Chapter 3: Legal Concepts Of The Insurance Contract

47 Questions | Total Attempts: 21

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Chapter 3: Legal Concepts Of The Insurance Contract

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.
  • 2. 
    Something of value that each interested party gives to each other. The insured provides [Blank] with payment of premium. The insurer provides [Blank] by promising to pay the insurance benefit.
  • 3. 
    An insurance contract must be legal and not in opposition of public policy. 
  • 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)
  • 5. 
    An agreement without legal effect: an invalid contract
  • 6. 
    A contract that can be made void at the option of one or more parties to the agreement
  • 7. 
    An agreement [Blank]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
  • 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 [Blank]. A fiduciary is someone in a position of trust.
  • 9. 
    A situation in which the insurer gives the customer reasonable belief that an agent has the power and authority to bind the principal. [Blank] deals with the relationship between the insurer, agent, and customer.
  • 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.
  • 11. 
    The explicit authority granted to the agent by the insurer as written in the agency contract
  • 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. 
  • 13. 
    Life insurance arrangements where investors persuade consumers (usually seniors) to take out new life insurance policies, with the investors named as beneficiary
  • 14. 
    Requires that an individual have a valid concern for the continuation of the life or well-being of the person insured. Without [Blank], an insurance contract is not legally enforceable and would be considered a wagering contract. [Blank] only needs to exist at the time of the application.
  • 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.
  • 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.
  • 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.
  • 18. 
    Implies that there will be no attempt  by either party to misrepresent, conceal or commit fraud as it pertains to insurance policies.
  • 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 [Blank]
  • 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.
  • 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. 
  • 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.
  • 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

  • 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

  • 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