Podcast
Questions and Answers
When must insurable interest be present in order for a life insurance policy to be valid?
When must insurable interest be present in order for a life insurance policy to be valid?
When the application is made
What is the consideration given by an insurer in the Consideration clause of a life policy?
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
The Consideration clause of an insurance contract includes?
The Consideration clause of an insurance contract includes?
The schedule and amount of premium payments
A life insurance arrangement which circumvents insurable interest statutes is called?
A life insurance arrangement which circumvents insurable interest statutes is called?
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When third-party ownership is involved, applicants who also happen to be the stated primary beneficiary are required to have?
When third-party ownership is involved, applicants who also happen to be the stated primary beneficiary are required to have?
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Which of these require an offer, acceptance, and consideration?
Which of these require an offer, acceptance, and consideration?
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The part of a life insurance policy guaranteed to be true is called a(n)?
The part of a life insurance policy guaranteed to be true is called a(n)?
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Where will the proceeds from E's life insurance policy be directed to if E dies and the primary beneficiary is F?
Where will the proceeds from E's life insurance policy be directed to if E dies and the primary beneficiary is F?
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A life insurance policy would be considered a wagering contract WITHOUT?
A life insurance policy would be considered a wagering contract WITHOUT?
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All of the following are considered to be typical characteristics describing the nature of an insurance contract EXCEPT?
All of the following are considered to be typical characteristics describing the nature of an insurance contract EXCEPT?
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Who makes the legally enforceable promises in a unilateral insurance policy?
Who makes the legally enforceable promises in a unilateral insurance policy?
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If a contract of adhesion contains complicated language, to whom would the interpretation be in favor of?
If a contract of adhesion contains complicated language, to whom would the interpretation be in favor of?
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Life and health insurance policies are?
Life and health insurance policies are?
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Q purchases a $500,000 life insurance policy and pays $900 in premiums over the first six months. Q dies suddenly; what does this reflect about the insurance contract features?
Q purchases a $500,000 life insurance policy and pays $900 in premiums over the first six months. Q dies suddenly; what does this reflect about the insurance contract features?
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Insurance policies are offered on a 'take it or leave it' basis, which make them?
Insurance policies are offered on a 'take it or leave it' basis, which make them?
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At what point does an informal contract become binding?
At what point does an informal contract become binding?
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Taking receipt of premiums and holding them for the insurance company is an example of?
Taking receipt of premiums and holding them for the insurance company is an example of?
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A warranty?
A warranty?
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When must insurable interest exist for a life insurance contract to be valid?
When must insurable interest exist for a life insurance contract to be valid?
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Which of these is NOT a type of agent authority?
Which of these is NOT a type of agent authority?
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Which of these arrangements allows one to bypass insurable interest laws?
Which of these arrangements allows one to bypass insurable interest laws?
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Insurance contracts are known as ____ because certain future conditions or acts must occur before any claims can be paid.
Insurance contracts are known as ____ because certain future conditions or acts must occur before any claims can be paid.
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In regards to representations or warranties, which of these statements is TRUE?
In regards to representations or warranties, which of these statements is TRUE?
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Statements made on an insurance application that are believed to be true to the best of the applicant's knowledge are called?
Statements made on an insurance application that are believed to be true to the best of the applicant's knowledge are called?
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Which of these is considered a statement that is assured to be true in every respect?
Which of these is considered a statement that is assured to be true in every respect?
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A policy of adhesion can only be modified by whom?
A policy of adhesion can only be modified by whom?
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Which of these is NOT considered to be an element of an insurance contract?
Which of these is NOT considered to be an element of an insurance contract?
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Stranger Originated Life Insurance (STOLI) has been found to be in violation of which of the following contractual elements?
Stranger Originated Life Insurance (STOLI) has been found to be in violation of which of the following contractual elements?
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Insurance policies are considered aleatory contracts because?
Insurance policies are considered aleatory contracts because?
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Which of the following consists of an offer, acceptance, and consideration?
Which of the following consists of an offer, acceptance, and consideration?
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In an insurance contract, the insurer is the only party who makes a legally enforceable promise. What kind of contract is this?
In an insurance contract, the insurer is the only party who makes a legally enforceable promise. What kind of contract is this?
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Study Notes
Insurable Interest
- Insurable interest must exist when the application for a life insurance policy is made.
- Investor-Originated Life Insurance (IOLI) circumvents insurable interest statutes by allowing investors to persuade individuals to take out policies for sale to the investor.
Consideration Clause
- The consideration given by an insurer includes the promise to pay a death benefit to a named beneficiary.
- The Consideration clause also details the schedule and amount of premium payments.
Life Insurance Policy Ownership
- Third-party ownership mandates that applicants who are also named as primary beneficiaries must have an insurable interest in the proposed insured.
- Insurable interest only needs to exist at the time of application for the policy to remain valid.
Policy Proceeds and Wagering Contracts
- If an insured person dies after insurable interest has lapsed, the policy proceeds go to the current beneficiary, irrespective of changes in circumstances.
- Without insurable interest, life insurance policies are deemed wagering contracts, which are not legally valid.
Characteristics of Insurance Contracts
- Insurance contracts are typically unilateral, aleatory, and adhesive, meaning only one party promises performance, involves a degree of chance, and offers take-it-or-leave-it terms.
- Bilateral is not a characteristic of insurance contracts; these contracts do not involve mutual promises from both parties.
Legal Obligations
- In a unilateral insurance policy, the insurance company is bound by enforceable promises.
- Contracts of adhesion can only be modified by the insurance company, ensuring terms remain standardized.
Contract Binding and Fiduciary Responsibility
- An informal contract becomes binding when one party offers, and the other party accepts the offer.
- Insurance agents have fiduciary responsibilities, which include receiving and holding premiums for the insurance company.
Representations and Warranties
- A warranty is a statement guaranteed to be true; discrepancies can void a policy.
- False representations in an application can void a policy if they significantly affect risk.
- Statements believed to be true by the applicant are classified as representations.
Conditional Nature of Insurance Contracts
- Insurance policies are conditional, as claims depend on future occurrences.
- Aleatory contracts introduce uncertainty, where payment by the insurer depends on unexpected events.
Contract Elements
- A valid contract consists of an offer, acceptance, and consideration, exclusively excluding negotiating as a necessary element.
- Insurance contracts are characterized by the insurer as the sole party to make enforceable promises, reaffirming their unilateral nature.
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Description
Explore the crucial concepts surrounding insurable interest, consideration clauses, and life insurance policy ownership. This quiz covers the legal implications of insurable interest in life insurance and how it applies to beneficiaries and premiums. Test your understanding of these foundational principles of life insurance.
