Chapter 2 - The Insurance Contract

7 Questions | Total Attempts: 7356

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Insurance Quizzes & Trivia

A contract is a legal agreement between two or more competent parties that promises a certain performance in exchange for a certain consideration. When an insurance company agrees to pay for an insured's losses in exchange for a certain premium, the two parties have entered into a contract. Although a contract of insurance can be oral, it is usually written in the form of an insurance policy.


Questions and Answers
  • 1. 
    • A. 

      Consideration

    • B. 

      Offer and acceptance

    • C. 

      Competent parties

    • D. 

      Signatures of the parties involved

  • 2. 
    What is meant by a contract of adhesion?
    • A. 

      Both parties are required to provide services for the other.

    • B. 

      One party draws up the contract provisions, and the other party adheres to the terms.

    • C. 

      The contract can be revoked by any party at any time for any reason.

    • D. 

      A contract that is formed without any consideration by either party.

  • 3. 
    • A. 

      After a loss, an insured should be restored to approximately the same condition that existed before the loss.

    • B. 

      Every insured will receive full compensation for all losses in all cases.

    • C. 

      When property is damaged or destroyed, the insurance company must pay the full replacement cost.

    • D. 

      In the case of bodily injuries, liability coverage must be available without regard to any policy exclusions.

  • 4. 
    Which part of an insurance policy describes what property and/or perils will be covered by the contract?
    • A. 

      Definitions

    • B. 

      Exclusions

    • C. 

      Insuring agreement

    • D. 

      Conditions

  • 5. 
    What is the consideration that an insurer gives to the insured under an insurance contract?
    • A. 

      Stated benefits and the dates on which they are to be paid

    • B. 

      The premium

    • C. 

      A promise to pay for certain losses if they occur

    • D. 

      A promise to be conscientious about the customer's situation

  • 6. 
    Under an insurance contract, the uncertainty of events can lead to unequal financial results for the two parties. This means that insurance is what kind of contract?
    • A. 

      Unilateral

    • B. 

      Aleatory

    • C. 

      Conditional

    • D. 

      Utmost good faith

  • 7. 
    The "ground rules" are described in which part of an insurance policy?
    • A. 

      Definitions

    • B. 

      Exclusions

    • C. 

      Insuring agreement

    • D. 

      Conditions