Legal Concepts Flashcards
which of the following consist of an offer, acceptance, and consideration?
Contract
Life and health insurance policies are:
Unilateral contracts
The part of a life insurance policy guaranteed to be true is called a(n):
Warranty
A contract where one party either accepts or rejects the terms of a contract written by another party is called a contract of
adhesion
If a contract of adhesion contains complicated language, to whom would the interpretation be in favor of?
insured
In an insurance contract, the insurer is the only party who makes a legally enforceable promise. What kind of contract is this?
Unilateral
Insurance contracts are known as ____ because certain future conditions or acts must occur before any claims can be paid.
conditional
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?
Aleatory
What is the consideration given by an insurer in the Consideration clause of a life policy?
Promise to pay a death benefit to a named beneficiary
What type of life insurance incorporates flexible premiums and an adjustable death benefit?
Universal Life
A(n) __________ term life policy is normally used when covering an insured’s mortgage balance.
decreasing
Which of the following actions is NOT possible with a Universal Life policy?
Premiums may be applied as a credit against income tax
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?
Variable universal life
Stranger-Owned Life Insurance (STOLI) is when a person purchases life insurance only to sell to a(n):
third-party with no insurable interest
Term insurance has which of the following characteristics?
Expires at the end of the policy period
Which of the following Life insurance policies combine term insurance with an investment element?
Universal Life
The cash value in a(n) ____________ Life policy may fluctuate to reflect changing assumptions regarding mortality cost, interest, and expense factors.
Universal
Under a Graded Premium Whole Life policy,
the premium increases each year during the early years of the contract and remains the same after that time
What does a Face Amount Plus Cash Value Policy pay upon the insured’s death?
Face amount plus the policy’s cash value
A policy that becomes a Modified Endowment Contract (MEC):
will lose many of its tax advantages
Credit Life insurance is:
issued in an amount not to exceed the amount of the loan
Which policy requires an agent to register with the National Association of Securities Dealers (NASD) before selling?
Variable Life
Life insurance that covers an insured’s whole life with level premiums paid over a limited time is called:
Limited Pay Life
What type of life policy covers two lives and pays the face amount after the first one dies?
Joint Life Policy
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?
Modified Whole Life
What type of life policy covers two people and pays upon the death of the last insured?
Survivorship
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?
20-Pay Life accumulates cash value faster than Straight Life
S is covered by a whole life policy. Which insurance product can cover his children?
Child term rider
What advantage does the renewability feature give to a term policy?
The insured may extend the coverage period
Which of these Nonforfeiture Options continue a build-up of cash value?
Reduced Paid-Up
A long-term care rider in a life insurance policy pays a daily benefit in the event of which of the following?
Inability of the insured to perform more than 2 Activities of Daily Living (ADL’s)
A Whole Life insurance policyowner does NOT have the right to
change the grace period
Which of these statements about a Guaranteed Insurability Option rider is NOT TRUE?
Evidence of insurability is required when the option is exercised
All of these statements about the Waiver of Premium provision are correct, EXCEPT:
Insured must be eligible for Social Security disability for claim to be accepted
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?
Entire Contract Provision
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?
Full face amount minus any past due premiums
Whose life is covered on a life insurance policy that contains a payor benefit clause?
Child
A Nonforfeiture clause gives the policyowner
guaranteed values even if the policy has lapsed
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?
The full face amount
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
pay the amount that the premium would have purchased at the correct age
Variable Whole Life Insurance can be described as:
both an insurance and securities product
What benefit does the Payor clause on a Juvenile Life policy provide?
Premiums are waived if payor becomes disabled
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?
Exclusion
The __________ has the right to change a life insurance policy’s beneficiary.
policyowner
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):
Insuring agreement
What action can a policyowner take if an application for a bank loan requires collateral?
Assign policy ownership to the bank
The Automatic Premium Loan provision is designed to:
avoid a policy lapse
Which statement is TRUE in regards to a policy loan?
Past-due interest on a policy loan is added to the total debt
A life insurance policy which ensures that the premium will be paid if the insured becomes disabled has what kind of rider attached?
Waiver of Premium
