General Principles Ch 10

Question 1

Enforceable agreements between two or more parties

Answer 1

Contracts

Question 2

Certain elements must apply for a contract to be legally enforceable:

An agreement preceded by ___________________.

Something of value must be exchanged in _____________ of the object of the contract.

The principal must have ______________ to execute contracts.

The contract must be for a ______________.

Answer 2

an offer and an acceptance

consideration

legal capacity

lawful purpose

Question 3

Incompetent or intoxicated adults have _______________ capacity to execute contracts.

Answer 3

limited or no

Question 4

Minors have capacity to contract for ________________ only.

Answer 4

Necessities (e.g. food, clothing, shelter)

Question 5

Courts _________ enforce a contract that asks either or both parties to do something illegal.

Answer 5

will not

Question 6

A __________ contract was never valid. It is not enforceable because it lacks one or more of the necessary elements.

Answer 6

VOID

Question 7

A _________ contract is where one party has the option of voiding the contract if desired while the other party is bound by the contract.

Answer 7

VOIDABLE

Question 8

Where one of the parties to a contract is legally incompetent because of age, illness, or inebriation, the contract is ______ but may be ____________.

Answer 8

valid / voided by the incompetent party.

Question 9

A legal representative of an insurance company with express, implied, or sometimes apparent authority to act on behalf of the insurer (the insurance company).

Answer 9

Agent

Question 10

A marketing intermediary between the insurer and the policy owner who represent the policy owner rather than the insurance company.

Answer 10

Broker

Question 11

Written, explicit direction from principal (the insurance company) to the agent.

Answer 11

Express authority

Question 12

That which the public believes the individual has and is based on such indicators as signage, rate books, etc. Actual authority the agent has to carry out the principal’s business in accordance with general business practices.

Answer 12

Implied authority

Question 13

arises out of the negligence of the principal allowing the agent to appear to have the authority because of certain past action of the agent.

Answer 13

apparent authority

Question 14

Evidence of a temporary contract obliging a life insurance company to provide coverage as long as a premium accompanies an acceptable application

Answer 14

conditional receipt

Question 15

Compliance with the rules of the insurance company (the principal) falls under the _____________.

Answer 15

Law of Agency

Question 16

Actions of brokers’ authority __________ extend to insurers.

Answer 16

does not

Question 17

True or False:

A broker is generally authorized to bind coverage only within specific limits.

Answer 17

FALSE. The broker cannot make insurance effective. The broker is not party to the insurance contract.

Question 18

A ________ is a person, company, or association holding assets in trust for a beneficiary; charged with the responsibility of investing the money wisely for the beneficiary.

Answer 18

Fiduciary

Question 19

CFP Certificates, Executors of wills and estates, Receivers in bankruptcy, Trustees, Financial Planners, and PHYSICIANS are all examples of _______________.

Answer 19

Fiduciaries (Investopedia)

A fiduciary is a person or organization that acts on behalf of another person or persons, putting their clients’ interests ahead of their own, with a duty to preserve good faith and trust. Being a fiduciary thus requires being bound both legally and ethically to act in the other’s best interests.

A fiduciary may be responsible for the general well-being of another (e.g., a child’s legal guardian), but the task often involves finances—for example, managing the assets of another person or a group of people.

Question 20

The __________ is a guideline for making financial decisions using the principles of common sense and reasonable risk.

The rule is commonly cited for trustees and guardians tasked with administering assets on behalf of others.

Federal rules for pension fund managers contain similar cautions against reckless investing.

Answer 20

prudent-person rule

Question 21

Bankruptcy for individuals who do not qualify under Chapter 13 because they exceed the debt limitations or do not have a regular source of income

Answer 21

Chapter 11

Question 22

Reorganization; Payments to creditors are typically reduced to be more manageable. Creditors cannot harass the debtor. The debtor is generally not required to relinquish assets.

Answer 22

Chapter 13

Question 23

Permits a debtor to claim either the “federal” exemptions or the exemptions available under state law. 33 states have opted out of Federal exemptions.

Answer 23

Chapter 7

Question 24

The following types of debts are/are not generally cancelable by bankruptcy:

Student and government loans
Wage withholding and FICA obligations/recent income taxes due
Child support and alimony

Answer 24

ARE NOT

Question 25

Under federal bankruptcy laws, if the debtor’s average monthly net income for 60 months is > _________, Chapter 7 bankruptcy is not an option.

Answer 25

$10,000

Question 26

If the debtor’s average monthly net income for 60 months is < _________, Chapter 7 bankruptcy is an option.

Answer 26

$6,000

Question 27

If net monthly income is between $6,000 and $10,000, then the debtor can file under Chapter 7, if net monthly income is _______of all non-priority unsecured debt.

Answer 27

< 25%

Question 28

With regards to bankruptcy, funds in a traditional or Roth IRA (contributory) are now exempt up to ____________. For a Rollover IRA, the exemption is ________. If the IRA income exceeds a debtor’s need, it is not exempt.

Answer 28

$1 million / unlimited.

Question 29

Does bankruptcy law make it safer to rollover 401(k) funds into an IRA account or to leave the funds in the 401 (k)?

Answer 29

ERISA protection applies regardless of state law. The IRA may only afford limited protection under bankruptcy law (state dependent).

Question 30

Lost or stolen credit cards have limited liability of _____ per card.

Answer 30

$50