Contract Law Flashcards
The insurer organized to return a profit to the stockholders is what type of insurer?
Stock company
If an insurer meets the state’s financial requirements and is approved to transact business in the state, it is considered what type of insurer?
Authorized or admitted
When agents act within the scope of their contract, their actions will be assumed to be the acts of whom?
Insurer
In insurance, when is the offer usually made on a contract?
When the insurance application is submitted
What is a warranty in an insurance contract?
An absolutely true statement upon which the validity of the insurance contract is based.
Insurers are classified according to their domicile. What are the three types of insurers?
Domestic, foreign and alien.
What are the four(4) elements of an insurance contract?
Agreement (offer and acceptance), consideration, competente parties, and legal purpose.
What is the best way to handle incomplete insurance applications?
Return the application to the applicant for completition.
When a change needs to be made on the application for insurance, which is the best method for correcting the information?
Complete a new application or ask the applicant to initial the correction on the original application.
If an applicant fails to obtain the applicants signature on the insurance application, what must the insurer do?
Send the application back to the applicant for signature.
The requirement that agents must account for and promptly remit all insurance funds collected is knows as what type of agent responsibility?
Fiduciary
In forming an insurance contract, when does an acceptance usually occur?
When the insurer approves a prepaid application.
Whose responsibility is it to determine that all questions on an insurance application are answered?
The agent’s.
What two elements are necessary for a life insurance contract to have a legal purpose?
Insurance interest and consent.
Who owns stock companies?
Stockholders
When would a misrepresentation on and insurance application be considered fraud?
When it is intentional and material.
Whom does an insurance agent represent?
Insurance company.
If and applicant does not receive his or her insurance policy, who would be held responsible?
The agent.
What entities make up the medical information bureau?
Insurers.
When does an insurance policy go into effect?
When the policy is delivered and the premium is paid.
According to law of agency, a principal is represented by whom?
Agent or producer.
When risks with higher probability of loss are seeking insurance more often than other risks, this is knows as what?
Adverse selection
What are the three types of agent authority?
Express, implied and apparent.
A person who does not lock the doors to his or he house shows an indifferent attitude. This person presents what type of hazard?
Morale.
What are the strategies used by underwriters to prevent adverse selection?
Restriction of coverage, refusal to accept a risk, and accepting a risk at a higher rate.
Conditions that increase the chance of a loss are known as what?
Hazards.
An insurance company is domiciled in California and transacts insurance in Nevada. What is this insurer’s classification in Nevada?
Foreign.
In the agent/insurer relationship, who is considered the principal?
Insurer.
What document is required for an insurance company to transact insurance?
Certificate of authority.
For the purpose of insurance, what is risk?
Uncertainty of loss.
What type of insurer is formed under the laws of another country?
Alien.
What do individuals use to transfer their risk of loss to a larger group?
Insurance.
What are the five characteristics of an ideally insurance risk?
Loss must be
1) due to chance,
2) definite and measurable,
3) statistically predictable,
4) not catastrophic, and
5) coverage cannot be mandatory.
The reduction, decrease, or disappearance of value of the person or property insured in a policy is know as what?
Loss.
What type of risk is insurance?
Pure.
Insurance is a contract that protects the insured from what?
Loss.
The insurer organized to return a profit to the stockholder is what type of insurer?
Stock company,
An applicant conceals relevant health information on the application. The applicant presents what type of hazard?
Moral.
Wagering on a sporting event is know as what type of risk?
Speculative.
What are the three types of hazard?
Physical, moral and morale.
An insurance policy paid a no taxable dividend to the insured one year, and nothing the next. From what type of insurer did the insured purchase the policy?
Mutual.
The type of insurance company organized to return any surplus money to its policyholders is know as what?
Mutual company.
A situation in which a person can only experience a loss and no gain presents what type of risk?
Pure risk.
What is the term for the causes of loss insured against in an insurance policy?
Peril.
An insurance company that is formed under the laws of another state is know as what type of insurer?
Foreign.
In calculating the amount of life insurance needed, what is the needs approach based on?
The predicted needs of a family after the premature death of the insured.
What are the personal users of life insurance?
Survivor protection, estate creation and conservation, cash accumulation and liquidity.
What type of insurance creates an immediate estate?
Life insurance.
All other factors being equal, which premium payment mode will require an overall higher premium: monthly or annual?
Monthly.
If an insured changes his payment plan from monthly to annually, what happens to the total premium?
It will decrease.
What are the three main instances when insurance interest exists in life insurance?
Insuring your own life, the life of a family member, or the life of a business partners or someone who has a financial
