Chapter 3

Question 1

the insurance company agrees to pay the face amount, in exchange for the premium

Answer 1

life insurance

Question 2

the insurance company agrees to pay a percentage of the insureds medical bills or benefit in exchange for the premium

Answer 2

health insurance

Question 3

the four elements of an insurance contract

Answer 3

consideration, legal purpose, offer and acceptance, and competent parties

Question 4

something of value that each interested party gives to each other. the insured provides this with payment of premium

Answer 4

Consideration

Question 5

the insurance contract has insurable interest and the insured has provided written consent

Answer 5

legal purpose

Question 6

the applicant has to submit the application and initial premium to be insured

Answer 6

offer and acceptance

Question 7

must be legal age, mentally capable of understanding the terms and not drinking or doing drugs

Answer 7

Competent parties

Question 8

an insurance contract that has been prepared by the insurance company with no negotiation. the only author is the insurance company. Always favors the insured over the insurer

Answer 8

Contract of adhesion

Question 9

There is an unequal exchange. the premiums paid by the applicant is small compared to what the insurance will pay out in event of a loss

Answer 9

aleatory contract

Question 10

the insurance company is legally bond. the insured does not promise to make premium payments, but if they are not paid, the insurer can cancel the contract.

Answer 10

unilateral contract

Question 11

contract between the insurance company and the insured person, not transferable to another person without the insurers consent.

Answer 11

personal contract

Question 12

certain conditions must be met by all parties in the contract

Answer 12

conditional contract

Question 13

restore the insured to the same financial condition that existed prior to the loss. you cannot benefit from this.

Answer 13

principle of indemnity

Question 14

statements made by applicant to be true becomes part of the contract. if found to be untrue, the contract can be revoked.

Answer 14

warranties

Question 15

statements made by the applicant believed to be true but are not part of the contract. only needs to be true only to the extent that they are material and related to the risk.

Answer 15

representations

Question 16

withholding of info or facts by the applicant

Answer 16

concealment

Question 17

requires that the person have a valid concern for the continuation of the life or well-being of the persons insured. only needs to exist at the time of the application

Answer 17

insurable interest

Question 18

the insured is entitled to coverage under a policy that a sensible and product person would expect to provide.

Answer 18

reasonable expectations

Question 19

when a life insurance policy is purchased in agreement that a 3rd party agent/broker or investor will purchase the person policy and receive the proceeds as a profit if the person dies.

Answer 19

STOLI
Stranger-originated life insurance

Question 20

where one person is authorized to represent another person or company is established through this. the insurance company will always be the principal.

Answer 20

law of agency

Question 21

a person who acts for another person or entity and has the power to bind the principal to contracts

Answer 21

authorized agent

Question 22

the explicit authority granted to the agent by the insurer as written on the agency contract

Answer 22

express authority

Question 23

the unwritten authority of a producer to perform incidental acts necessary to fulfill the purpose of the agency agreement

Answer 23

implied authority

Question 24

deals with the relationship between the insurer, the agent, and the customer.

Answer 24

apparent authority

Question 25

handling of money of the insured and insurer. someone in the position of trust and confidence.

Answer 25

fiduciary responsibility

Question 26

the intentional misrepresentation or concealment of material fact made by one party in order to cheat another party out of something that has economic value. an insurer may void an insurance policy if a misrepresentation on the application is proven to be material

Answer 26

fraud

Question 27

is voluntarily giving up the known right

Answer 27

waiver

Question 28

the legal process of preventing one party from reclaiming a right that was waived

Answer 28

estoppel

Question 29

rule that prevents parties in a contract from changing the meaning of a written contract by oral or written evidence made prior to the formation of the contract, but not part of the contract.

Answer 29

parol evidence rule

Question 30

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

Answer 30

subrogation

Question 31

an agreement that does not have legal effect, therefore is not a contract. not enforceable by either party.

Answer 31

void contract

Question 32

is a valid, binding contract which can be avoided at the request of a party with the right to reject.

Answer 32

voidable contract

Question 33

the voluntary act of terminating an insurance contract.

Answer 33

cancellation

Question 34

a written form attached to an insurance policy that alters the policy’s coverage, terms, or conditions.

Answer 34

endorsement

Question 35

an agent that can represent more then one insurance company under separate contractual agreements.

Answer 35

brokers

Question 36

where producers can be sued for mistakes of putting a policy into effect.

Answer 36

professional liability insurance