Which of the following statements correctly describes a contract of indemnity?
A) One party is restored to the same financial position the party was in before the loss occurred
B) The unequal exchange of value or consideration for both parties
C) One part
A) One party is restored to the same financial position the party was in before the loss occurred
Which course of action is the insurer entitled to when deliberate concealment is committed by the insured?
A) Rescinding the contract
B) Charge a higher premium
C) Charge a penalty
D) Nothing
A) Rescinding the contract
The power given to an individual producer that is not specifically addressed in his/her contract is considered what type of authority?
A) discreet
B) apparent
C) implied
D) express
C) implied
In order for a contract to be valid, it must
A) be filed with the state
B) be signed and witnessed by an attorney
C) be in writing
D) contain an offer and acceptance
D) contain an offer and acceptance
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) Contest
B) Consideration clause
Restoring an insured to the same condition as before a loss is an example of the principle of
A) Utmost good faith
B) Adhesion
C) Legal purpose
D) Indemnity
D) Indemnity
Which of the following statements about aleatory contracts is NOT true?
A) Insurance contracts are considered aleatory
B) The insured and the insurer have the potential for unequal contributions
C) The insured and the insurer contribute equally to the con
C) The insured and the insurer contribute equally to the contract
Which statement is CORRECT when describing a contract of adhesion?
A) Contract may be accepted or rejected by the insured
B) Contract involves negotiation between insurer and insured
C) Any confusing language in the contract would be interpreted in favor
A) Contract may be accepted or rejected by the insured
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
C) Aleatory
When handling premiums for an insured, an agent is acting in which capacity?
A) Adhesion
B) Fiduciary
C) Conditional
D) Aleatory
B) Fiduciary
______ is NOT an element of a valid contract.
A) Legal
B) Consideration
C) Competent parties
D) Countersignature
D) Countersignature
According to the principle of Utmost Good Faith, the insured will answer questions on the application to the best of their knowledge and pay the required premium, while the insurer will deal fairly with the insured and it's
A) underwriting
B) issuance of
C) promises made
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
C) consideration
Which principle is accurately described with the statement "Insureds are entitled to recover an amount NOT greater than the amount of their loss"?
A) Unilateral
B) Indemnity
C) Aleatory
D) Utmost good faith
B) Indemnity
What does the insurance term "indemnity" refer to?
A) Make whole
B) Unequal consideration
C) Law of large numbers
D) Competent parties
A) Make whole
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 exchange of consideration for both parties
C) A c
A) A contract that requires certain conditions or acts by the insured individual
All of the following are elements of an insurance policy EXCEPT
A) definitions
B) other insurance
C) claim forms
D) conditions
C) claim forms
The authority granted to a licensed producer is provided via the
A) producer's apparent authority
B) written contract
C) Law of Agency
D) Principal Capacity
C) Law of Agency
A unilateral contract is one in which
A) there is an element of chance and potential for unequal exchange of value or consideration for both parties
B) only one party (the insurer) makes any kind of legally enforceable promise
C) the contract has been pre
B) only one party (the insurer) makes any kind of legally enforceable promise
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
B) concealment
Which of the following is NOT required in the content of a policy?
A) Parties involved in the contract
B) Period to which the coverage exists
C) Probability of loss
D) Risk insured against
C) Probability of loss
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
B) errors and omissions
In an insurance contract, the insurer is the only party legally obligated to perform. Because of this, an insurance contract is considered
A) voidable
B) conditional
C) aleatory
D) unilateral
D) unilateral
Who is responsible for assembling the policy forms for insureds?
A) State Insurance Departments
B) NAIC
C) Insurance carriers
D) Insurance producers
C) Insurance carriers
If a material warranty violation on the part of the insured is found, what recourse does an insurer have?
A) Sue the insured
B) Rescind the policy
C) Charge more premium
D) Terminate the agent
B) Rescind the policy
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
D) Business owner and business client
Under a contract of adhesion,
A) there is the potential for an unequal exchange of value
B) the insurer's obligations are dependent upon certain acts of the insured individual
C) the terms must be accepted or rejected in full
D) only one party makes any k
C) the terms must be accepted or rejected in full
What is implied authority defined as?
A) Authority given in writing to an agent in the agency agreement
B) Authority that is not specifically given to an agent in the agency contract, but that an agent can reasonably assume to carry out his/her duties
C)
B) Authority that is not specifically given to an agent in the agency contract, but that an agent can reasonably assume to carry out his/her duties
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
C) there must be legal reasons for entering into the contract
Ambiguities in an insurance policy are always resolved in favor of the
A) insured
B) producer
C) insurer
D) underwriter
A) insured
Reasonably necessary acts that an agent must perform for carrying out his/her expressly authorized duties are covered by an agent's
A) Express authority
B) Implied authority
C) Apparent authority
D) Evident authority
B) Implied authority
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
B) A paid premium
Which contract element is insurable interest a component of?
A) Competent parties
B) Offer and acceptance
C) Consideration
D) Legal Purpose
D) Legal purpose
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
C) Insurable interest
What are an applicant's statements concerning occupation, hobbies, and personal health history regarded as?
A) warranty
B) guarantee
C) representation
D) collateral
C) representation
Express power given to an agent in an agency agreement is
A) the appearance of authority an insurer gives to its agent
B) the unwritten authority that the agent is assumed to have
C) the authority to represent the insurer
D) the authority to add provision
C) the authority to represent the insurer
Which of the following contracts is defined as "one that restores an injured party to the condition that was present before the loss"?
A) Unilateral contract
B) Contract of adhesion
C) Indemnity contract
D) Personal contract
C) Indemnity contract
The importance of a representation is demonstrated in what rule?
A) Insurable interest
B) Law of adhesion
C) Materiality of concealment
D) Consideration clause
C) Materiality of concealment
When the principal gives the agent authority in writing, it's referred to as
A) express authority
B) implied authority
C) apparent authority
D) imposed authority
A) express authority
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
C) Only the insurer is legally bound
Bob and Tom start a business. Since each partner contributes an important element to the success of the business, they decide to take life insurance policies out on each other, and name each other as beneficiaries. Eventually, they retire and dissolve the
D) Tom
The deeds and actions of a producer indicate what kind of authority?
A) Express
B) Apparent
C) Implied
D) Conditional
B) Apparent
Which of the following is NOT a requirement of a contract?
A) Parties involved must be competent
B) Equal consideration is required between the involved parties
C) Contract must have a legal purpose
D) Offer and acceptance must be involved
B) Equal consideration is required between the involved parties
A contract requires
A) implied authority
B) only an offer
C) negotiation between the involved parties
D) an offer and acceptance of the contract terms
D) an offer and acceptance of the contract terms
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
C) statements made in the application and the premium
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
B) at the time of application