Chapter two quiz questions

Question 1

insurance policies are considered aleatory contracts becauase

Answer 1

performance is conditioned upon a future occurrence

this means there is an element of chance and potential for unequal exchange of value or consideration for both parties. an aleatory contract is conditioned upon the occurrence of an event

Question 2

a contract where one party either accepts or rejects the terms of a contract written by another party is called a contract of

Answer 2

adhesion

Question 3

what is the consideration given by an insurer in the Consideration clause of a life policy?

Answer 3

promise to pay a death benefit to a named beneficiary

Question 4

a policy of adhesion can only be modified by whole?

Answer 4

the insurance company

Question 5

insurance policies are offered on a “take it or leave it” basis which make them

Answer 5

contracts of adhesion

Question 6

a life insurance policy would be considered a wagering contract WITHOUT

Answer 6

insurable interest

Question 7

which of these is considered a statement that is assured to be true in every respect?

Answer 7

warranty

Question 8

a life insurance arrangement that circumvents insurable interest statues is called

Answer 8

Investor-originated life insurance (IOLI)

this is done with an investor persuades an individual to take out life insurance specifically for the purpose of selling the policy to the investor. The investor compensates the insured and makes the premiums, then collects the death benefit when the insured dies

Question 9

Q purchases a $500,000 life insurance policy and pays $900 in premiums over the first six months. Q dies suddenly and the beneficiary is paid $500,000. this exchange of unequal values reflects which of the following insurance contract features?

Answer 9

aleatory

the amount the insured will pay in premiums is unequal to the amount that the insurer will pay in the event of a loss

Question 10

E and F are business partners. Each takes out a $500,000 life insurance policy on the other, naming himself as primary beneficiary. E and F eventually terminate their business, and four months later E dies. Athough E was married with three children at the time of death the primary beneficiary is still F. however, an inurable interest no longer exists. Where will the proceeds from E’s life insurance policy be directed to?

Answer 10

F

Question 11

which of these arrangements allows one to bypass insurable interest laws?

Answer 11

IOLI- invest originated life insurance

Question 12

which of these is NOT a type of agent authority?

Answer 12

principal

Question 13

life and health insurance policies are

Answer 13

unilateral contracts

Question 14

who makes the legally enforceable promises in a unilateral insurance policy?

Answer 14

insurance company

Question 15

at what point does an informal agreement become a binding contract?

Answer 15

when consideration is provided by one of the parties on the contract

Question 16

statements made on a insurance application that are believed to be true to the best of the applicants knowledge are called

Answer 16

representations

Question 17

if a contract of adhesion contains complicated language to whom would the interpretation be in favor of?

Answer 17

insured

Question 18

in regards to representations or warranties, which of these statements is True?

Answer 18

if material to the risk, false representations will NOT void a policy

Question 19

in an insurance contract, the insurer is the only party who makes a legally enforceable promise. What kind of contract is this?

Answer 19

unilateral

Question 20

STOLI has been found to be in violation of which of the following contractual elements?

Answer 20

legal purpose “insurable interest”

Question 21

when must insurable interest be present in order for a life insurance policy to be valid?

Answer 21

when the application is made

Question 22

which of these arrangements allows one to bypass insurable interest laws?

Answer 22

investor-originated life insurance

Question 23

taking receipt of premiums and holding them for the insurance company is an example of

Answer 23

fiduciary responsibility

Question 24

what is the consideration given by an insurer in the consideration clause of a life policy?

Answer 24

promise to pay a death benefit to a named beneficiary

Question 25

the consideration clause of an insurance contract includes

Answer 25

the schedule and amount of the premium payments