Sec. 1 - Ch.10 - Business Law/Consumer Protection Laws

Question 1

What the elements of a contract?

Answer 1

• There must be an agreement preceded by offer and an acceptance by the one to whom the offer is made (Counteroffer is not an acceptance)
• There must be consideration, and something of value must be exchanged
• The principal must have legal capacity to execute contracts
• The contract must be for lawful purpose

Question 2

What is a void contract?

Answer 2

A contract that was never valid, it is not enforceable because it lacks one of the requirements for being an enforceable contract

Question 3

What is a voidable contract?

Answer 3

Where one party has the option of voiding the contract if desired while the other party is bound by the contract

Question 4

What is express authority?

Answer 4

Written, explicit direction from principal (the insurance company) to agent

Question 5

What is implied authority?

Answer 5

That which the public believes the individual has and is based on such indicators as signage, rate books, etc. Implied authority is actual authority that the agent has to carry out the principals business in accordance with general business practices

Question 6

What is apparent authority?

Answer 6

Arises out of the negligence of the principal in allowing the agent to appear to have the authority because of certain past actions of the agent

Question 7

What is conditional receipt?

Answer 7

Evidence of a temporary contract obliging a life insurance company to provide coverage as long as a premium accompanies an acceptable application
- This allows the insurer time to process the application and to issue or refuse a policy
**If a applicant were to die, and their application would have been approved, they death benefit will be payed out

Question 8

What is the Law of Agency

Answer 8

Compliance with the rules of the insurance company

Question 9

If an insurance broker writes a policy without discussing all the clients health issues, does the company have to honor the policy?

Answer 9

No, an insurance brokers authority does not extend to insurers. So the insurance company would refund the premium and not be obligated to pay any claims.
- It would be different it an AGENT of the company wrote this policy

Question 10

Can a broker make insurance policies effective in any way?

Answer 10

NO, the broker is not party to the contract in any way
- AGENTs are the ones that are tied to the company and the policy

Question 11

What is chapter 11 bankruptcy?

Answer 11

This is typically for individuals who do not qualify under ch 13 because they exceed the debt limitations or do not have a regular sourse of income

Question 12

What is chapter 13 bankruptcy?

Answer 12

Reorganization: Payments to creditors are typically reduced to be more manageable
- Creditors cannot harass the debtor
- The advantage is that debtors generally do not have to relinquish assets

Question 13

What is chapter 7 bankrupty?

Answer 13

Permits a debtor to claim either the “federal” exemptions or the exemptions available under state law. Basically this allows people to walk away from most of their debt, but will have assets seized

Question 14

What is the cap on exemptions for an IRA or Roth?

Answer 14

$1 million

Question 15

What is the cap on exemptions for a Rollover IRA?

Answer 15

Unlimited
**If the IRA income exceeds a debtor’s need it is not exempt

Question 16

What accounts are considered exempt accounts?

Answer 16

SEPs, SIMPLEs, ERISA plans, and Deferred Compensation plans

Question 17

Are 529s exempt from Chapter 7 bankruptcy?

Answer 17

Yes, unless they were opened within 2 years of filing or a non-child/grandchild beneficiary

Question 18

What is the Fair Credit Reporting Act?

Answer 18

• Consumers may review their files at anytime for a nominal fee but are entitled to one free report per year per reporting firm
• If consumers are denied credit, they have the right to receive a free copy of their file
• Only interested parties can access a consumers file

Question 19

What is the Consumer Credit Protection Act (Truth in Lending Act)?

Answer 19

• Interest must be reported as annual percentage rate (APR)
• Credit terms must be disclosed, including fees, points, prepayment penalties, etc.
• Lost or stolen credit cards have limited liability of $50 per card