Insurance Contracts Test Bank: Legally Binding Quiz and Flashcards

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Questions and Answers

What is required for a legally binding insurance contract?

An agreement based on trust

An offer and acceptance between the insurer and the insured (correct)

A handshake agreement

A verbal agreement

What is consideration in an insurance contract?

The price paid by each party (correct)

The amount of coverage provided

The duration of the policy

The number of claims made

What is the purpose of endorsements and riders in insurance contracts?

To supplement and modify the original policy (correct)

To extend the original policy

To cancel the original policy

To replace the original policy

What is the difference between endorsements and riders in insurance contracts?

Endorsements supplement, delete, or change terms in the original contract, while riders modify or alter the original policy Signup and view all the answers

What is the legal requirement for both parties involved in an insurance contract?

They must have the legal capacity to enter into the agreement Signup and view all the answers

Can riders and endorsements be added to an insurance policy at any time?

Yes Signup and view all the answers

What is the main advantage of riders and endorsements in insurance contracts?

They offer full coverage and can be added at any time without waiting for policy renewal Signup and view all the answers

What are the two ways organizations can obtain funding from capital markets?

Debt and equity Signup and view all the answers

What are the two types of assets that organizations can invest in?

Current and fixed assets Signup and view all the answers

What are the three accounting statements that reflect an organization's financial activities?

Balance Sheet, Profit and Loss Account, and Cash Flow Statements Signup and view all the answers

Who carries out financial analysis to determine profitability, liquidity, and solvency?

Investors, management, lenders, suppliers, and customers Signup and view all the answers

What are the risks that banks face due to asset-liability transformation?

Credit and market risks Signup and view all the answers

What do banks implement to address interest rate, currency, and liquidity risks?

Comprehensive risk management systems Signup and view all the answers

What is the purpose of financial planning?

To determine the organization's financial objectives and requirements Signup and view all the answers

Study Notes

Requirements and Elements of a Legally Binding Insurance Contract

An insurance contract must be based on an offer and acceptance between the insurer and the insured.
Consideration, or the price paid by each party, is required for a legally binding insurance contract.
Insurance contracts must have a legal purpose and not be contrary to public policy.
Both parties involved in the contract must have the legal capacity to enter into the agreement.
Endorsements and riders are often included in insurance contracts to supplement and modify the original policy.
Endorsements in property and casualty insurance supplement, delete, or change terms in the original contract.
Riders in life and health insurance modify or alter the original policy.
Endorsements and riders can cover gaps in coverage for expensive items such as antiques, jewelry, and electronics.
Riders and endorsements can be added to the policy at any time to increase coverage.
Riders and endorsements remain valid as long as the insurance policy is in force.
Riders and endorsements can be removed from the policy if no longer needed.
The main advantage of riders and endorsements is that they offer full coverage and can be added at any time without waiting for policy renewal.

Financial Management and Analysis in Organizations and Banks

Organizations require funding from capital markets through debt or equity, obtained directly or through intermediaries like banks.
Funds raised are invested in assets, which can be current or fixed assets, determined by factors like the industry and objectives.
Accounting statements like Balance Sheet, Profit and Loss Account, and Cash Flow Statements reflect the organization's financial activities.
Financial statements are further examined to assess the performance of the organization and its divisions.
Banks face credit and market risks due to asset-liability transformation, and require strategic management to balance profitability and viability.
Banks implement comprehensive risk management systems to address interest rate, currency, and liquidity risks.
Financial analysis is carried out by investors, management, lenders, suppliers, and customers to determine profitability, liquidity, and solvency.
Financial analysis inputs are frequently employed in creating budgets and planning processes.
Linkages between operating and funding activities are provided by financial analysis.
More activity requires the addition of new assets and funds, determined by financial analysis.
Financial analysis shows how different financial components have been linked historically, helpful in financial planning.
Financial planning requires financial analysis to determine the organization's financial objectives and requirements.

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Description

Test your knowledge of the Requirements and Elements of a Legally Binding Insurance Contract with this informative quiz. From the basics of offer and acceptance to endorsements and riders, this quiz covers the essential components of a legally binding insurance contract. Challenge yourself and learn about the ins and outs of insurance contracts, including how endorsements and riders can enhance coverage for valuable items. Take this quiz now to increase your understanding of the legal requirements for a valid insurance contract.