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Insurance > Chapter 2 > Flashcards

Chapter 2 Flashcards

1
Q

describes a contract that has been prepared by one party (the insurance company) with no negotiation between the applicant and insurer. The applicant adheres to the terms of the contract on a “take it or leave it” basis when accepted.

A

Adhesion

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2
Q

represents themselves and the insurer at the time of application.

A

Agent

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3
Q

contract presents the potential for an unequal exchange of value or consideration between both parties. contracts are conditioned upon the occurrence of an event.

A

Aleatory

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4
Q

the appearance of the insurer providing the agent authority to perform unspecified tasks based on the agent-insurer relationship.

A

Apparent Authority

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5
Q

represents themselves and the insured (i.e., the client or customer) at the time of application.

A

Broker

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6
Q

one who is capable of understanding the contract being agreed to. All parties must be of legal competence, meaning they must be of legal age, mentally capable of understanding the terms and not influenced by drugs or alcohol.

A

Competent Party

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7
Q

the failure of the applicant to disclose a known material fact when applying for insurance.

A

Concealment

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8
Q

policy describes the insurer’s promise to pay benefits depends on the occurrence of an event covered by the contract.

A

Conditional

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9
Q

the part of an insurance contract setting forth the amount of initial and renewal premiums and frequency of future payments.

A

Consideration

*Applicants provide the insurer with a completed application and initial premium as consideration for insurance.

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10
Q

the legal impediment to one party denying the consequences of its own actions or deeds if such actions or deeds result in another party acting in a specific manner or if certain conclusions are drawn.

A

Estoppel

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11
Q

The explicit authority granted to the agent by the insurer, as written in the agency contract.

A

Express Authority

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12
Q

The responsibility an insurance producer has to account for all premiums collected and provide sound financial advice to clients. in a position of trust with regards to the funds of their clients and the insurer.

A

Fiduciary

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13
Q

includes the deliberate knowledge of or intentional deceit to make false statements to be compensated by an insurance company.

A

Fraud

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14
Q

an authority not explicitly granted to the agent in the contract of agency, but which common sense dictates the agent has. It enables the agent to carry out routine responsibilities.

A

Implied Authority

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15
Q

Contracts attempt to return the insured to their original financial position

A

Indemnity contract

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16
Q

is the financial, economic, and emotional impact associated with a person experiencing a specified loss. a loss if they have more to gain by not suffering the loss.

A

Insurable Interest

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17
Q

means an insurance contract must be legal in nature and not in opposition to public policy

A

Legal Purpose

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18
Q

a written contract in which one party promises to indemnify another against loss that arises from an unknown event.

A

Insurance Policy

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19
Q

a false statement made by an applicant that would influence an insurer in determining whether or not to accept the risk.

A

Material misrepresentation

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20
Q

involves parties put their agreement in writing, all previous verbal statements come together in that writing, and a written contract cannot be changed or modified by parol (oral) evidence.

A

Parol Evidence Rule

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21
Q

an amendment added to an insurance contract that overrides terms in the original policy. May add or remove coverages, change deductibles, or revise any other policy feature.

A

Policy rider or endorsement

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22
Q

means the insured is entitled to coverage under a policy that any sensible and prudent person would expect it to provide

A

Reasonable expectations

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23
Q

are statements made by the applicant that they consider to be true and accurate to the best of the applicant’s belief.

A

Representations

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24
Q

the right for an insurer to pursue a third party that caused an insurance loss to the insured.

A

Subrogation

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25
Q

Contracts mean only one party, the insurer, makes any kind of enforceable promise

A

Unilateral

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26
Q

involves the belief that both the policyowner and the insurer must know all material facts and relevant information, and as such, they will provide each other with all material facts and relevant information.

A

Utmost Good Faith

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27
Q

pays a stated sum regardless of the actual loss incurred

A

Valued contract:

*Life insurance contracts are valued contracts.

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28
Q

is an agreement that, for a reason satisfactory to the court, may be set aside by one of the parties in the contract.

A

Voidable Contract

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29
Q

the voluntary giving up of a legal, given right.

A

Waiver

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30
Q

a statement made by the applicant that is guaranteed to be true in every respect. It becomes part of the contract and, if found to be untrue, can be grounds for revoking the contract.

A

Warranty

31
Q

the insurer binds itself to pay a certain sum upon the death of the insured

A

life insurance contract

32
Q

the insurer binds itself to pay a certain sum for accidental injury, sickness, or disability

A

health insurance

33
Q

the insurer agrees to pay for loss sustained to the insured’s covered property

A

property insurance

34
Q

the insurer agrees to pay for losses or damages caused by the insured

A

casualty insurance

35
Q

two parties to an insurance contract

A

the insured and the insurer.

36
Q

The following four essential elements must be contained in every contract for it to be legally valid and binding (enforceable):

A

Offer and acceptance
Consideration
Legal purpose
Competent parties

37
Q

When an offer is answered by a counter-offer, the first offer is ?

A

void

38
Q

is simply an agreement without legal effect

A

A void contract

39
Q

an agreement that, for a reason satisfactory to the court, may be set aside by one of the parties to the contract.

A

A voidable contract

40
Q

means the contract is made null and void

A

Rescission

41
Q

is either a valued contract or an indemnity contract

A

An insurance contract

42
Q

written contract in which one party promises to indemnify another against loss that arises from an unknown event.

A

A policy

43
Q

are required to make a full, fair, and honest disclosure of the risk to the agent and insurer

A

Insurance applicants

44
Q

are contracts of adhesion because the contract has been prepared by one party (the insurance company) with no negotiation between the applicant and the insurer.

A

Insurance contract

45
Q

is considered competent if it has been licensed or authorized by the state in which it conducts business.

A

The insurer

46
Q

is considered to be a personal contract or personal agreement between the insurer and the insured.

A

Most insurance

47
Q

to provide full compensation for proved harm.

A

The concept of tort law

48
Q

has the authority to seek insurance applicants for a company but does not have any authority to bind coverage on behalf of a company to a customer.

A

A solicitor

49
Q

the failure to act in a reasonable or prudent manner.

A

Simple negligence

50
Q

involves a reckless disregard for the need to act in a reasonable manner regardless of the potential for harm.

A

Gross negligence

51
Q

is considered even more severe.

A

Willful and wanton negligence

52
Q

life insurance arrangements where investors persuade individuals (typically seniors) to take out new life insurance.

A

Stranger-Originated Life Insurance (STOLI) transactions

53
Q

are binding legal agreements and are enforceable by law.

A

Contracts of insurance

54
Q

NOT personal contracts

A

Life Insurance contracts

55
Q

an insured is entitled to coverage under a policy that a prudent person would expect it to provide. This principle is called?

A

Reasonable expectations

56
Q

In what way are insurance policies said to be aleatory

A

Involves the potential for the unequal exchange of value.

57
Q

The courts will normally interpret a policy in favor of the insured when the meaning of the policy is not clear. This is because an insurance policy is a (n)?

A

Contract of adhesion

58
Q

XYZ Insurance Company gives direct authority to its producers to sell insurance through and agency contract, but nothing is stated regarding the collection of premiums. Which authority grants the producer the right to collect premiums?

A

Implied authority

59
Q

Which of the following relationships demonstrates insurable interest in the absence of economic interest?

A. Lifelong friends
B. Employees
C. Marriage partners
D. Business associates

A

C. Marriage partners

60
Q

The insurer’s obligation to pay a claim depends on whether the insured or beneficiary has complied with all policy conditions. This makes a policy a (n)?

A

Conditional Contract

61
Q

Which of these do NOT indicate the presence of insurable interest in a life insurance contract?

A. Lifelong Friendship
B. Marriage
C. Blood- Related
D. Co-owning a business

A

A. Lifelong Friendship

62
Q

An insurance contract many be voided if a misrepresentation found on the application is determined to be?

A

Material

63
Q

During the application, a statement made by an applicant that becomes part of the contract is considered to be a (n)?

A

Warranty

64
Q

Giving up a known right on a voluntary basis is called a (n)?

A

Waiver

65
Q

An agreement is reached when an insurance contract is formed. Which of the following is NOT considered to be an element of an agreement?

A. Meeting of the minds
B. Offer
C. Acceptance
D. Equity

A

D. Equity

66
Q

Insurable interest involves what assumption?

A

One person benefits from another person’s continued life.

67
Q

Greg applies for insurance and makes a false statement on the application that will influence whether or not the insurer will accept the risk. Greg’s false statement is called a (n)?

A

Material Misrepresentation

68
Q

Which of the following would NOT have a restricted ability to enter into a contract?

A. Mentally ill person
B. Minor
C. Person under the influence of alcohol
D. Small employer

A

D. Small employer

69
Q

Statements made by an insured on an accident and health insurance application are considered to be?

A

Representations

70
Q

Which of these is true regarding the exchange of consideration among parties involved in an insurance contract?

A. Required to be in currency
B. Must be equal
C. Can be unequal
D. Must be certified by the state where transactions takes place/

A

C. Can be unequal

71
Q

The following are all elements of a valid contract EXCEPT?

A. Consideration
B. Offer and acceptance
C. Competent
D. Written Evidence

A

D. Written Evidence

72
Q

The unwritten authority given to a producer to carry out necessary incidental acts of the agency agreement is called?

A

Implied Authority

73
Q

The powers directly given to a producer in an agency contract are called?

A

Express

74
Q

An insurance company’s failure to enforce a contract’s provision is called a (n)?

A

Waiver

Insurance (5 decks)

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