LPAC Ch. 1: General Insurance
Illegal use of narcotics would be an example of
Moral hazard
What is material misinterpretation?
A statement by the applicant that would affect the underwriting decision of the insurance company, if discovered
Insurance policies are not drawn up through negotiations, and an insured has little to say about its provisions. What contract characteristic does this describe?
Adhesion
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?
Conditional
When both parties to a contract must perform certain duties and follow rules of conduct to make the contract enforceable, the contract is
Conditional
In insurance transactions, fiduciary responsibility means
Handling insurer funds in a trust capacity.
Examples of risk retention do not include
Premiums
If a court ordered payment for a loss that was not covered in the policy even if it was clearly worded, it would be an example of which legal concept?
Reasonable expectations
Reciprocal refers to which type of agreement?
Risk-sharing
An insured wants to transfer his personal insurance policy to a friend. Under what conditions would this be possible?
The insured will need a written consent of the insurer.
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?
Unilateral
A statement that is guaranteed to be true, and if untrue, may breach an insurance contract.
Warranty
In forming an insurance contract, when does acceptance usually occur?
When an insurer's underwriter approves coverage
____ is not a legal element of an insurance contract
Conditions
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?
Consideration
An individual applies for a life policy. Two years ago he suffered a head injury so he cannot remember parts of his past, but is otherwise competent. He has also been hospitalized for drug abuse, but does NOT remember this when applying for insurance. What will happen to his policy when the insurer finds out?
His policy will NOT be affected
When an insured makes truthful statements on the application for insurance and pays the required premium, is is known as ____?
Consideration
