chapter two

Question 1

There are two parties to an insurance contract

Answer 1

the insured and the insurer.

Question 2

he following four essential elements must be contained in every contract for it to be legally valid and binding

Answer 2

Offer and acceptance
Consideration
Legal purpose
Competent parties

Question 3

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

Answer 3

void

Question 4

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

Answer 4

voidable contract

Question 5

contract is made null and void

Answer 5

recession

Question 6

Insurance contracts are aleatory.

Answer 6

This means there is an element of chance and potential for unequal exchange of value or consideration for both parties.

Question 7

An insurance contract is either a valued contract or an indemnity contract.

Question 8

A valued contract

Answer 8

pays a stated sum regardless of the actual loss incurred.

Question 9

An indemnity contract

Answer 9

is one that pays an amount equal to the loss.

Question 10

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

Answer 10

a policy contract

Question 11

Insurance applicants

Answer 11

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

Question 12

Insurable interest

Answer 12

can be defined as the kind of financial interest a person must have in order to possess legally enforceable insurance coverage.

Question 13

A policy rider or endorsement

Answer 13

is a legal attachment amending a policy.

Question 14

the applicant gives consideration

Answer 14

in exchange for the insurer’s promise to pay benefits.

Question 15

means there is a potential for unequal exchange of value or consideration for both parties.

Answer 15

Aleatory

Question 16

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

Answer 16

adhesion

Question 17

This means that only one party (the insurer) makes any kind of enforceable promise.

Answer 17

Insurance contracts are unilateral

Question 18

warranty

Answer 18

is a statement made by the applicant that is guaranteed to be true in every respect.

Question 19

representation

Answer 19

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

Question 20

concealment

Answer 20

defined as the failure or neglect by the applicant to disclose a known material fact when applying for insurance.

Question 21

authority a principal deliberately gives to its agent.

Answer 21

express authority

Question 22

is the unwritten authority that is not expressly granted, but which the agent is assumed to have in order to transact the business of the principal.

Answer 22

implied authroity

Question 23

is the appearance or assumption of authority based on the actions, words, or deeds of the principal.

Answer 23

apparent authority

Question 24

provide full compensation for proved harm

Answer 24

tort law

Question 25

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.

Answer 25

soliciter

Question 26

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

Answer 26

STOLI stranger-originated life insurance