Section 3 - legal concepts of the insurance contract

Question 1

The unwritten authority given to a producer to carry out necessary incidental acts of the agency agreement is called _____

Answer 1

Implied authority

Question 2

Insurable interest involves what assumption?

Answer 2

One person benefits from another person’s continued life

Question 3

Under the law of agency, the principal is considered to be _____

Answer 3

The insurer

Question 4

The powers directly given to a producer in an agency contract are called _____

Answer 4

Express authority

Question 5

An insurance company can be liable for a producers, unauthorized acts _____

Answer 5

When the agency contract is unclear concerning the authority given.

Question 6

An agent whose actions exceed the authority granted by contract is ____

Answer 6

Not backed by the insurer

Question 7

An agreement is reached when an insurance contract is formed. What is not considered to be an element of an agreement?

Answer 7

Equity

Question 8

What qualifies as acceptance of an insurance contract offer?

Answer 8

An issued policy

Question 9

Which situation would not require the insured consent when a life insurance policy is issued?

Answer 9

A policy is purchased by a parent for a minor child

Question 10

Which element of a contract constitutes a definite and unqualified proposal by one party to another?

Answer 10

Offer

Question 11

What does NOT indicate the presence of insurable interest in a life insurance contract?
Lifelong friendship
Marriage
Blood related
Co-owning a business

Answer 11

Lifelong friendship

Question 12

The insurer’s obligation to pay a claim depends on whether the insured or beneficiary has complied with all policy conditions. This makes the policy a(n) _____

Answer 12

Conditional contract

Question 13

Name a situation, where an insurance agent would need to guard against liability for professional errors and omissions

Answer 13

Making a recommendation to a potential insured to replace existing coverage

Question 14

Ambiguities in insurance contracts are typically interpreted in favor of the insured. This rule is referred to as

Answer 14

Reasonable expectations

Question 15

An appointed producers implied authority is derived

Answer 15

Express authority

Question 16

XYZ insurance company gives direct authority to its producers to sell insurance through an agency contract, but nothing is stated regarding the collection of premiums. Which authority grants, the producer, the right to collect premiums?

Answer 16

Implied authority

Question 17

What happens when an initial offer is answered with a counter offer?

Answer 17

The initial offer is void

Question 18

Voluntarily terminating an insurance policy is also known as

Answer 18

Cancellation

Question 19

All of these statements correctly, describe an aleatory contract EXCEPT
-A legal wager is considered an aleatory contract
-Potential unequal exchange of value for both parties
-Only one party makes any kind of legally enforceable offer
-Element of chance is involved

Answer 19

Only one party makes any kind of legally enforceable offer

Question 20

A false statement on an application is called

Answer 20

Material misrepresentation

Question 21

The payment of the first premium, the promise to pay a covered loss, and the agreement to abide by policy conditions are all examples of

Answer 21

Consideration

Question 22

An insurance companies failure to enforce a contracts provision is called a

Answer 22

Waiver

Question 23

An arrangement where an individual is authorized to act on behalf of another person, or company is established through

Answer 23

The law of agency

Question 24

A contract is considered void when

Answer 24

When consideration is unequal