XCEL Chapter 3 Flashcards
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Questions and Answers

Which contract element is insurable interest a component of?

  • Consideration
  • Legal purpose (correct)
  • Competent parties
  • Offer and acceptance
  • In an insurance contract, the element that shows each party is giving something of value is called?

  • Acceptance
  • Offer
  • Consideration (correct)
  • Purpose
  • What makes an insurance policy a unilateral contract?

  • Only the insured is legally bound
  • Only the insurer is legally bound (correct)
  • Only the insured pays the premium
  • Only the insured can change the provisions
  • The authority granted to a licensed producer is provided via the?

    <p>Law of Agency</p> Signup and view all the answers

    Legal purpose is a term used in contract law meaning?

    <p>There must be legal reasons for entering into the contract</p> Signup and view all the answers

    All of the following are elements of an insurance policy EXCEPT?

    <p>Claim forms</p> Signup and view all the answers

    According to life insurance contract law, insurable interest exists?

    <p>At the time of application</p> Signup and view all the answers

    Insurable interest does NOT occur in which of the following relationships?

    <p>Business owner and business client</p> Signup and view all the answers

    What is implied authority defined as?

    <p>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</p> 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?

    <p>Aleatory</p> Signup and view all the answers

    In the given scenario, who will receive Bob's policy proceeds?

    <p>Tom</p> Signup and view all the answers

    Who is responsible for assembling the policy forms for insureds?

    <p>Insurance carriers</p> Signup and view all the answers

    Under a contract of adhesion?

    <p>The terms must be accepted or rejected in full</p> Signup and view all the answers

    Which of the following BEST describes a conditional insurance contract?

    <p>A contract that requires certain conditions or acts by the insured individual</p> Signup and view all the answers

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

    <p>Express authority</p> Signup and view all the answers

    Study Notes

    Insurance Contract Elements

    • Insurable interest is a vital component of legal purpose within a contract.
    • Consideration in an insurance contract is when each party gives something of value to one another.

    Unilateral Contracts

    • An insurance policy is classified as a unilateral contract because only the insurer is obligated to fulfill the contract terms.

    Authority in Insurance

    • Licensed producers derive authority through the Law of Agency, which defines their relationship with the insurer.
    • Implied authority allows agents to undertake actions that are not explicitly stated but necessary to fulfill their roles.
    • Legal purpose requires lawful reasons for entering into a contract.

    Elements of an Insurance Policy

    • Key components include definitions, other insurance, and conditions, while claim forms are not considered a formal element.

    Insurable Interest in Life Insurance

    • Insurable interest must exist at the time of application, ensuring a legitimate stake in the life or health of the insured.

    Relationships and Insurable Interest

    • Insurable interest cannot occur between a business owner and a business client, unlike familial relationships or partnerships.

    Nature of Contracts

    • Aleatory contracts highlight the concept of unequal value exchange between parties, emphasizing the unpredictable nature of outcomes.

    Policy Proceeds Distribution

    • In a case where partners in a dissolved business have life insurance policies on each other, the surviving partner will receive the policy proceeds.

    Role of Insurance Carriers

    • Insurance carriers are responsible for assembling policy forms necessary for the insureds.

    Contract of Adhesion

    • A contract of adhesion mandates that the insured must accept or reject the terms entirely, leading to potential imbalances in agreements.

    Conditional Insurance Contracts

    • These contracts stipulate that specific conditions or actions must be fulfilled by the insured for effectiveness.

    Authority Classifications

    • The written authority granted by the principal to the agent is termed express authority, distinguishing it from implied and apparent authority.

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    Description

    Test your knowledge of key concepts from XCEL Chapter 3! This quiz focuses on the components of insurance contracts including insurable interest, legal purpose, and consideration. It's perfect for students preparing for their insurance exams.

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