Unit 2 Exam

Question 1

Holly visits her insurance agent’s office to discuss coverage for her new condo. They complete the insurance application and Holly gives the agent a check for $500.00 for the premium. A month later the agent calls holly to tell her the policy arrived at his office. At which point did consideration take place?

Answer 1

When holly gave the check to the agent

Question 2

A statement guaranteed to be true is a __________

Answer 2

Warranty

Question 3

Mr. & Mrs. Smith meet their insurance agent at a restaurant after work to purchase a new dwelling policy. Both have had several cocktails by the time the agent arrives. Which element of a legal contract is missing?

Answer 3

Competent parties

Question 4

Intentional misrepresentation and withholding material information is known as _________-

Answer 4

Fraud

Question 5

Edward is applying for an auto insurance policy for him and his son Bradley. He knows that Bradley has had 3 speeding tickets within the past year but he did not tell the agent this while filling out the application. This is an example of ____________.

Answer 5

Concealment

Question 6

All of the following statements about waiver and estoppel are true except; once a waiver has been created it can be changed, once a right has been waived it can’t be used against the insured, once a waiver has been created it can’t be changed, the waiver is the intentional and voluntary giving up of a known right.

Answer 6

Once a waiver has been created it can be changed

Question 7

All of the following statements about unilateral contracts are true except; the insured can’t stop paying premiums or abandon the insurance w/o approval, the insured can stop paying premiums and abandon the insurance at any time, as long as insured pays premiums the insured is required to pay for the loss, insurance policies are unilateral

Answer 7

The insured can’t stop paying premiums or abandon the insurance w/o approval

Question 8

Information that’s given on an insurance application that’s not true and would affect the insurer’s decision to accept the contract is known as____________

Answer 8

Material misrepresentation

Question 9

Which of the following elements consists of an offer and an acceptance? Agreement, consideration, counteroffer, premium payment

Answer 9

Consideration

Question 10

All of the following are requirements of a legal contract except; waiver and estoppel, legal purpose, competent parties, offer & acceptance

Answer 10

Waiver and estoppel

Question 11

An insurance policy between the insurance company and the insured which can’t be assigned to another person w/o the insurer’s consent is ________

Answer 11

A personal contract

Question 12

All of the following statements about aleatory contracts are true except; in an aleatory contract the insured may pay premiums for many years and never receive any money from the insurer, aleatory contracts have an unequal value, aleatory contracts have an equal value, in an aleatory contract the insured may only pay a few premiums and the insurer will be paying much more for a claim.

Answer 12

Aleatory contracts have an equal value

Question 13

Which of the following statements best describes the principle of indemnity? The insured is restored to their pre-loss financial condition, the insured and insurer have the legal obligation to act ethically when entering into a contract, the insured has a legitimate risk of financial loss in the object being insured, the insurer is legally bound to pay claims once a policy is issued

Answer 13

The insured it restored to their pre-loss financial condition

Question 14

Statements provided by an insurance applicant that the applicant believes are true are considered to as ____________.

Answer 14

Representations

Question 15

An applicant for insurance must accept or reject a contract as written. For this reason insurance policies are ________________.

Answer 15

Contracts of adhesion