Questions and Answers
An arrangement where an individual is authorized to act on behalf of another person or company is sanctioned through:
When must insurable interest exist for a life insurance contract to be valid?
The following are all elements of a legal contract EXCEPT:
Which of these do NOT indicate the presence of insurable interest in a life insurance contract?
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XYZ Insurance Company gives direct authority to its agents to sell insurance through an agency contract, but nothing is stated regarding the collection of premiums. Which authority grants the agent the right to collect premiums?
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In what way are insurance policies said to be aleatory?
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Insurable interest involves what assumption?
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An insurance application requires an applicant to make a full, accurate disclosure of the risk factor involved. Using this criteria, an insurance policy is considered what type of contract?
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Which of these is true regarding the exchange of consideration among the parties involved in an insurance contract?
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The courts will normally interpret a policy in favor of the insured when the meaning of the policy is not clear. This is because an insurance policy is a(n):
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Study Notes
Legal Concepts of the Insurance Contract
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The Law of Agency allows one individual to act on behalf of another, establishing authority in insurance transactions.
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Insurable interest must exist at the time of application for a life insurance contract to be valid.
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Key elements of a legal contract include consideration, offer and acceptance, and competent parties. Recorded evidence is not a necessary element.
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Lifelong friendship does not qualify as an indication of insurable interest in a life insurance contract. Valid relationships typically include marriage, blood relations, or co-owning a business.
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Implied authority allows agents to collect premiums even when it is not explicitly stated in their agency contract with the insurance company.
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Insurance policies are considered aleatory due to the potential for unequal value exchange between parties involved.
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Insurable interest assumes that one person benefits from the continuation of another’s life, not solely from their death.
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An insurance policy is categorized as a contract of utmost good faith, requiring full and accurate risk disclosures from applicants.
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Consideration in insurance contracts can be equal but does not have to be monetary; the exchange can involve non-currency elements.
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In cases of unclear policy language, courts usually interpret the policy in favor of the insured, as insurance policies are classified as contracts of adhesion.
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Description
Test your knowledge of essential legal concepts related to insurance contracts. This quiz covers the law of agency, insurable interest, and other critical aspects from Chapter 3. Perfect for students studying insurance law.
