Law of Contracts and Other Contract Features

Question 1

Which two legal principles prevent an insurer from denying a claim?

Answer 1

Waiver and estoppel

Question 2

True or False: The voluntary surrendering of a known right by an insurer is known as a waiver.

Answer 2

True

Question 3

Define the term concealment.

Answer 3

Failing to disclose a terminal illness when applying for a life insurance policy

Question 4

What court ruling states that a contract should be interpreted to mean what is said verbally or stated in the contract?

Answer 4

Reasonable expectations

Question 5

Who develops the language in a unilateral contract?

Answer 5

A unilateral contract is one-sided and written by the insurer.

Question 6

May an insurance contract be voided if an applicant makes a material misrepresentation?

Answer 6

Yes

Question 7

True or False: A representation is a statement that is guaranteed to be absolutely true.

Answer 7

False.

A representation is a statement that is true to the best of the applicant’s knowledge.

Question 8

True or False: An insurer who makes a counteroffer has rejected the applicant’s original offer.

Answer 8

True

Question 9

Who is considered incompetent to enter into a legal contract?

Answer 9

Minors, the insane/mentally ill, a person under alcohol/drugs, anyone forced into a contract, enemy aliens or convicts

Question 10

True or False: A conditional contract does not require both parties to satisfy terms before it can be executed.

Answer 10

False

Question 11

If an insurer discovers that a policyholder lied about his health but fails to void the contract, may a claim be denied?

Answer 11

Due to estoppel, the claim may not be denied since the insurer failed to void the contract.

Question 12

What is a contract of adhesion?

Answer 12

An insurance policy drafted by an insurer and accepted/adhered to by an applicant

Question 13

Define the term warranty.

Answer 13

A statement made by an applicant that is guaranteed to be absolutely true

Question 14

A person in a position of trust, particularly with collected premiums, is referred to as a ___________.

Answer 14

Fiduciary

Question 15

The offer and acceptance is also known as the ___________.

Answer 15

Agreement

Question 16

Define the term invitation.

Answer 16

When an applicant submits an application without paying an initial premium

Question 17

Who is a representative of an insurer?

Answer 17

An agent

Question 18

What is another term for being financially strong?

Answer 18

Solvent

Question 19

A contract that pays a larger amount in return for a smaller fee is known as an __________ contract.

Answer 19

Aleatory

Question 20

What four elements must exist for a contract to be enforceable?

Answer 20

Offer and acceptance, consideration, competent parties, and legal purpose

Question 21

A policyholder who has filed a false claim is guilty of _______.

Answer 21

Fraud

Question 22

What is the applicant’s consideration, and what is the insurer’s consideration?

Answer 22

Applicant’s consideration–premium paid and app. info; Insurer’s consideration–the promise to pay legitimate claims

Question 23

Who is a representative of the consumer?

Answer 23

A broker