Legal Concepts

Question 1

is a feature of insurance contracts in that there is an element of chance for both parties and that the dollar given by the policyholder (premiums) and the insurer (benefits) may not be equal. The premiums paid by the applicant is small in relation to the amount that will be paid by the insurance company in the event of a loss.

Answer 1

Aleatory

Question 2

deals with the relationship between the insurer, the agent, and the customer. It is the appearance of authority based on the agent-insurer relationship. is a situation in which the insurer gives the customer reasonable belief that an agent has the power and authority to bind the principal.

Answer 2

Apparent Authority

Question 3

means certain conditions must be met by all parties in the contract. This is needed when a loss occurs in order for the contract to be legally enforceable.

Answer 3

Conditional Contract

Question 4

is something of value that each interested party gives to each other. The insured provides consideration with payment of premium. The insurer provides consideration by promising to pay the insurance benefit.

Answer 4

Consideration

Question 5

there is only one author - the insurance company. If there is an ambiguity in the contract, the courts always favor the insured over the insurer. Because an insurance contract has been prepared by an insurance company with no negotiation.

Answer 5

contract of adhesion

Question 6

granted to the agent by the insurer as written in the agency contract.

Answer 6

explicit authority

Question 7

is authority not specifically granted to the agent in the contract of agency, but which common sense dictates the agent has. It enables the agent to carry out routine responsibilities.

Answer 7

implied authority

Question 8

establishes a relationship in which one person is authorized to represent and act for another person or company. the insurance company (insurer) is the principal. An agent or producer will always be deemed to represent the insurance company and not the applicant. In regard to the insurance contract, any knowledge of the agent is considered to be the knowledge of the insurance company (insurer). If the agent is working within the conditions of his/her contract, the insurance company is fully responsible.

Answer 8

law of agency

Question 9

statement made by the applicant that is guaranteed to be true. It becomes part of the contract and, if found to be untrue, can be grounds for revoking the contract. Warranties are presumed to be material because they affect the insurer’s decision to accept or reject an applicant.

Answer 9

Warranty

Question 10

is a statement made by the applicant that she believes to be true. It is used by the insurer to evaluate whether or not to issue a policy. Unlike warranties, representations are not a part of the contract and need be true only to the extent that they are material and related to the risk. Most states require that life insurance policies contain a provision that all statements made in the application be deemed representations, not warranties. If an insurance company rejects a claim on the basis of a representation, the company bears the burden of proving materialit

Answer 10

Representation

Question 11

Insurance polices are offered on a “take it or leave it” basis which make them:

Answer 11

contracts of adhesion

Question 12

If material to the risk, false representations will void a policy.

True or False

Answer 12

True

Question 13

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

Answer 13

Promise to pay a death benefit to a named beneficiary

Question 14

A life insurance arrangement which circumvents insurable interest statutes is called:

Answer 14

IOLI - Invenstor Originated Life Insurance

Question 15

Insurance policies are considered aleatory contracts because

Answer 15

performance is conditioned upon a future occurrence