Aleatory Contract Quiz and Flashcards: Insurance Basics

Questions and Answers

The authority given by an insurer or employer to a licensee to transact insurance or adjust claims on their behalf is called ______.

Authorization

An agent is an individual who has been authorized by an insurer to be its representative and to perform all of the following acts EXCEPT:

Authorize payment of certain claims (correct)

Collect premiums from policyowners

Render services to prospects

Solicit applications for insurance

Which of the following statements regarding utmost good faith in insurance contracts is CORRECT?

A warranty is a statement that is technically part of the contract.

Statements in an application for an insurance policy are considered representations. (correct)

A representation is guaranteed to be true.

The concept applies only to the insurer.

When an agent is provided the materials from his/her company, which category of authority allows those items to be used?

Apparent Signup and view all the answers

Which of the following statements about authority is NOT correct?

Express authority is determined by a principal's conduct. Signup and view all the answers

Which of the following is an example of legal consideration?

Application and initial premium Signup and view all the answers

All of the following are true about aleatory contracts EXCEPT:

Only one party makes a legally enforceable offer Signup and view all the answers

If the agency contract gives the producer the authority to solicit insurance but states nothing about the collection of premiums, the producer normally has authority to collect premiums based on:

Implied authority Signup and view all the answers

Which characteristic of an insurance contract means there is a potential for unequal exchange of value for both parties?

Aleatory Signup and view all the answers

An agent is an individual that represents whom?

Insurer Signup and view all the answers

All of the following are considered to be typical characteristics describing the nature of an insurance contract EXCEPT:

Bilateral Signup and view all the answers

Which of the following statements describes an insurable interest?

The policyowner must expect to suffer a loss when the insured dies or becomes disabled. Signup and view all the answers

The authority of an agent which is spelled out in the written words of the agency contract between the agent and the insurer is called:

Expressed authority Signup and view all the answers

In life insurance, an insurable interest in the life of the insured must exist:

Only at the inception of the contract Signup and view all the answers

Which of the following statements about authority is NOT correct?

Express authority is determined by a principal's conduct. Signup and view all the answers

Which of the following best describes the concept that the consideration is not equal in contract law?

Aleatory Signup and view all the answers

Which of the following is an example of legal consideration?

Application and initial premium Signup and view all the answers

The term which describes the fact that both parties of a contract may NOT receive the same value is referred to as:

Aleatory Signup and view all the answers

When an agent is provided the materials from his/her company, which category of authority is the one which allows those items to be used?

Apparent Signup and view all the answers

The following are all characteristics of insurance contracts EXCEPT:

Unconditional Signup and view all the answers

Which is considered a statement made by an applicant that he/she believes to be true?

Representation Signup and view all the answers

A life insurance policy would be considered a wagering contract WITHOUT:

Insurable interest Signup and view all the answers

A producer's powers stated in the agency contract are:

Express Signup and view all the answers

All of the following are true about aleatory contracts EXCEPT:

Only one party makes a legally enforceable offer Signup and view all the answers

With life and health contracts, when must an insurable interest exist?

At the inception of the policy Signup and view all the answers

The deeds and actions of a producer indicate what kind of authority?

Apparent Signup and view all the answers

All of the following would be considered non-competent parties in an insurance contract EXCEPT:

The disabled Signup and view all the answers

Which of the following terms is used for the voluntary relinquishment of a known right?

Waiver Signup and view all the answers

All of the following normally indicate the presence of insurable interest in the life of another person EXCEPT:

Maintaining a lasting friendship with the other person Signup and view all the answers

Krissa and Janet enter into a contract in which Krissa agrees to fraudulently induce sick people to sell their insurance contracts to Janet's company. Krissa and Janet's contract can best be described as:

Void Signup and view all the answers

An insurance contract is prepared by one party, the insurer, rather than by a negotiation between the contracting parties. Which of the following statements explains this characteristic of insurance contracts?

The insurance contract is a contract of adhesion. Signup and view all the answers

An insurance company has how many years to challenge the validity of a life insurance contract?

Two Signup and view all the answers

When the principal gives the agent authority in writing, it's referred to as:

Express authority Signup and view all the answers

The power given to an individual producer that is not specifically addressed in his/her contract is considered what type of authority?

Implied Signup and view all the answers

What makes an insurance policy a unilateral contract?

Only the insurer is legally bound Signup and view all the answers

Which of the following statements regarding insurable interest is NOT correct?

A policy obtained by a person without an insurable interest in the insured can be enforced. Signup and view all the answers

The unwritten authority of a producer to perform incidental acts necessary to fulfill the purpose of the agency agreement is:

Implied authority Signup and view all the answers

Which type of clause describes the following statement: 'We have issued the policy in consideration of the representations in your applications and payment of the first-term premium'?

Consideration clause Signup and view all the answers

A relationship in which one person is authorized to represent and act for another person or company is established through:

The law of agency Signup and view all the answers

Which of the following statements describes the parol evidence rule?

A written contract cannot be changed by oral evidence. Signup and view all the answers

Intentional withholding of material facts that would affect an insurance policy's validity is called a(n):

Concealment Signup and view all the answers

A valid contract requires all of the following EXCEPT:

Written evidence Signup and view all the answers

In insurance, an offer is usually made when:

The application is submitted Signup and view all the answers

Special features of insurance contracts include all of the following EXCEPT:

Estoppel Signup and view all the answers

An agreement without legal effect is:

Void Signup and view all the answers

The authority that an insurer gives to its agent by means of the agent's contract is known as:

Express authority Signup and view all the answers

A professional liability for which producers can be sued for mistakes of putting a policy into effect is called:

Errors and omissions Signup and view all the answers

All are competent parties who can enter into insurance contracts EXCEPT:

Those under the influence of alcohol Signup and view all the answers

What is implied authority defined as?

Authority that is not specifically given to an agent in the agency contract, but that an agent can reasonably assume to carry out his/her duties. Signup and view all the answers

In an insurance contract, the element that shows each party is giving something of value is called:

Consideration Signup and view all the answers

Because an insurance contract has been prepared by an insurance company with no negotiation, it is considered:

A contract of adhesion Signup and view all the answers

Insurable interest must exist at what time?

At the time of application Signup and view all the answers

Which of the following is a unique characteristic of an insurance contract?

Unilateral Signup and view all the answers

Study Notes

Legal Concepts of the Insurance Contract

Implied Authority: A producer may have the authority to collect premiums even if not explicitly stated in the agency contract, highlighting the concept of implied authority.
Aleatory Contracts: Insurance contracts are considered aleatory, meaning there is a possibility for an unequal exchange of value, as benefits may not always exceed premiums paid.
Role of an Agent: An agent represents the insurer by selling goods/services and is authorized to act on behalf of the insurer.
Characteristics of Insurance Contracts: Common characteristics include unilateral obligations, being aleatory, and contracts of adhesion, but not bilateral, as they do not require mutual promises.
Insurable Interest: Required for a policyowner who must expect to suffer a financial loss upon the insured's death or disability.
Express Authority: This type of authority is explicitly defined in the agency contract, allowing agents to perform specific functions.
Time of Insurable Interest: In life insurance, insurable interest must exist at the inception of the contract, not throughout its duration.
Incorrect Authority Statements: A statement that express authority is determined by a principal's conduct is inaccurate; express authority is clearly defined in a contract.
Consideration in Contracts: Legal consideration in insurance is exchanging premiums for the insurer's promise to pay.
Unilateral Nature of Contracts: Insurance policies are unilateral contracts since only the insurer is required to fulfill obligations (e.g., making payments).
Competent Parties: To enter an insurance contract, parties such as trusts and estates must be competent, while minors and those under the influence of drugs/alcohol cannot.
Waiver: The voluntary relinquishment of a known right can prevent an insurer from denying a claim later.
Parties and Relationships: Relationships that indicate insurable interest include being closely related, married, or co-signing mortgages; mere friendship doesn't establish it.
Void Contracts: A contract based on fraudulent actions (e.g., inducing fraud) is void and without legal effect.
Agency Law: The agency relationship allows one individual to act on behalf of another, establishing authority through written agreements.
Parol Evidence Rule: This rule states a written contract cannot be contradicted by oral statements made before or at the same time as the contract.
Concealment: Intentionally withholding significant information affecting an insurance policy's validity is defined as concealment.
Contract Validity: A valid contract requires offer and acceptance, competent parties, and consideration, but does not mandate written evidence.
Offer in Insurance: The applicant makes an offer by submitting an insurance application, with acceptance occurring when the insurer issues the policy.
Conditional Nature: Insurance agreements require specific conditions to be met before enforcement.
Authorization: The authority given to an agent to transact insurance on behalf of the insurer is referred to as authorization.
Errors and Omissions: Producers may be liable for mistakes made during the policy underwriting process.
Representations vs. Warranties: Representations are statements believed true by the applicant; warranties are guaranteed truths critical to the insurance contract.
Authority Limitations: Agents typically cannot authorize claim payments and must adhere to the boundaries of their authority as defined in contracts.
Legal Effect of Contracts: Contracts created for illegal purposes are void and cannot be enforced.
Timing of Insurable Interest: Must exist at the time of application for life or health insurance, not necessarily during the policy's validity.
Unique Insurance Characteristics: Insurance contracts involve conditional terms that necessitate compliance for legal enforcement.

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Test your knowledge with flashcards on the legal concepts related to insurance contracts. This quiz covers essential terms and definitions that are foundational in understanding insurance law and the agency relationships within it. Perfect for students of insurance studies or professionals looking to refresh their knowledge!

Legal Concepts of the Insurance Contract

Questions and Answers

The authority given by an insurer or employer to a licensee to transact insurance or adjust claims on their behalf is called ______.

An agent is an individual who has been authorized by an insurer to be its representative and to perform all of the following acts EXCEPT:

Which of the following statements regarding utmost good faith in insurance contracts is CORRECT?

When an agent is provided the materials from his/her company, which category of authority allows those items to be used?

Which of the following statements about authority is NOT correct?

Which of the following is an example of legal consideration?

All of the following are true about aleatory contracts EXCEPT:

If the agency contract gives the producer the authority to solicit insurance but states nothing about the collection of premiums, the producer normally has authority to collect premiums based on:

Which characteristic of an insurance contract means there is a potential for unequal exchange of value for both parties?

An agent is an individual that represents whom?

All of the following are considered to be typical characteristics describing the nature of an insurance contract EXCEPT:

Which of the following statements describes an insurable interest?

The authority of an agent which is spelled out in the written words of the agency contract between the agent and the insurer is called:

In life insurance, an insurable interest in the life of the insured must exist:

Which of the following statements about authority is NOT correct?

Which of the following best describes the concept that the consideration is not equal in contract law?

Which of the following is an example of legal consideration?

The term which describes the fact that both parties of a contract may NOT receive the same value is referred to as:

When an agent is provided the materials from his/her company, which category of authority is the one which allows those items to be used?

The following are all characteristics of insurance contracts EXCEPT:

Which is considered a statement made by an applicant that he/she believes to be true?

A life insurance policy would be considered a wagering contract WITHOUT:

A producer's powers stated in the agency contract are:

All of the following are true about aleatory contracts EXCEPT:

With life and health contracts, when must an insurable interest exist?

The deeds and actions of a producer indicate what kind of authority?

All of the following would be considered non-competent parties in an insurance contract EXCEPT:

Which of the following terms is used for the voluntary relinquishment of a known right?

All of the following normally indicate the presence of insurable interest in the life of another person EXCEPT:

Krissa and Janet enter into a contract in which Krissa agrees to fraudulently induce sick people to sell their insurance contracts to Janet's company. Krissa and Janet's contract can best be described as:

An insurance contract is prepared by one party, the insurer, rather than by a negotiation between the contracting parties. Which of the following statements explains this characteristic of insurance contracts?

An insurance company has how many years to challenge the validity of a life insurance contract?

When the principal gives the agent authority in writing, it's referred to as:

The power given to an individual producer that is not specifically addressed in his/her contract is considered what type of authority?

What makes an insurance policy a unilateral contract?

Which of the following statements regarding insurable interest is NOT correct?

The unwritten authority of a producer to perform incidental acts necessary to fulfill the purpose of the agency agreement is:

Which type of clause describes the following statement: 'We have issued the policy in consideration of the representations in your applications and payment of the first-term premium'?

A relationship in which one person is authorized to represent and act for another person or company is established through:

Which of the following statements describes the parol evidence rule?

Intentional withholding of material facts that would affect an insurance policy's validity is called a(n):

A valid contract requires all of the following EXCEPT:

In insurance, an offer is usually made when:

Special features of insurance contracts include all of the following EXCEPT:

An agreement without legal effect is:

The authority that an insurer gives to its agent by means of the agent's contract is known as:

A professional liability for which producers can be sued for mistakes of putting a policy into effect is called:

All are competent parties who can enter into insurance contracts EXCEPT:

What is implied authority defined as?

In an insurance contract, the element that shows each party is giving something of value is called:

Because an insurance contract has been prepared by an insurance company with no negotiation, it is considered:

Insurable interest must exist at what time?

Which of the following is a unique characteristic of an insurance contract?

Study Notes

Legal Concepts of the Insurance Contract

Studying That Suits You

Description

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