30 Questions
According to the passage, what is typically included in an agency agreement between an insurance company and a financial professional?
All of the above.
Which of the following is NOT mentioned as a limitation on the financial professional's authority in an agency agreement?
The financial professional cannot determine the scope of their own authority.
What type of compensation is typically included in an agency agreement between an insurance company and a financial professional?
Commission, service fees, and bonuses
According to the passage, what is one type of termination provision that may be included in an agency agreement?
Both a and b.
What is the primary reason an insurance company would include limitations on a financial professional's authority in an agency agreement?
All of the above.
What is the main purpose of an agency agreement between an insurance company and a financial professional?
To grant the financial professional the authority to represent the company and perform certain tasks.
Who must demonstrate a financial interest in the continued life of the insured to satisfy insurable interest requirements?
Distant relatives like cousins and aunts
In the context of insurable interest, who has an insurable interest in the lives of its key employees?
Employers
In what scenario would someone who is not a close relative of an insured have a financial interest in the insured's life and qualify for an insurable interest?
Being financially dependent on the insured
Which of the following is NOT considered to create an insurable interest?
Close family relationships
Who usually names themselves as the beneficiary when purchasing insurance on another person's life?
The insured
Which relationship would grant a creditor an insurable interest in someone's life according to the text?
Credit relationship
What is the main difference between binding premium receipts and conditional premium receipts?
Binding premium receipts provide temporary insurance coverage, while conditional premium receipts do not.
Under a binding receipt, when does the insurer provide insurance coverage?
Before evaluating whether the proposed insured is insurable.
What type of condition is the coverage provided by a binding premium receipt subject to?
Subsequent condition
When does temporary coverage under a binding premium receipt typically end?
When the insurer issues the applicant a policy.
Why are the terms of binding premium receipts considered more advantageous to applicants?
Because they provide coverage without specified conditions being met.
How does the ability to cancel temporary insurance coverage differ between conditional and binding premium receipts?
Conditional receipts cannot cancel temporary coverage; binding receipts can.
Who were the primary beneficiaries of Daphne Christou's $300,000 insurance policy?
Adrian and Basil
What portion of the insurance policy proceeds would Adrian receive?
$300,000
Who were the secondary beneficiaries of Daphne Christou's insurance policy?
Hector and Selene
Why did Julius Devine decide to change the beneficiary on his life insurance policy?
He remarried
Was Carina's consent required for Julius Devine to change the beneficiary on his life insurance policy?
Yes
When an insurer issues a life insurance policy, what must the policyowner do to keep it in force?
Pay premiums as they come due
What is generally true about insurance agents regarding acceptance of renewal premium payments?
They usually do not have authority to accept renewal premium payments
When can an insurer be bound by an agent's actions outside their scope of authority?
When the agent had apparent authority to act on behalf of the insurer
What establishes an agent's apparent authority to accept renewal premiums?
When the insurer establishes a pattern of accepting payments from the agent
If an agent has apparent authority, what is the status of a renewal premium payment made to them?
It is considered a payment to the insurer even if not remitted promptly
How is the scope of an agent's authority determined?
It is a question of fact that depends on the circumstances
What knowledge is considered the insurer's knowledge when an agent acts on its behalf?
The knowledge the agent possesses about business transacted for the insurer
Study Notes
Agency Agreements
- Agency agreements outline the terms of the relationship between the insurance company and the financial professional, including the financial professional's authority, performance requirements, compensation, and termination provisions.
- The agreement specifies whether the financial professional is an independent contractor or an employee of the insurance company.
- The financial professional's authority is limited, and they cannot change premium rates, alter contracts, or incur debts on behalf of the company.
Insurable Interest
- State laws do not presume an insurable interest in the case of distant relatives, such as cousins, aunts, and uncles, and stepchildren.
- An individual must demonstrate a financial interest in the continued life of the insured to satisfy the insurable interest requirements.
- Financial dependence or business relationships can create an insurable interest, such as:
- Partners having an insurable interest in each other's lives
- An employer having an insurable interest in the lives of key employees
- A creditor having an insurable interest in the lives of debtors
Binding Premium Receipts
- Binding premium receipts provide temporary insurance coverage without requiring specified conditions to be met.
- The terms of binding premium receipts are more advantageous to applicants and less advantageous to insurers.
- Temporary coverage remains effective until the earliest of:
- The insurer issuing the applicant a policy
- The insurer declining the application
Policy Ownership and Premium Payments
- A policyowner must pay premiums as they come due to keep a policy in force.
- Agents generally do not have actual authority to accept renewal premium payments.
- An insurer may confer apparent authority on an agent to accept future renewal premium payments if the insurer has established a pattern of accepting payments from the agent.
- Payment of a renewal premium to an agent with apparent authority is considered payment to the insurer.
Test your knowledge on the concept of insurable interest in insurance law, including the requirements for demonstrating financial interest in the insured's continued life. Explore scenarios involving close relatives, distant relatives, and individuals with business relationships.
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