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Questions and Answers
A policy of adhesion can only be modified by whom?
A policy of adhesion can only be modified by whom?
- The agent
- The insurance company (correct)
- The applicant
- The primary beneficiary
The Consideration clause of an insurance contract includes:
The Consideration clause of an insurance contract includes:
- The schedule and amount of premium payments (correct)
- A summary of the coverage provided
- The named beneficiaries
- The buyer's guide
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?
- Insured (correct)
- Beneficiary
- Reinsurer
- Insurer
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?
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.
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?
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?
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?
E and F are business partners. Each takes out a $500,000 life insurance policy on the other, naming himself as primary beneficiary. Where will the proceeds from E's life insurance policy be directed to?
E and F are business partners. Each takes out a $500,000 life insurance policy on the other, naming himself as primary beneficiary. Where will the proceeds from E's life insurance policy be directed to?
A life insurance arrangement which circumvents insurable interest statutes is called:
A life insurance arrangement which circumvents insurable interest statutes is called:
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 third-party ownership is involved, applicants who are also the stated primary beneficiary are required to have:
When third-party ownership is involved, applicants who are also the stated primary beneficiary are required to have:
Which of these is NOT a type of agent authority?
Which of these is NOT a type of agent authority?
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):
Which of these requires an offer, acceptance, and consideration?
Which of these requires an offer, acceptance, and consideration?
At what point does an informal contract become binding?
At what point does an informal contract become binding?
What is a warranty?
What is a warranty?
Insurance policies are considered aleatory contracts because:
Insurance policies are considered aleatory contracts because:
Life and health insurance policies are:
Life and health insurance policies are:
Which of the following consists of an offer, acceptance, and consideration?
Which of the following consists of an offer, acceptance, and consideration?
Q purchases a $500,000 life insurance policy and pays $900 in premiums over the first six months. What does this exchange of unequal values reflect?
Q purchases a $500,000 life insurance policy and pays $900 in premiums over the first six months. What does this exchange of unequal values reflect?
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?
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:
Which of these arrangements allows one to bypass insurable interest laws?
Which of these arrangements allows one to bypass insurable interest laws?
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:
In regards to representations or warranties, which statement is TRUE?
In regards to representations or warranties, which statement is TRUE?
Who makes the legally enforceable promises in a unilateral insurance policy?
Who makes the legally enforceable promises in a unilateral insurance policy?
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?
A life insurance policy would be considered a wagering contract WITHOUT:
A life insurance policy would be considered a wagering contract WITHOUT:
Insurance policies are offered on a 'take it or leave it' basis, which makes them:
Insurance policies are offered on a 'take it or leave it' basis, which makes them:
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:
Study Notes
Insurance Contract Basics
- A policy of adhesion can only be modified by the insurance company.
- The Consideration clause outlines the schedule and amount of premium payments.
- Contracts of adhesion that contain complex language favor the insured in interpretation.
Key Components of Insurance Contracts
- The insurer's consideration is the promise to pay a death benefit to a named beneficiary.
- Insurance contracts are conditional, requiring certain future events to occur before claims are valid.
- Legal purpose or insurable interest is essential; Stranger Originated Life Insurance (STOLI) violates this principle.
Important Definitions
- A warranty is a statement guaranteed to be true, differentiating it from a representation, which is believed true to the applicant's knowledge.
- Insurance contracts don't typically include negotiating as an element, which comprises the offer, acceptance, and consideration.
Life Insurance Specifics
- In cases of third-party ownership, the beneficiary must have insurable interest in the proposed insured.
- If a partnership dissolves, life insurance proceeds go to the named beneficiary even without current insurable interest.
Contractual Principles
- A contract requires an offer, acceptance, and consideration; unilateral contracts involve one party making enforceable promises.
- An arrangement circumventing insurable interest laws is called Investor-Originated Life Insurance.
Insurable Interest Conditions
- Insurable interest must be present at the application stage to be valid for life insurance.
- False representations material to the risk can void a policy, while warranties are absolute truths.
Types of Agent Authority
- Types of agent authority include express, implied, and apparent; principal is not an authority type.
Characteristics of Insurance Policies
- Insurance policies are classified as unilateral, indicating only the insurer makes enforceable promises, and aleatory, contingent on future events.
- Policies of adhesion mean contracts are offered on a "take it or leave it" basis.
Fiduciary Responsibility
- Accepting and holding premiums for the insurer is an example of fiduciary responsibility, emphasizing integrity in handling funds.
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Description
This quiz covers essential concepts related to insurance contracts, including types of clauses, key components, and important definitions. Understand the principles behind contracts of adhesion, insurable interest, and the distinctions between warranties and representations in insurance. Test your knowledge of life insurance specifics and the legalities involved.
