Questions and Answers
Insurance contracts are known as ____ because certain future conditions or acts must occur before any claims can be paid.
conditional
What kind of contract is it when the insurer is the only party who makes a legally enforceable promise?
Unilateral
Statements made on an insurance application that are believed to be true to the best of the applicant's knowledge are called?
representations
Which of these is NOT a type of agent authority?
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The exchange of unequal values in an insurance contract reflects which feature?
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When does an informal contract become binding?
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Life and health insurance policies are considered what type of contracts?
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What consists of an offer, acceptance, and consideration?
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A life insurance policy would be considered a wagering contract WITHOUT?
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Why are insurance policies considered aleatory contracts?
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In the case where E dies, where will the proceeds from E's life insurance policy be directed to?
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Which of the following is NOT considered to be a typical characteristic describing the nature of an insurance contract?
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Which of these is NOT considered to be an element of an insurance contract?
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Who makes the legally enforceable promises in a unilateral insurance policy?
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What is the consideration given by an insurer in the consideration clause of a life policy?
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A policy of adhesion can only be modified by whom?
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When must insurable interest exist for a life insurance contract to be valid?
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What is a warranty in insurance terms?
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What is a life insurance arrangement which circumvents insurable interest statutes called?
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In regards to representations or warranties, which statement is TRUE?
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Study Notes
Legal Concepts in Insurance
- Insurance contracts are conditional, requiring certain future events to occur before claims are paid.
- They are classified as unilateral contracts, where only the insurer makes legally enforceable promises.
- Statements in insurance applications that the applicant believes to be true are termed representations.
- Types of agent authority include express, implied, and apparent, while "principal" is not considered agent authority.
- Insurance contracts demonstrate an aleatory nature, where premium payments can differ significantly from the potential payout.
- An informal contract becomes binding when one party offers and the other party accepts that offer.
- Life and health insurance policies are unilateral since the insurer promises to pay benefits while the insured can only accept by performance.
- A valid contract requires three elements: offer, acceptance, and consideration.
- Without insurable interest, a life insurance policy is treated as a wagering contract, lacking legitimate interest.
- Insurance policies are aleatory contracts, as performance depends on a future event and can result in unequal value exchange.
- In a situation between business partners with life insurance policies on each other, if one partner dies, the proceeds will go to the beneficiary designated initially, even after the relationship ends.
- Typical characteristics of insurance contracts include unilateral, aleatory, and adhesion; they are not bilateral.
- Negotiating is not an essential element of an insurance contract, which requires offer, acceptance, and consideration.
- In a unilateral insurance policy, the insurance company is responsible for legally enforceable promises.
- The insurer's consideration in a life policy is the promise to pay a death benefit to a designated beneficiary.
- Policies of adhesion can only be modified by the insurance company.
- Insurable interest must be present at the inception of the contract for the policy to be valid.
- A warranty is defined as a statement guaranteed to be true.
- Investor-Originated Life Insurance (IOLI) circumvents state insurable interest laws, allowing investors to profit from policies by persuading individuals to take out insurance for resale.
- False representations in insurance can void a policy if they are material to the risk involved.
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Description
Explore key legal concepts related to insurance contracts with this quiz. Learn about terms like conditional and unilateral contracts. Test your understanding of the essential principles governing insurance agreements.
