LAW OF CONTRACTS AND OTHER CONTRACT FEATURES

Question 1

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

Answer 1

Yes

Question 2

Who is considered incompetent to enter into a legal contract?

Answer 2

Minors, mentally ill, a person under the influence, anyone forced into a contract, enemy aliens or convicts.

Question 3

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

Answer 3

applicant’s consideration - premium paid and app. info; insurer’s consideration is the promise to pay legitimate claims.

Question 4

What is another term for being financially strong?

Answer 4

solvent

Question 5

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

Answer 5

False

Question 6

What is a contract of adhesion?

Answer 6

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

Question 7

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

Answer 7

Reasonable expectations

Question 8

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

Answer 8

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

Question 9

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

Answer 9

aleatory

Question 10

Who develops the language in a unilateral contract?

Answer 10

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

Question 11

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

Answer 11

fiduciary

Question 12

the offer and acceptance is also known as the ____.

Answer 12

agreement

Question 13

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

Answer 13

fraud

Question 14

Define the term invitation

Answer 14

when an applicant submits an application without paying an initial premium

Question 15

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

Answer 15

Waiver and estoppel

Question 16

Define the term warranty

Answer 16

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

Question 17

Define the term concealment

Answer 17

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

Question 18

T or F: A representation is a statement that is guaranteed to be absolutely true.

Answer 18

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

Question 19

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

Answer 19

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

Question 20

T or F: The voluntary surrendering of a known right by an insurer is known as a waiver

Answer 20

true

Question 21

Who is a representative of an insurer?

Answer 21

an agent

Question 22

Who is a representative of the consumer?

Answer 22

a broker

Question 23

T or F: An insurer who makes a counteroffer has rejected the applicant’s original offer.

Answer 23

true