Xcel Lesson 2 - Legal Concepts & Contracts Flashcards
In an Insurance contract, the insurer is the only party who makes a legally enforceable promise. What kind of contract is this?
a. subrogation
b. unenforceable
c. adhesion
d. unilateral
Unilateral
Insurance contracts are unilateral. This means that only one party (the insurer) makes any kind of enforceable promise.
Which is considered a statement that is assured to be true in every respect?
a. estoppel
b. warranty
c. guarantee
d. representation
warranty
A warranty is a statement that is considered guaranteed to be true.
Stranger Originated Life Insurance (STOLI) has been found to be in violation of which of the following contractual elements?
a. consideration
b. competent parties
c. offer/acceptance
d. legal purpose
legal purpose (insurable interest)
A STOLI arrangement is used to circumvent state insurable interest statues
A life insurance policy would be considered a wagering contract WITHOUT:
a. insurable interest
b. premium payment
c. agent solicitation
d. constructive delivery
insurable interest
without insurable interest, a life insurance policy would be considered a wagering contract.
Insurance policies are considered aleatory contracts because
a. they are “take it or leave it” contracts
b. both parties consent to the contract
c. performance is conditioned upon a future occurrence
d. the contract is voidable upon proof of fraud
performance is conditioned upon a future occurrence
Since contracts are aleatory, that means there is an element of chance and potential for unequal exchange of value or consideration for both parties. An aleatory contract is conditioned upon the occurrence of an event.
A policy of adhesion can only be modified by whom?
a. the agent
b. the applicant
c. the primary beneficiary
d. the insurance company
the insurance company
a policy of adhesion is best described as a policy which only the insurance company can modify
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 $500,00. This exchange of unequal values reflects which of the following insurance contract features?
a. aleatory
b. adhesion
c. unilateral
d. consideration
aleatory
Insurance contracts are aleatory in that the amount the insured will pay in a premium is unequal to the amount that the insurer will pay in the event of a loss.
What is the consideration given by an insurer in the Consideration clause of a life policy?
a. promise to never cancel coverage
b. promise to pay a death benefit to a named beneficiary
c. promise to not raise premiums
d. promise to accept an insured’s assignment of benefits.
promise to pay a death benefit to a named beneficiary
Consideration is given by the insurer by promising to pay a death benefit to a named beneficiary
Who makes the legally enforceable promises in a unilateral insurance policy?
a. beneficiary
b. insurance company
c. insured
d. applicant
insurance company
Under a unilateral insurance policy, the insurance company makes the legally enforceable promises
A policy of adhesion can only be modified by whom?
a. the agent
b. the applicant
c. the primary beneficiary
d. the insurance company
the insurance company
a policy of adhesion is best described as a policy which only the insurance company can modify.
Which of the following consists of an offer, acceptance, and consideration?
a. warranty
b. estoppel
c. contract
d. representation
contract
offer, acceptance and consideration are all elements of a contact.
At what point does an informal agreement become a binding contract?
a. when one party makes an invitation and other makes an offer
b. when an offer is made by one party and the other party rejects the offer and makes a counteroffer
c. when one party makes an offer and the other party accepts that offer
d. when consideration is provided by one of the parties to the contract
when consideration is provided by one of the parties to the contract
consideration must be given in order to make a contract legally binding.
If a contract of adhesion contains complicated language, to whom would the interpretation be in favor of?
a. insurer
b. beneficiary
c. re-insurer
d. insured
insured
In a contract of adhesion, any confusing language would be interpreted in the favor of the insured.
Which consists of an offer, acceptance, and consideration?
a. warranty
b. estoppel
c. contract
d. representation
contract
Offer, acceptance, and consideration are all elements of a contract
E and F are business partners. Each takes out a $500,00 life insurance policy on the other, naming himself as primary beneficiary. E and F eventually terminate their business, and four months later E dies. Although E was married with three children at the time of death, the primary beneficiary is still F. However, an insurable interest no longer exists. Where will the proceeds from E’s life insurance policy be directed to?
a. F
b. the dissolved partnership
c. E’s family
d. E’s estate
F
In this situation, the proceeds from E’s life insurance policy will go to F. Insurable interest only needs to exist at the time of application.
