Chapter 2

Question 1

May an insurance contract be voided if an applicant makes a material misrepresentation?

Answer 1

Yes

Question 2

The offer and acceptance is also known as the ___________.

Answer 2

Agreement

Question 3

What is the applicant’s consideration, and what is the insurer’s consideration?

Answer 3

Applicant’s consideration - premium paid and application info; insurer’s consideration - promise to pay legitimate claims

Question 4

A person in a position of trust, particularly with collected premiums, is referred to as a _____________.

Answer 4

Fiduciary

Question 5

A contract that pays a larger amount in return for a smaller fee is known as an ___________ contract.

Answer 5

Aleatory

Question 6

T/F: An insurer who makes a counteroffer has rejected the applicant’s original offer.

Answer 6

T

Question 7

Which two legal principles prevent an insurer from denying a claim?

Answer 7

Waiver and estoppel

Question 8

Who is a representative of an insurer?

Answer 8

An agent

Question 9

Who develops the language in a unilateral contract?

Answer 9

A unilateral contract is one-sided and written by the insurer

Question 10

Define the term invitation.

Answer 10

When an applicant submits an application without paying an initial premium

Question 11

What is a contract of adhesion?

Answer 11

An insurance policy drafted by an insurer and acceptance/adhered to by an applicant.

Question 12

T/F: The voluntary surrendering of a known right by an insurer is known as a waiver.

Answer 12

T

Question 13

What is another term for being financially strong?

Answer 13

Solvent

Question 14

What four elements must exist for a contract to be enforceable?

Answer 14

Offer and acceptance, consideration, competent parties, and legal purpose.

Question 15

Who is considered incompetent to enter into a legal contract?

Answer 15

Minors, the insane/mentally I’ll, a person under alcohol/drugs, anyone forced into a contract, enemy aliens or convicts

Question 16

T/F: A conditional contract does not require both parties to satisfy terms before it can be executed.

Answer 16

F

Question 17

Define the term warranty.

Answer 17

A statement made by an applicant that is guaranteed to be absolutely true.

Question 18

What court ruling states that a contract should be interpreted to mean what is said verbally or stated in the contract?

Answer 18

Reasonable expectations

Question 19

T/F: A representation is a statement that is guaranteed to be absolutely true.

Answer 19

F; A representation is a statement that is true to the best of the applicants knowledge

Question 20

A policyholder who has filed a false claim is guilty of _______.

Answer 20

Fraud

Question 21

If an insurer discovers that a policyholder lied about his health but fails to void the contract, may a claim be denied?

Answer 21

Due to estoppel, the claim may not be denied since the insurer failed to void the contract.

Question 22

Define the term concealment.

Answer 22

Failing to disclose a terminal illness when applying for a life insurance policy

Question 23

Who is a representative of the consumer?

Answer 23

A broker