Define These Insurance Policy Quiz

Reviewed by Editorial Team

The ProProfs editorial team is comprised of experienced subject matter experts. They've collectively created over 10,000 quizzes and lessons, serving over 100 million users. Our team includes in-house content moderators and subject matter experts, as well as a global network of rigorously trained contributors. All adhere to our comprehensive editorial guidelines, ensuring the delivery of high-quality content.

Learn about Our Editorial Process

| By Thames

Thames

Community Contributor

Quizzes Created: 6820 | Total Attempts: 9,511,149

| Questions: 12

Quiz Flashcard

Share on Facebook Share on Twitter Share on Whatsapp Share on Pinterest Share on Email Copy to Clipboard Embed on your website

Question 1 / 12

0 %

0/100

Score 0/100

1. An Insurance policy represents a special kind of agreement known as a contract, define contract:

It is an informal agreement that can be easily changed.

It is a legally enforceable agreement between two or more parties.

It is a temporary agreement that does not require any signatures.

It is a verbal agreement with no legal standing.

A contract is a legally binding agreement that outlines the rights and obligations of the parties involved. It can be verbal or written, but for clarity and enforceability, it is recommended to have it in writing. Contracts require mutual assent, offer, acceptance, consideration, legality of object, and capacity of the parties involved.

Explanation

Submit

About This Quiz

Define These Insurance Policy Quiz - Quiz

The list of Define this Insurance Policy is here in the form of Flashcards Quizzes. These Flashcards quizzes are designed to learn, explore the Define this Insurance Policy.... see moreLearn these Define this Insurance Policy with ease and fun. see less

2. What is the difference between an individual life or health insurance policy and a group policy?

In an individual contract, the parties are the insurance co. that issued the policy and the individual who owns it. In a group contract, the parties are the insurer that issued the policy and the group policyholder, which is the person who decides what type of group coverage there will be.

Individual policies are typically more expensive than group policies due to the personalized coverage they offer.

In an individual contract, the parties are the employer and the individual, while in a group contract the parties are the individual and the insurance company.

The main difference is that an individual policy covers one person at a time while a group policy covers multiple individuals under one contract.

When comparing individual and group insurance policies, it is important to understand the key difference in the parties involved in each type of contract.

Explanation

When comparing individual and group insurance policies, it is important to understand the key difference in the parties involved in each type of contract.

Submit

3. There are several types of contracts - explain the difference between Formal and Informal Contracts and which one do life and health insurance policies fall under?

Informal contracts are not legally binding while formal contracts are

Formal contracts are usually temporary in nature while informal contracts are permanent

Formal contracts are always oral agreements while informal contracts are always in writing

A formal contract is one that is enforceable because the parties to the contract met certain formalities concerning the form of the agreement. They must be in writing and that the written document contains some form of seal. An Informal contract is also enforceable but can either be in writing or an oral agreement and the parties must meet requirements as to the substance of the agreement rather than the form of the agreement. Life and Health Ins. Contracts are informal.

Life and Health Insurance policies are considered informal contracts because they can be either in writing or oral agreements, and the enforceability of the contract is based on the substance of the agreement rather than the form.

Explanation

Submit

4. A contract between two people can be unilateral or bilateral - define these and which one is used for an insurance policy?

A bilateral is a contract where only one party makes legally enforceable promises.

A unilateral is a contract where both parties make legally enforceable promises.

A bilateral is a contract where no promises are legally enforceable.

A unilateral is a contract when one party makes legally enforceable promises when the parties enter into the contract. Ex: An Insurance policy. A bilateral is if both parties makes legally enforceable promises when they enter into a contract. Ex: You contract with someone to mow your lawn and pay them. Two people for a deal and agree.

In a unilateral contract, only one party makes promises that are legally enforceable, while in a bilateral contract, both parties make legally enforceable promises. An insurance policy is an example of a unilateral contract because the insurance company makes promises to pay out benefits in certain situations.

Explanation

Submit

5. Contracts may be classified as Commutative or Aleatory. What are the differences and which one would a life insurance policy fall under?

Commutative is similar to bilateral - this is where two people enter an agreement and the parties specify in advance the values that will be exchanged. In an aleatory contract, one party provides something of value to another party in exchange for a conditional promise. Ex: An Insurance Co. promises to pay death benefits in the event the insured dies.

Aleatory is similar to unilateral - this is where two people enter an agreement and the parties specify in advance the values that will be exchanged.

Commutative is similar to aleatory - this is where one party provides something of value to another party in exchange for a conditional promise.

Aleatory is similar to bilateral - this is where one party provides something of value to another party in exchange for a conditional promise.

Submit

6. Contracts can be classified as either bargaining or contracts of adhesion. What are the differences and which does an insurance policy fall under?

Contracts of adhesion are always more favorable to the party who prepared the contract compared to bargaining contracts.

A bargaining contract is one which both parties, as equals, set the terms and conditions of the contract. Life and Health Ins. policies are contracts of adhesions because one party prepares the contract and the other party simply accepts or rejects the contact as a whole, without bargaining.

Bargaining contracts are only used in commercial agreements, while contracts of adhesion are used for personal transactions.

Insurance policies are typically considered bargaining contracts because both parties negotiate terms before finalizing the agreement.

In this question, it is important to highlight the differences between bargaining contracts and contracts of adhesion, and explain why insurance policies are classified as contracts of adhesion. The incorrect answers provide common misconceptions or misunderstandings about contract classification and insurance policies.

Explanation

Submit

7. What are the four general requirements that must be met for the parties to create an informal contract that is legally enforceable?

1. The contract must be in writing.

1. Parties must have agreed to the terms of the contract.2. Must have contractual capacity3. Must have legally adequate consideration.4. Contract must be for a lawful purpose.

3. The contract must have at least three witnesses.

2. The contract must be notarized.

In order for an informal contract to be legally enforceable, the parties must meet the requirements of agreement, contractual capacity, consideration, and lawful purpose. The contract does not necessarily need to be in writing, notarized, or have witnesses to be valid.

Explanation

Submit

8. What are the differences between valid, void, and voidable?

Valid is one that can be avoided by a party without legal liability. Void satisfies all legal requirements and is enforceable by law. Voidable does not satisfy any legal requirement and is not enforceable.

Valid is one in which a party has the right to avoid the obligation without incurring legal liability. Void does not satisfy legal requirements and is not enforceable. Voidable satisfies all legal requirements and is enforceable by law.

Valid is one that does not satisfy legal requirements and is never enforceable by law. Void is enforceable by law. Voidable satisfies all legal requirements.

Valid satisfies all legal requirements and is enforceable by law.Void is one that does not satisfy one or more of the legal requirements and is never enforceable by law.Voidable is one in which a party has the right to avoid the obligation without incurring legal liability.

The correct answer explains the differences between valid, void, and voidable in terms of legal requirements, enforceability, and party's rights. The incorrect answers provide alternative statements that do not accurately define the concepts.

Explanation

Submit

9. What is Contractual Capacity? There are two groups who have limited capacity - what are they?

Students and teachers

Employees and employers

Minors and elderly individuals

Each person must have legal capacity to make a contract - the insurance co. must have the legal capacity to issue a policy just as the applicant must have the legal capacity to purchase the policy. Minors and individuals lacking mental capacity are limited. The age of majority differs from age 16 in some countries to 21 in others. In the U.S. and Canada, the age is 18.

The correct answer refers to minors and individuals lacking mental capacity as the two groups with limited contractual capacity.

Explanation

The correct answer refers to minors and individuals lacking mental capacity as the two groups with limited contractual capacity.

Submit

10. For an Informal Contract (an Ins. policy) to be valid, the parties to the contract must exchange Consideration- what does this mean?

Having Consideration means that each must give or promise something that be of value to the other party. Ex: The Ins. co. gives a policy and the other party pays an initial premium. Renewal premiums are a condition to continue coverage and are not a consideration for the policy.

Consideration is not required for Informal Contracts to be valid.

Both parties must exchange goods of equal value in an Informal Contract.

The Ins. co. gives a policy without any payment from the other party.

In an informal contract, consideration is a key element where both parties must give or promise something of value to the other. This ensures that there is a mutual exchange of benefits, creating a valid contract.

Explanation

Submit

11. Contracts must be made for a lawful purpose. The requirement for a lawful purpose is that a party has insurable interest. What is this?

A contract made for speculative purposes without any intention of financial loss.

A policy that allows a party to profit from another party's ill health.

An assurance that a life or health ins. policy contract is being made to protect a party against financial loss, rather than just speculating on a life or profiting from ill health. It is to protect against financial loss and not for profit.

A guarantee that one party will profit financially by causing harm to another party.

Insurable interest ensures that insurance contracts are designed to protect against financial loss and not for profit or speculation.

Explanation

Insurable interest ensures that insurance contracts are designed to protect against financial loss and not for profit or speculation.

Submit

12. Insurance policies are a type of property and subject to the principles of property law. There are two types - real and personal - what is the difference?

Personal property is land and real property is related to stocks and bonds.

Real property is property related to automobiles and personal property refers to land and buildings.

Real property is intangible property like patents and trademarks, while personal property is tangible goods such as electronics and appliances.

Real property is land and whatever is growing on or affixed to that land. All property other than real property is considered to be personal property - like furniture, clothing, and cars. These are considered as tangible goods. An insurance policy is intangible personal property.

Real property refers to land and affixed items, while personal property encompasses movable items. Insurance policies fall under the category of personal property as they are considered intangible assets.

Explanation

Submit

View My Results

Quiz Review Timeline (Updated): Aug 4, 2025 +

Our quizzes are rigorously reviewed, monitored and continuously updated by our expert board to maintain accuracy, relevance, and timeliness.