Chapter 3: Legal Concepts Of The Insurance Contract

Approved & Edited by ProProfs Editorial Team
The editorial team at ProProfs Quizzes consists of a select group of subject experts, trivia writers, and quiz masters who have authored over 10,000 quizzes taken by more than 100 million users. This team includes our in-house seasoned quiz moderators and subject matter experts. Our editorial experts, spread across the world, are rigorously trained using our comprehensive guidelines to ensure that you receive the highest quality quizzes.
Learn about Our Editorial Process
| By Kernsshanice
K
Kernsshanice
Community Contributor
Quizzes Created: 9 | Total Attempts: 4,630
Questions: 47 | Attempts: 142

SettingsSettingsSettings
Chapter 3: Legal Concepts Of The Insurance Contract - Quiz

South Carolina Pre-licensing Education - Life and Health Insurance


Questions and Answers
  • 1. 

    An offer that may be made by the applicant by signing the application, paying the first premium, and if necessary, submitting to a physical examination. Premium payment on the offered policy then constitutes acceptance by the applicant.

    Explanation
    This answer refers to the concept of "offer and acceptance" in contract law. It suggests that the applicant can make an offer to enter into a contract by signing the application, paying the first premium, and undergoing a physical examination if required. The payment of the premium on the offered policy would then be considered as acceptance by the applicant. This explanation highlights the process by which the applicant expresses their intention to enter into a contract and the subsequent acceptance of that offer through the payment of the premium.

    Rate this question:

  • 2. 

    Something of value that each interested party gives to each other. The insured provides ________ with payment of premium. The insurer provides ________ by promising to pay the insurance benefit.

    Explanation
    The term "consideration" refers to something of value that each interested party gives to each other in a contract. In this insurance context, the insured provides consideration by making payment of the premium, which is the amount of money paid to the insurer for the insurance coverage. On the other hand, the insurer provides consideration by promising to pay the insurance benefit, which is the amount of money or coverage provided to the insured in case of a covered loss or event. The concept of consideration ensures that both parties are giving something of value in exchange for the insurance contract to be valid and enforceable.

    Rate this question:

  • 3. 

    An insurance contract must be legal and not in opposition of public policy. 

    Explanation
    An insurance contract must have a legal purpose in order to be valid. This means that the contract should not involve any illegal activities or go against public policy. Public policy refers to the principles and values that are considered important for the well-being of society as a whole. Therefore, for an insurance contract to be enforceable, it must comply with the law and not violate any public policy principles.

    Rate this question:

  • 4. 

    One who is capable of understanding the contract being agreed to. All parties must be of legal [competence] (legal age, mentally capable of understanding the terms, and not influenced by drugs or alcohol)

    Explanation
    The correct answer is "A competent party". In order for a contract to be valid, all parties involved must be capable of understanding the terms and implications of the agreement. This means that they must be of legal age, mentally capable, and not under the influence of drugs or alcohol. A competent party refers to an individual who meets these criteria and is able to enter into a legally binding contract.

    Rate this question:

  • 5. 

    An agreement without legal effect: an invalid contract

    Explanation
    A void contract refers to an agreement that is considered invalid and has no legal effect from the beginning. It lacks the essential elements required to create a legally binding contract, such as legality, capacity, or proper form. Therefore, any obligations or rights arising from a void contract are unenforceable by law.

    Rate this question:

  • 6. 

    A contract that can be made void at the option of one or more parties to the agreement

    Explanation
    A voidable contract is a type of contract that can be declared null and void at the discretion of one or more parties involved in the agreement. This means that one or more parties have the option to cancel or invalidate the contract if certain conditions or circumstances arise. Unlike a void contract, which is considered to be invalid from the beginning, a voidable contract is initially valid and enforceable, but can be rendered void if the party exercising the option chooses to do so.

    Rate this question:

  • 7. 

    An agreement ________ing the company's liability for a certain type or types of risk ordinarily covered I the policy; a voluntary giving up of a legal, given right

    Explanation
    A waiver refers to an agreement made by a company where they voluntarily give up a legal right, specifically the right to hold them liable for a certain type or types of risk that are typically covered by an insurance policy. In other words, the company agrees to not hold the insurer responsible for any damages or losses related to the specified risks. This waiver allows the company to assume the responsibility for these risks themselves, relieving the insurer of any liability.

    Rate this question:

  • 8. 

    Describes the relationship between the agent o producer and client or company funds. Because the agent handles money of the insured and insurer, he/she has a ________. A fiduciary is someone in a position of trust.

    Explanation
    The relationship between the agent or producer and the client or company funds is one of trust and responsibility. The agent is entrusted with handling the money of both the insured and the insurer, making them a fiduciary. A fiduciary is someone who is in a position of trust and has a legal and ethical duty to act in the best interests of the clients or beneficiaries. In this context, the agent has a fiduciary responsibility to handle the funds with utmost care and integrity, ensuring that they are used appropriately and in the best interests of the parties involved.

    Rate this question:

  • 9. 

    A situation in which the insurer gives the customer reasonable belief that an agent has the power and authority to bind the principal. ________ deals with the relationship between the insurer, agent, and customer.

    Explanation
    Apparent Authority refers to a situation where the insurer creates a reasonable belief in the customer that the agent has the power and authority to act on behalf of the principal. It deals with the relationship between the insurer, agent, and customer, indicating that the insurer has given the customer the impression that the agent has the authority to bind the principal. This concept allows the customer to rely on the actions and representations of the agent, even if the agent does not actually possess the authority.

    Rate this question:

  • 10. 

    Authority not specifically granted to the agent in the contract of agency, but which common sense dictates the agent has. It enables the agent to carry out routine responsibilities.

    Explanation
    Implied authority refers to the authority that is not explicitly stated in the contract of agency but is assumed to exist based on common sense and the nature of the agent's responsibilities. It allows the agent to perform routine tasks that are necessary to fulfill their duties. This type of authority is necessary for the smooth functioning of the agency relationship and ensures that the agent can effectively carry out their responsibilities without the need for constant instructions or explicit authorization for every action.

    Rate this question:

  • 11. 

    The explicit authority granted to the agent by the insurer as written in the agency contract

    Explanation
    Express authority refers to the specific powers and responsibilities that are explicitly granted to an agent by the insurer through a written agency contract. This means that the agent has clear and direct authorization to perform certain actions on behalf of the insurer. The agent can exercise express authority without seeking further approval or clarification from the insurer. This type of authority is important in establishing the scope of the agent's responsibilities and ensuring that they act within the boundaries set by the insurer.

    Rate this question:

  • 12. 

    Establishes a relationship in which one person is authorized to represent and act for another person or company. The insurance company (insurer) is the principal. An agent or producer will always be deemed to represent the insurance company and not the applicant. 

    Explanation
    The law of agency refers to the legal principles that govern the relationship between a principal and an agent. It establishes that one person or company (the principal) can authorize another person (the agent) to act on their behalf and represent them in various matters. In the context of the given explanation, the insurance company is the principal, and the agent or producer represents and acts on behalf of the insurance company, not the applicant. This relationship is governed by the law of agency.

    Rate this question:

  • 13. 

    Life insurance arrangements where investors persuade consumers (usually seniors) to take out new life insurance policies, with the investors named as beneficiary

    Explanation
    Stranger-Originated Life Insurance (STOLI) refers to life insurance arrangements where investors convince consumers, typically seniors, to take out new life insurance policies, with the investors being named as the beneficiary. This practice is often considered unethical and fraudulent as it involves individuals with no insurable interest benefiting from the death of the insured. STOLI policies are typically designed to be sold or transferred to investors shortly after issuance, leading to potential legal and ethical issues.

    Rate this question:

  • 14. 

    Requires that an individual have a valid concern for the continuation of the life or well-being of the person insured. Without ________, an insurance contract is not legally enforceable and would be considered a wagering contract. ________ only needs to exist at the time of the application.

    Explanation
    Insurable interest refers to the requirement that an individual must have a valid concern for the continuation of the life or well-being of the person insured in order for an insurance contract to be legally enforceable. Without insurable interest, the contract would be considered a wagering contract, which is not legally enforceable. It is important to note that insurable interest only needs to exist at the time of the application for the insurance policy.

    Rate this question:

  • 15. 

    The failure of the insured to disclose to the company a fact material to the acceptance of the risk at the time application is made.

    Explanation
    Concealment refers to the failure of the insured to disclose a material fact to the insurance company during the application process. This means that the insured intentionally withheld important information that could have influenced the company's decision to accept or reject the risk. By concealing this information, the insured has violated their duty of utmost good faith, which is a fundamental principle in insurance contracts. Consequently, the insurance company may have grounds to void the policy or deny a claim based on the concealment.

    Rate this question:

  • 16. 

    Statements made by applicants on their applications for insurance that they represent as being substantially true to the best of their knowledge and belief, but that are not warranted as exact in every detail.

    Explanation
    The given correct answer is "Representations." In insurance applications, applicants are required to make statements that they believe to be substantially true to the best of their knowledge. However, these statements are not guaranteed to be exact in every detail. This means that while the applicants are being honest in their representations, there may still be some discrepancies or inaccuracies in the information provided.

    Rate this question:

  • 17. 

    Statements made on an application for insurance that are warranted to be true; that is, they are exact in every detail as opposed to representations. Statements on applications for insurance are rarely warranties, unless fraud is involved.

    Explanation
    The explanation for the correct answer "Warranties" is that statements made on an application for insurance that are warranted to be true are exact in every detail and are considered warranties. This means that the applicant guarantees the truthfulness and accuracy of the statements made on the application. However, it is important to note that statements on insurance applications are rarely considered warranties unless there is fraud involved.

    Rate this question:

  • 18. 

    Implies that there will be no attempt  by either party to misrepresent, conceal or commit fraud as it pertains to insurance policies.

    Explanation
    Utmost Good Faith refers to the principle in insurance contracts where both parties, the insurer and the insured, are expected to act honestly and disclose all relevant information. This means that there should be no intention to deceive or hide any facts that could affect the insurance policy. By adhering to this principle, both parties can trust that the insurance contract is based on accurate information and that there will be no fraudulent activities involved.

    Rate this question:

  • 19. 

    Certain conditions must be met by all parties in the contract. This is needed when a loss occurs in order for the contract to be legally enforceable. All insurance contracts are ________

    Explanation
    A conditional contract is a type of contract where certain conditions must be met by all parties involved for the contract to be legally enforceable. In the context of insurance contracts, these conditions are necessary in order for the contract to be valid when a loss occurs. This means that the insurance policy will only be enforced and the insurer will only be obligated to pay out claims if the specific conditions outlined in the contract are fulfilled.

    Rate this question:

  • 20. 

    A one sided agreement, where only the insurer is legally bound. In an insurance contract, only the insurance company is legally bound to do anything.

    Explanation
    A unilateral contract is a type of agreement where only one party is legally obligated to fulfill their obligations. In the context of an insurance contract, the insurer is the only party bound by legal obligations. This means that the insured party is not required to do anything, but the insurer must provide coverage and pay out claims if necessary. This type of contract is often used in insurance to ensure that the insured party is protected without having to make any promises or commitments themselves.

    Rate this question:

  • 21. 

    There is only one author - the insurance company. If there is an ambiguity in the contract, the courts always favo the insured over the insurer. 

    Explanation
    The given answer, "Contract of adhesion," is correct because it refers to a type of contract where one party has significantly more bargaining power than the other. In this case, the insurance company is the author of the contract and holds a dominant position. When there is ambiguity or uncertainty in the contract, the courts tend to interpret it in favor of the insured party, who is generally considered to be the weaker party in the agreement. This principle ensures that the insured is protected and prevents the insurance company from taking advantage of any ambiguities in the contract.

    Rate this question:

  • 22. 

    A feature of insurance contracts in that there is an element of chance for both parties and that the dollar given by the policyholder (premiums) and the insurer (benefits) may not be equal.

    Explanation
    The term "Aleatory" refers to a feature of insurance contracts where there is an element of chance for both parties involved. This means that the amount of money paid by the policyholder in the form of premiums and the amount of money provided by the insurer as benefits may not be equal. In other words, there is a certain level of uncertainty and risk involved in insurance contracts, as the outcome and financial outcome for both parties are not guaranteed to be equal.

    Rate this question:

  • 23. 

    Insurable interest does NOT occur in which of the following relationships?

    • A.

      Sister and brother

    • B.

      Parent and children

    • C.

      Business partners

    • D.

      Business owner and business client

    Correct Answer
    D. Business owner and business client
    Explanation
    Insurable interest refers to the financial interest that a person has in the continued existence or well-being of the subject matter of insurance. In the case of sister and brother, parent and children, and business partners, there is a potential insurable interest as they have a personal or financial relationship that could be affected by the loss or damage of the insured property. However, in the relationship between a business owner and a business client, there is typically no insurable interest as the business owner does not have a direct financial interest in the client's property. Therefore, the correct answer is business owner and business client.

    Rate this question:

  • 24. 

    Which of the following BEST describes a conditional insurance contract?

    • A.

      A contract that requires certain conditions or acts by the insured individual

    • B.

      A contract that has the potential for the unequal exchangeof consideration for both parties

    • C.

      A contract where one party "adhere" to the terms of the contract

    • D.

      A contract where only one party makes any kind of enforceable contract

    Correct Answer
    A. A contract that requires certain conditions or acts by the insured individual
    Explanation
    A conditional insurance contract is a type of contract that requires certain conditions or acts to be fulfilled by the insured individual in order for the insurance coverage to be valid. This means that the insured individual must meet specific requirements or perform certain actions as outlined in the contract in order to be eligible for insurance benefits.

    Rate this question:

  • 25. 

    A professional liability for which producers can be sued for mistakes of putting a policy into effect is called

    • A.

      Fiduciary bond

    • B.

      Errors and omissions

    • C.

      Fiduciary trust

    • D.

      Errors and oversights

    Correct Answer
    B. Errors and omissions
    Explanation
    Errors and omissions is the correct answer because it refers to the professional liability that producers can be sued for when they make mistakes while putting a policy into effect. This term is commonly used in the insurance industry to describe situations where insurance agents or brokers fail to fulfill their duties or make errors that result in financial harm to their clients. It encompasses a wide range of mistakes, oversights, or negligence that can occur during the policy implementation process.

    Rate this question:

  • 26. 

    In order for a contract to be valid, it must

    • A.

      Be filed with the state

    • B.

      Be signed and witessed by an attorney

    • C.

      Be in writing

    • D.

      Contain an offer and acceptance

    Correct Answer
    D. Contain an offer and acceptance
    Explanation
    To be considered valid, a contract must contain an offer and acceptance. This means that there must be a clear proposal from one party (offer) and an agreement from the other party (acceptance) to the terms laid out in the contract. This requirement ensures that both parties have willingly entered into the contract and have reached a mutual understanding of the terms and conditions. Without an offer and acceptance, there is no meeting of the minds, and the contract would not be legally binding.

    Rate this question:

  • 27. 

    According to life insurance contract law, insurable interest exists

    • A.

      When any business relationship exists

    • B.

      At the time of application

    • C.

      At the time of death

    • D.

      Only when determined by a judge

    Correct Answer
    B. At the time of application
    Explanation
    Insurable interest exists at the time of application according to life insurance contract law. This means that the person applying for the life insurance policy must have a financial or other type of interest in the insured individual's life at the time of applying for the policy. This ensures that the policyholder has a legitimate reason to have the policy and prevents individuals from taking out insurance policies on the lives of unrelated individuals. It is important for the insurable interest to exist at the time of application to ensure the validity and fairness of the life insurance contract.

    Rate this question:

  • 28. 

    The power given to an individual producer that is not specifically addresses in his/her contract is considered what type of authority?

    • A.

      Discreet

    • B.

      Apparent

    • C.

      Implied

    • D.

      Express

    Correct Answer
    C. Implied
    Explanation
    Implied authority refers to the power given to an individual producer that is not explicitly stated in their contract. It is derived from the nature of the job or the position held by the producer. This type of authority allows the producer to make decisions and take actions that are reasonably necessary to carry out their responsibilities, even if they are not explicitly mentioned in the contract.

    Rate this question:

  • 29. 

    In an insurance contract, the insurer is the only part legally obligated to perform. Because of this, an insurance contract is considered

    • A.

      Voidable

    • B.

      Conditional

    • C.

      Aleatory

    • D.

      Unilateral

    Correct Answer
    D. Unilateral
    Explanation
    An insurance contract is considered unilateral because only the insurer is legally obligated to perform. This means that the insured party is not required to take any action or fulfill any obligations under the contract. The insurer, on the other hand, is obligated to provide coverage and pay claims if the insured party meets the specified conditions. This one-sided nature of the contract makes it unilateral.

    Rate this question:

  • 30. 

    Ambiguities is an insurance policy are always resolved in favor of the

    • A.

      Insured

    • B.

      Producer

    • C.

      Insurer

    • D.

      Underwriter

    Correct Answer
    A. Insured
    Explanation
    In insurance policies, ambiguities refer to unclear or uncertain terms or provisions. When such ambiguities arise, they are resolved in favor of the insured. This means that any doubts or uncertainties in the policy will be interpreted in a way that benefits the insured, ensuring that they receive the maximum coverage and protection. Resolving ambiguities in favor of the insured helps to ensure fairness and uphold the principle of providing adequate insurance coverage to policyholders.

    Rate this question:

  • 31. 

    Which of the following is an example of the insured's consideration?

    • A.

      Insurer's promise to pay benefits

    • B.

      A paid premium

    • C.

      Legal purpose

    • D.

      Intent

    Correct Answer
    B. A paid premium
    Explanation
    The insured's consideration refers to something of value that the insured provides in exchange for the insurer's promise to pay benefits. In this case, a paid premium is an example of the insured's consideration. By paying the premium, the insured is fulfilling their part of the insurance contract and providing the insurer with the necessary funds to cover potential losses or claims.

    Rate this question:

  • 32. 

    Blank is NOT an element of a valid contract.

    • A.

      Legal

    • B.

      Consideration

    • C.

      Competent parties

    • D.

      Countersignature

    Correct Answer
    D. Countersignature
    Explanation
    A countersignature is not an element of a valid contract. A countersignature refers to the act of signing a document or agreement by a second party to indicate their agreement or approval. While a countersignature may be required in certain situations, such as for certain types of legal documents or government contracts, it is not a necessary element for a contract to be valid. The essential elements of a valid contract typically include legal capacity (competent parties), mutual agreement (offer and acceptance), consideration (something of value exchanged), and legality (compliance with the law).

    Rate this question:

  • 33. 

    In an insurance contract, the applicant's "consideration" is the

    • A.

      Offer and acceptance

    • B.

      Premium only

    • C.

      Statements made in the application and the premium

    • D.

      Statements made in the application only

    Correct Answer
    C. Statements made in the application and the premium
    Explanation
    The applicant's "consideration" in an insurance contract refers to the statements made in the application and the premium. This means that the applicant's consideration includes both the information provided in the application form and the payment of the premium. Both of these elements are essential for the formation of the insurance contract.

    Rate this question:

  • 34. 

    All of the following are elements of an insurance policy EXCEPT

    • A.

      Definitions

    • B.

      Other insurance

    • C.

      Claim forms

    • D.

      Conditions

    Correct Answer
    C. Claim forms
    Explanation
    An insurance policy is a contract between the insurer and the insured that outlines the terms and conditions of the coverage. It typically includes definitions of key terms, information about other insurance policies held by the insured, and the conditions that must be met for the policy to be valid. However, claim forms are not considered an element of an insurance policy. Claim forms are documents that the insured must complete and submit to the insurer when filing a claim for coverage. While they are related to the insurance policy, claim forms are not a part of the policy itself.

    Rate this question:

  • 35. 

    In an insurance contract, the element that shows each party is giving something of value is called

    • A.

      Offer

    • B.

      Acceptance

    • C.

      Consideration

    • D.

      Purpose

    Correct Answer
    C. Consideration
    Explanation
    Consideration is the correct answer because it refers to the element in an insurance contract where each party involved gives something of value. In a contract, consideration is the exchange of promises, money, goods, or services between the parties involved. It is an essential element to establish a legally binding agreement, demonstrating that both parties are providing something of value and showing mutual consent and intention to be bound by the terms of the contract.

    Rate this question:

  • 36. 

    Which type of clause describes the following statement: "We have issued the policy in consideration of the representations in your applications and payment of the first-term premium."

    • A.

      Premium clause

    • B.

      Consideration clause

    • C.

      Adhesion clause

    • D.

      Contestability clause

    • E.

      Option 5

    Correct Answer
    B. Consideration clause
    Explanation
    The given statement, "We have issued the policy in consideration of the representations in your applications and payment of the first-term premium," refers to the idea that the policy has been issued based on the representations made by the policyholder in their application and their payment of the first-term premium. This aligns with the concept of a consideration clause, which is a clause in a contract that states that each party is giving something of value (consideration) in exchange for the benefits of the contract. In this case, the policyholder is providing their representations and payment, while the insurance company is providing the policy.

    Rate this question:

  • 37. 

    Legal purpose is a term used in contract law meaning

    • A.

      There must be an offer and acceptance

    • B.

      The contract must be aleatory

    • C.

      There must be legal reasons for entering into the contract

    • D.

      The contract must be a contract of adhesion

    Correct Answer
    C. There must be legal reasons for entering into the contract
    Explanation
    The correct answer is "There must be legal reasons for entering into the contract." This means that for a contract to be valid, there must be a legitimate and lawful purpose for entering into the agreement. Both parties involved must have a legal justification for entering into the contract, such as the exchange of goods, services, or monetary compensation. Without a legal purpose, the contract may be considered void or unenforceable.

    Rate this question:

  • 38. 

    What makes an insurance policy a unilateral contract?

    • A.

      Only the insured pays the premium

    • B.

      Only the insured can change the provisions

    • C.

      Only the insurer is legally bound

    • D.

      Only the insured is legally bound

    Correct Answer
    C. Only the insurer is legally bound
    Explanation
    An insurance policy is considered a unilateral contract because only the insurer is legally bound. This means that the insured is not obligated to perform any actions or make any payments unless a covered loss occurs. The insurer, on the other hand, is legally obligated to fulfill their promises and provide coverage as stated in the policy. The insured has the option to pay the premium and can also make changes to the policy provisions, but they are not legally required to do so.

    Rate this question:

  • 39. 

    The term which describes the fact that both parties of a contract may NOT receive the same value is referred to as

    • A.

      Apparent

    • B.

      Estoppel

    • C.

      Aleatory

    • D.

      Unilateral

    Correct Answer
    C. Aleatory
    Explanation
    Aleatory refers to a type of contract in which the parties involved may not receive the same value. This means that the outcome or performance of the contract is dependent on an uncertain event or contingency. In an aleatory contract, one party may receive a significantly greater benefit or value compared to the other party. This term is used to describe situations where the value exchanged between the parties is not equal or balanced.

    Rate this question:

  • 40. 

    When the principal gives the agent the authority in writing, it's referred to as

    • A.

      Express authority

    • B.

      Implied authority

    • C.

      Apparent authority

    • D.

      Imposed authority

    Correct Answer
    A. Express authority
    Explanation
    Express authority refers to the authority given to an agent by the principal through explicit and written instructions. It is a clear and direct authorization that outlines the agent's powers and responsibilities. This type of authority leaves no room for ambiguity or interpretation, as it is explicitly stated in writing. Express authority ensures that both the principal and the agent have a clear understanding of the agent's scope of authority and can hold the agent accountable for their actions.

    Rate this question:

  • 41. 

    What are an applicant's statements concerning occupation, hobbies, and personal health history regarded as?

    • A.

      Warranty

    • B.

      Guarantee

    • C.

      Representation

    • D.

      Collateral

    Correct Answer
    C. Representation
    Explanation
    An applicant's statements concerning occupation, hobbies, and personal health history are regarded as representations. These statements are made by the applicant to provide information about themselves and their background. Unlike warranties or guarantees, representations are not legally binding promises, but rather factual statements made by the applicant that can be relied upon by the other party.

    Rate this question:

  • 42. 

    Bob and Tom start a business. Since each partner contributes an important element to the success of the business, they decide to take like insurance policies out on each other, and name each other as beneficiaries. Eventually, they retire and dissolve the business. Bob dies 12 months later. The policies continue in force with no change. Both partners are still married at the time of Bob's death. In this situation, who will receive Bob's policy proceeds?

    • A.

      Tom's spouse

    • B.

      Bob's estate

    • C.

      Bob's spouse

    • D.

      Tom

    Correct Answer
    D. Tom
    Explanation
    Since Tom is the beneficiary of Bob's insurance policy, he will receive the policy proceeds upon Bob's death. The fact that both partners are still married at the time of Bob's death does not affect the beneficiary designation on the policy. Therefore, Tom's spouse, Bob's estate, and Bob's spouse are not entitled to receive the policy proceeds.

    Rate this question:

  • 43. 

    Which contract element is insurable interest a component of?

    • A.

      Competent parties

    • B.

      Offer and acceptance

    • C.

      Consideration

    • D.

      Legal purpose

    Correct Answer
    D. Legal purpose
    Explanation
    Insurable interest is a component of the contract element of legal purpose. Legal purpose refers to the requirement that a contract must be formed for a lawful reason and cannot involve illegal activities. In insurance contracts, insurable interest is necessary to ensure that the policyholder has a financial stake or potential loss in the insured property or person. This requirement prevents individuals from taking out insurance policies on assets or individuals in which they have no legitimate interest, thus maintaining the integrity and purpose of insurance contracts.

    Rate this question:

  • 44. 

    Intentional withholding of material facts that would affect an insurance policy's validity is called a(n)

    • A.

      Estoppel

    • B.

      Concealment

    • C.

      Adhesion

    • D.

      Misrepresentation

    Correct Answer
    B. Concealment
    Explanation
    Concealment refers to the deliberate act of withholding important information that would impact the validity of an insurance policy. It involves intentionally hiding material facts that the insured party is obligated to disclose to the insurer. By concealing such information, the insured party misleads the insurer and prevents them from making an informed decision about the policy. This can result in the policy being rendered invalid or the insurer denying a claim based on the concealed facts.

    Rate this question:

  • 45. 

    Which of the following is present when an applicant stands to lose value if the insured dies?

    • A.

      Insurability

    • B.

      Offer and acceptance

    • C.

      Insurable interest

    • D.

      Consideration

    Correct Answer
    C. Insurable interest
    Explanation
    Insurable interest is the correct answer because it refers to the financial stake or relationship that an individual has in the life or property of another person. In the context of insurance, it means that the applicant would suffer a financial loss if the insured person were to die. This is important because insurance policies are typically only issued to individuals who have a valid insurable interest in the insured person or property. Therefore, insurable interest is necessary for the applicant to stand to lose value if the insured dies.

    Rate this question:

  • 46. 

    The deeds and actions of a producer indicate what kind of authority?

    • A.

      Express

    • B.

      Apparent

    • C.

      Implied

    • D.

      Conditional

    Correct Answer
    B. Apparent
    Explanation
    The deeds and actions of a producer indicate apparent authority. Apparent authority refers to the authority that a third party reasonably believes an agent or representative of a company has based on the actions and behavior of the agent. In this case, the producer's actions and behavior would lead others to believe that they have the authority to act on behalf of the company.

    Rate this question:

  • 47. 

    Type question here. Example: Practice makes you ________

    Correct Answer
    N/A

Quiz Review Timeline +

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

  • Current Version
  • Jan 30, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Jan 04, 2020
    Quiz Created by
    Kernsshanice
Back to Top Back to top
Advertisement
×

Wait!
Here's an interesting quiz for you.

We have other quizzes matching your interest.