Chapter 1 (contracts)

Question 1

A __________ is an agreement between two or more parties enforceable by law

Answer 1

contract

Question 2

In order for insurance contracts to be legally binding, they must have 4 essential elements?

Answer 2

1. Agreement — offer and acceptance;
2. Consideration;
3. Competent parties; and
4. Legal purpose.

Question 3

In insurance, the applicant usually makes the _________ when submitting the application. ____________ takes place when an insurer’s underwriter approves the application and issues a policy.

Answer 3

Offer, Acceptance

Question 4

The binding force in any contract is the _____________. _________is something of value that each party gives to the other.

Answer 4

consideration

Question 5

The consideration on the part of the insurer is the promise to _____________

Answer 5

pay in the event of loss.

Question 6

Insurer’s consideration is the promise ____________

Answer 6

to pay for losses;

Question 7

The parties to a contract must be capable of entering into a contract in the eyes of the law. Generally, this requires that both parties be of legal age,_____________ to understand the contract, and not under the influence of drugs or alcohol.

Answer 7

mentally competent

Question 8

The purpose of the contract must be _______ and not against public policy.

Answer 8

legal

Question 9

If an agent implies through advertising, sales literature or statements that these provisions exist, an insured could _______________

Answer 9

reasonably expect coverage.

Question 11

____________ (sometimes referred to as reimbursement) is a provision in an insurance policy that states that in the event of loss, an insured or a beneficiary is permitted to collect only to the extent of the financial loss, and is not allowed to gain financially because of the existence of an insurance contract.

Answer 11

Indemnity

Question 12

The principle of ____________ implies that there will be no fraud, misrepresentation or concealment between the parties.

Answer 12

utmost good faith

Question 13

_____________ are statements believed to be true to the best of one’s knowledge, but they are not guaranteed to be true

Answer 13

Representations

Question 14

Untrue statements on the application are considered _____________ and could void the contract

Answer 14

misrepresentations

Question 15

A __________ misrepresentation is a statement that, if discovered, would alter the underwriting decision of the insurance company.

Answer 15

material

Question 16

if material misrepresentations are intentional, they are considered ________.

Answer 16

fraud

Question 17

Representations are statements believed to be true. Insured’s statements on the application are ____________.

Answer 17

representations

Question 18

A ___________is an absolutely true statement upon which the validity of the insurance policy depends

Answer 18

warranty

Question 19

__________is the legal term for the intentional withholding of information of a material fact that is crucial in making a decision.

Answer 19

Concealment

Question 20

___________ is the intentional misrepresentation or intentional concealment of a material fact used to induce another party to make or refrain from making a contract, or to deceive or cheat a party

Answer 20

Fraud