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Insurance > Legal Concepts > Flashcards

Legal Concepts Flashcards

1
Q

which of the following consist of an offer, acceptance, and consideration?

A

Contract

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2
Q

Life and health insurance policies are:

A

Unilateral contracts

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3
Q

The part of a life insurance policy guaranteed to be true is called a(n):

A

Warranty

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4
Q

A contract where one party either accepts or rejects the terms of a contract written by another party is called a contract of

A

adhesion

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5
Q

If a contract of adhesion contains complicated language, to whom would the interpretation be in favor of?

A

insured

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6
Q

In an insurance contract, the insurer is the only party who makes a legally enforceable promise. What kind of contract is this?

A

Unilateral

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7
Q

Insurance contracts are known as ____ because certain future conditions or acts must occur before any claims can be paid.

A

conditional

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8
Q

Q purchases a $500,000 life insurance policy and pays $900 in premiums over the first six months. Q dies suddenly and the beneficiary is paid $500,000. This exchange of unequal values reflects which of the following insurance contract features?

A

Aleatory

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9
Q

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

A

Promise to pay a death benefit to a named beneficiary

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10
Q

What type of life insurance incorporates flexible premiums and an adjustable death benefit?

A

Universal Life

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11
Q

A(n) __________ term life policy is normally used when covering an insured’s mortgage balance.

A

decreasing

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12
Q

Which of the following actions is NOT possible with a Universal Life policy?

A

Premiums may be applied as a credit against income tax

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13
Q

Which of the following policies is characterized by a flexible premium and death benefit and allows the policyowner control of the investment aspect of the plan?

A

Variable universal life

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14
Q

Stranger-Owned Life Insurance (STOLI) is when a person purchases life insurance only to sell to a(n):

A

third-party with no insurable interest

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15
Q

Term insurance has which of the following characteristics?

A

Expires at the end of the policy period

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16
Q

Which of the following Life insurance policies combine term insurance with an investment element?

A

Universal Life

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17
Q

The cash value in a(n) ____________ Life policy may fluctuate to reflect changing assumptions regarding mortality cost, interest, and expense factors.

A

Universal

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18
Q

Under a Graded Premium Whole Life policy,

A

the premium increases each year during the early years of the contract and remains the same after that time

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19
Q

What does a Face Amount Plus Cash Value Policy pay upon the insured’s death?

A

Face amount plus the policy’s cash value

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20
Q

A policy that becomes a Modified Endowment Contract (MEC):

A

will lose many of its tax advantages

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21
Q

Credit Life insurance is:

A

issued in an amount not to exceed the amount of the loan

22
Q

Which policy requires an agent to register with the National Association of Securities Dealers (NASD) before selling?

A

Variable Life

23
Q

Life insurance that covers an insured’s whole life with level premiums paid over a limited time is called:

A

Limited Pay Life

24
Q

What type of life policy covers two lives and pays the face amount after the first one dies?

A

Joint Life Policy

25
Q

K buys a policy where the premium stays fixed for the first 5 years. The premium then increases in year 6 and stays level thereafter, all the while the death benefit remains the same. What kind of policy is this?

A

Modified Whole Life

26
Q

What type of life policy covers two people and pays upon the death of the last insured?

A

Survivorship

27
Q

A potential client, age 40, would like to purchase a Whole Life policy that will accumulate cash value at a faster rate in the early years of the policy. Which of these statements made by the producer would be correct?

A

20-Pay Life accumulates cash value faster than Straight Life

28
Q

S is covered by a whole life policy. Which insurance product can cover his children?

A

Child term rider

29
Q

What advantage does the renewability feature give to a term policy?

A

The insured may extend the coverage period

30
Q

Which of these Nonforfeiture Options continue a build-up of cash value?

A

Reduced Paid-Up

31
Q

A long-term care rider in a life insurance policy pays a daily benefit in the event of which of the following?

A

Inability of the insured to perform more than 2 Activities of Daily Living (ADL’s)

32
Q

A Whole Life insurance policyowner does NOT have the right to

A

change the grace period

33
Q

Which of these statements about a Guaranteed Insurability Option rider is NOT TRUE?

A

Evidence of insurability is required when the option is exercised

34
Q

All of these statements about the Waiver of Premium provision are correct, EXCEPT:

A

Insured must be eligible for Social Security disability for claim to be accepted

35
Q

Which provision prevents an insurer from changing the terms of the contract with the policyowner by referring to documents not found within the policy itself?

A

Entire Contract Provision

36
Q

An insured is past due on his life insurance premium, but is still within the Grace Period. What will the beneficiary receive if the insured dies during this Grace Period?

A

Full face amount minus any past due premiums

37
Q

Whose life is covered on a life insurance policy that contains a payor benefit clause?

A

Child

38
Q

A Nonforfeiture clause gives the policyowner

A

guaranteed values even if the policy has lapsed

39
Q

D was actively serving in the Marines when he was killed in an automobile accident while on leave. His $100,000 Whole life policy contains a War Exclusion clause. How much will D’s beneficiary’s receive?

A

The full face amount

40
Q

B recently died and was insured with a life insurance policy for over five years. During the claims process, the insurer discovered that B had understated his age by 5 years at the time of application. In this situation, the insurer will

A

pay the amount that the premium would have purchased at the correct age

41
Q

Variable Whole Life Insurance can be described as:

A

both an insurance and securities product

42
Q

What benefit does the Payor clause on a Juvenile Life policy provide?

A

Premiums are waived if payor becomes disabled

43
Q

N is a student pilot with a large life insurance policy. Which of these features would limit the insurer’s obligation in the event N was killed while flying as a student pilot?

A

Exclusion

44
Q

The __________ has the right to change a life insurance policy’s beneficiary.

A

policyowner

45
Q

The agreement in a life insurance contract that states a specific sum of money will be paid to a designated person upon an insured’s death is called a(n):

A

Insuring agreement

46
Q

What action can a policyowner take if an application for a bank loan requires collateral?

A

Assign policy ownership to the bank

47
Q

The Automatic Premium Loan provision is designed to:

A

avoid a policy lapse

48
Q

Which statement is TRUE in regards to a policy loan?

A

Past-due interest on a policy loan is added to the total debt

49
Q

A life insurance policy which ensures that the premium will be paid if the insured becomes disabled has what kind of rider attached?

A

Waiver of Premium

50
Q
A

Insurance (3 decks)

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