurance contract to be valid?
Inception of the contract
Stranger Originated Life Insurance (STOLI) has been found to be in violation of which of the following contractual elements
Legal Purpose (Insurable Interest) A STOLI arrangement is used to circumvent state insurable interest statutes
Who makes the legally enforceable promises in a unilateral contract?
The Insurance Company