The Life Insurance Contract

Question 1

a legal contract between the policy holder and the life insurance company.

Answer 1

life insurance company

Question 2

The contract only involves the enforceable promises of one party—the insurer. The policyowner makes no promise to pay the premiums.

Answer 2

unilateral contract

Question 3

All provisions in a life insurance contract are determined by the life insurance company. The applicant may only accept or reject the contract.

Answer 3

contract of adhesion

Question 4

The obligation of the insurance company to pay claim depends on the performance of certain acts by the insured or on other factors such as the payment of premiums or furnishing a proof of death.

Answer 4

conditional contract

Question 5

The policyowner agrees to pay a certain sum of money (the premium) which has no direct relationship to a potential monetary loss. If the insured dies, the face amount of the policy will be paid as a death benefit, whether only one or more than one premium has been paid.

Answer 5

valued contract

Question 6

There is no exchange of approximately equivalent values between the parties of a life insurance contract. It is always possible for the beneficiary of the insured to receive much more than was paid in premiums.

Answer 6

aleatory contract

Question 7

The insurance contract promises a benefit based on a future occurrence. If there is no future loss as stipulated in the contract, there will also be no payment of benefits.

Answer 7

executory contract

Question 8

A life insurance company has the legal capacity to enter a life insurance contract if it has the following qualifications:

Answer 8

• registered with SEC
• accredited by IC
  has a minimum capital of 100,000,000

Question 9

The policyowner has the legal capacity to enter into a life insurance contract if he or she possesses the following:

Answer 9

-sound mind and body
-legal age of 18

Question 10

Insurable interest exists when

Answer 10

the owner has a reasonable chance of suffering financial loss if the insured dies

Question 11

Insurable interest may exist given any of the following relationships:

Answer 11

-love (spouse, family)
-creditor-debtor
-employer-employee
-business partners

Question 12

A ______ is a statement that must be literally true. It must be strictly complied with (as in a promise) and should expressly be written in the policy.

Answer 12

warranty

Question 13

Should the untrue statements affect the policy, they become_______ representations.

Answer 13

material

Question 14

______ are mere inducements to the contract

Answer 14

representations

Question 15

_________form part of the contract and are presumed to be material.

Answer 15

warranties