Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Insurance Underwriting > Chapter One- Contract Law > Flashcards

Chapter One- Contract Law Flashcards

1
Q

What are the 4 essential elements that make an insurance contract LEGALLY binding?

A
  1. Agreement- Offer and Acceptance
  2. Consideration
  3. Competent Parties
  4. Legal purpose
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Which party makes the offer and which party accepts the offer in an agreement for an insurance contract?

A

The offer is made by in applicant during the application process.
The agreement is accepted when the insurer’s underwriter approves the application and issues a policy.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What is the binding force of any contract?

A

The consideration

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What is consideration in a contract?

A

Consideration is something of value that each party gives to the other.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What is the consideration on the part of the applicant?

A

The payment of the premium and the representations made in the application

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is the consideration on the part of the insurer?

A

The promise to pay in the event of a loss

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What are three requirements that a applicant must meet in order to be considered competent to enter a contract?

A
  1. Legal age
  2. Mentally competent to understand the contract
  3. Not under the influence of drugs or alcohol
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What is the purpose of a insurance contract?

A

To be legal and not against public policy,

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What are three ways to prove an interest is insurable?

A

Insurable interest is proven by the following:
1. Love and affection
2. Economic loss
3. Financial loss

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What is a warranty?

A

An absolutely TRUE statement upon which the validity of the insurance policy depends.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Are statements by the applicants usually considered warranty?

A

No.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What is the one case in which an applicants statements is considered warranties?

A

Fraud

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is representations?

A

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

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Give an example of representations in insurance.

A

Representations are the answers the insured gives to the questions on the insurance application.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What are untrue statements on an application called?

A

Misrepresentations

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What are material misrepresentations?

A

Statements that, if discovered, would alter the underwriting decision of the insurance company.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What is it called when material misrepresentations are intentional?

A

Fraud

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What is a conditional contract?

A

A contract that requires that certain condition s must be met by the policy owner and the company in order for the contract to be executed.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

If a insured person has to pay a premium and provide proof of loss in order for the insurance to cover a claim, what kind of insurance contract is this?

A

Conditional insurance contract

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What is a unilateral contract?

A

A contract in which only one of the parties to the contract is legally bound to do anything.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

If an insured party makes no legally binding promises and an insurer is legally bound to pay losses covered by a policy by force, what kind of contract is this?

A

Unilateral insurance contract

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What is a contract of adhesion?

A

A contract prepared by one of the parties (insurer) and accepted or rejected by the other party (insured).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Are contracts of adhesion negotiated?

A

No, they are offered on a take-it-or-leave-it basis by the insurer.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Which party do ambiguities benefit in a contract of adhesion?

A

The insurer

25
Q

Insurance contracts are aleatory, what does that mean?

A

A contract that outlines an exchange of UNEQUAL AMOUNTS OR VALUES.

26
Q

Give an example of an aleatory contract.

A

Insurance contracts are aleatory. The insured is paying far lower amount than the insurer would in the event of a loss.

27
Q

What two documents are required in order to have an ENTIRE CONTRACT?

A

The application stapled to the policy.

28
Q

What is the purpose of a notice to the applicant?

A

To inform the applicant that a credit report will be ordered concerning their past history and any other health insurance for which the applicant has previously applied.

29
Q

Whose responsibility is it to ensure the application for insurance is complete and accurate to the best knowledge of the applicant?

A

The agent

30
Q

What two (three) signatures are required on the application?

A
  1. Purposed insured
  2. The policy owner (if different from the purposed insured)
  3. The agent who solicits the insurance.
31
Q

What is the best thing to do if a mistake is made on an application?

A

Start over with a fresh application.

32
Q

If it is not practical to start the application over because of a mistake how do you correct mistakes on an application?

A

Draw a line through the incorrect information with an ink pen and have the applicant initial next to the corrected answer.

33
Q

If an applicant is paying a premium with the application are they covered at the time of payment?

A

No, they are not covered until the agent has approved the application and issued a policy.

34
Q

If a customer has filled out an application with out a premium what does the agent have to collect before releasing the policy?

A

The premium AND a statement of continued good health.

35
Q

Who send the application to the insurer for approval?

A

The agent that collected the information.

36
Q

Do you have to inform the applicant which sources you are using to determine if they are insurable?

A

Yes! You not only have advice the applicant of the sources to be used but also how the information is gathered.

37
Q

What is the best source for getting accurate information about an applicant’s medical history?

A

An attending physician’s statement (APS)

38
Q

What information is typically included in an attending physician’s statemtent (APS)?

A
  1. Disease/disorder being treated
  2. Treatment required
  3. Length of treatment and recovery
  4. Prognosis
39
Q

What are the two types of medical examinations that can be requested by a potential insurer?

A
  1. Paramedical report- completed by a paramedic or a registered nurse
  2. Attending physician’s statement (APS)
40
Q

What is the medical information bureau (MIB)?

A

A membership corporation owned by member insurance companies. It is a nonprofit trade organization that collects, maintains, and make available to insurance companies important underwriting information on applicants for life and health insurance.

41
Q

Can an applicant be refused because of some adverse information discovered through the MIB?

A

No, insurers cannot refuse coverage solely on the basis of adverse information on an MIB report.

42
Q

Who pays for medical examinations required by an insurance company before accepting a policy?

A

The insurance company is responsible for the costs of the exams

43
Q

What is required on the part of the insurance company if they require the applicant take an HIV test?

A

They have to get consent for the test which includes:
1. Explaining the purpose of the test.
2. Explaining the confidentiality of the results
3. An explanation of how they will inform the applicant of the results.

44
Q

When can an underwriter make an adverse decision concerning someone with HIV?

A

If the symptoms present in the applicant are confirmed to be directly related to HIV

45
Q

Which act establishes procedures that consumer-reporting agencies must follow in order to ensure that records are confidential, accurate, relevant, and properly used?

A

Fair Credit Reporting Act

46
Q

What two outside report sources can agents use to request additional information about a particular risk from an applicant?

A
  1. Consumer reports
  2. Investigative consumer reports
47
Q

What are consumer reports?

A

Information regarding a consumer’s credit, character, reputation, or habits collected by a reporting agency from employment records, credit reports, and other public sources.

48
Q

Are consumer reports oral or written?

A

They can be both

49
Q

What is the difference between a consumer report and an investigative consumer report?

A

The primary difference is that the information is obtained through an investigation and interviews with associates, friends and neighbors of the consumer.

50
Q

Do investigative consumer reports need to be reported to the consumer they are about?

A

Yes, they need to be advised in writing about the report within 3 DAYS of the date the report was requested.

51
Q

If the consumer wants more information about an investigative consumer report, how many days does an agent have to get them that additional information?

A

5 days

52
Q

What is protected health information (PHI)?

A

Protected information includes all “individually identifiable health information” held or transmitted by a covered entity or its business associate.

53
Q

How should policies be delivered?

A

In person, if possible.

54
Q

When does the free-loo period begin?

A

Once the delivery of a policy is made.

55
Q

Who is responsible for explaining the policy’s main benefits and provisions?

A

The agent has the responsibility to provide the insured person with this information

56
Q

What is required if the policy is issued with any changes or amendments?

A

The agent is required to explain the changes AND the insured’s signature acknowledging receipts of these amendments.

57
Q

Is it the responsibility of the agent or the insured to carefully compare the benefits, limitations and exclusions found in the current and proposed replacement policy?

A

The agent

58
Q

Who’s responsibility is it to make sure that the. current policy is not cancelled before the new policy is issued?

A

The agent

59
Q

What is it called when a insured has a medical condition for which the insured sought medical advice or treatment within a specified period of time prior to the policy issued?

A

A pre-existing condition

Insurance Underwriting (7 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions