If the agency contract gives the producer the authority to solicit insurance but states nothing about the collection of premiums, the producer normally has authority to collect premiums based on
* Implied authority
* Express authority
* Apparent authority
Implied authority
Which characteristic of an insurance contract means there is a potential for unequal exchange of value for both parties?
* Aleatory
* Adhesion
* Unilateral
* Conditional
Aleatory ( Insurance contracts are aleatory. Aleatory contracts are conditioned upon the occurrence of an event. The benefits provided by an insurance policy may or may not exceed the premiums paid.)
An agent is an individual that represents whom?
* Insurer
* Insured
* Broker
* Himself/Herself
Insurer (An agent is an individual who is authorized by an insurer to sell goods and services on its behalf. An agent is also the insurer's representative in dealing with the public.)
All of the following are considered to be typical characteristics describing the nature of an insurance contract EXCEPT
* Bilateral
* Unilateral
* Aleatory
* Adhesion
Bilateral
Which of the following statements describes an insurable interest?
* The policyowner must expect to benefit from the insured's death.
* The policyowner must expect to suffer a loss when the insured dies or becomes disabled. (The policyowner must face the
The policyowner must expect to suffer a loss when the insured dies or becomes disabled. (The policyowner must face the possibility of losing money or something of value in the event of the death or disability of the insured.)
The authority of an agent which is spelled out in the written words of the agency contract between the agent and the insurer is called
implied authority
apparent authority
presumed authority
expressed authority (Express authority is the authority a princi
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In life insurance, an insurable interest in the life of the insured must exist
Only at the inception of the contract (Insurable interest must only exist at the time of application.)
Only at the death of the insured
During the first two years of the contra
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Which of the following statements about authority is NOT correct?
Express authority is granted by means of the agent's contract.
Express authority is determined by a principal's conduct.
Implied authority is not overtly extended in the agent's contract bu
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Which of the following best describes the concept that the consideration is not equal in contract law?
Adhesion
Warranty
Subrogation
Aleatory (Insurance contracts are aleatory. This means there is an element of chance and potential for unequal exchange of
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Which of the following is an example of legal consideration?
Politeness
Application and initial premium (Consideration can be defined as something of value given in exchange for the promises sought. In an insurance contract, consideration is given by the
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The term which describes the fact that both parties of a contract may NOT receive the same value is referred to as
Apparent
Estoppel
Aleatory ( Aleatory is a term that describes the fact that both parties of a contract may NOT receive the same value.)
Uni
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When an agent is provided the materials from his/her company, which category of authority is the one which allows those items to be used?
Intended
Implied
Apparent (Apparent authority is the appearance or assumption of authority based on the actions, word
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The following are all characteristics of insurance contracts EXCEPT
insurable interest
unilateral
valued or indemnity
Unconditional (Unconditional is not a characteristic of an insurance contract)
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Which is considered a statement made by an applicant that he/she believes to be true?
Warranty
Concealment
Representation (Representations are statements made by applicants to which they believe are true. They are used by insurers to evaluate whether or n
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A life insurance policy would be considered a wagering contract WITHOUT
insurable interest
premium payment
agent solicitation
constructive delivery
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A producer's powers stated in the agency contract are:
Express
Implied
Apparent
Conditional
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All of the following are true about aleatory contracts EXCEPT
Consideration may be unequal
The outcome depends on chance or uncertain event
Only one party makes a legally enforceable offer (Insurance contracts are aleatory, which means there is an unequal
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With life and health contracts, when must an insurable interest exist?
After the policy is issued
Before the beneficiary is named
While the policy is in force
At the inception of the policy (Insurable interest must only occur at the time of inception. How
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The deeds and actions of a producer indicate what kind of authority?
Express
Apparent (Apparent authority is the appearance or assumption of authority based on the actions, words, or deeds of the producer.)
Implied
Conditional
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All of the following would be considered non-competent parties in an insurance contract EXCEPT
minors
the disabled
the mentally infirm
those under the influence of drugs or alcohol
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Which of the following terms is used for the voluntary relinquishment of a known right?
Estoppel
Adhesion
Waiver (If an insurer voluntarily waives a legal right it has under the contract, it cannot later deny a claim based on a violation of that right.)
U
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All of the following normally indicate the presence of insurable interest in the life of another person EXCEPT
Maintaining a lasting friendship with the other person
Being closely related to the other person by birth
Being married to the other person
Co-s
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Krissa and Janet enter into a contract in which Krissa agrees to fraudulently induce sick people to sell their insurance contracts to Janet's company. Krissa and Janet's contract can best be described as
Void (A void contract is simply an agreement withou
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An insurance contract is prepared by one party, the insurer, rather than by a negotiation between the contracting parties. Which of the following statements explains this characteristic of insurance contracts?
The insurance contract is an aleatory contrac
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An insurance company has how many years to challenge the validity of a life insurance contract?
One
Two ( After two years, the insurer cannot contest the policy or deny benefits based on any incorrect information in the insurance policy, this is called th
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When the principal gives the agent authority in writing, it's referred to as
express authority
implied authority
apparent authority
imposed authority
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The power given to an individual producer that is not specifically addressed in his/her contract is considered what type of authority?
discreet
apparent
Implied (Implied authority is the unwritten authority that is not expressly granted, but which the age
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What makes an insurance policy a unilateral contract?
Only the insured pays the premium
Only the insured can change the provisions
Only the insurer is legally bound (Insurance contracts are unilateral, meaning that only the insurer makes legally enforceab
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Which of the following statements regarding insurable interest is NOT correct?
Insurable interest exists when the applicant is the insured.
A policy obtained by a person without an insurable interest in the insured can be enforced. (Insurable interest occ
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The unwritten authority of a producer to perform incidental acts necessary to fulfill the purpose of the agency agreement is
Implied authority
Mandated authority
Express authority
Assumed authority
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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".
Premium clause
Consideration clause
Adhesion clause
Contestability clau
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A relationship in which one person is authorized to represent and act for another person or company is established through:
The Fair Credit Reporting Act
The law of agency (An agency is a situation where an agent has the power to represent and act for ano
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Which of the following statements describes the parol evidence rule?
A written contract cannot be changed once it is signed.
An oral contract cannot be modified by written evidence.
A written contract cannot be changed by oral evidence. (Parol evidence ru
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Intentional withholding of material facts that would affect an insurance policy's validity is called a(n)
estoppel
concealment
adhesion
misrepresentation
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A valid contract requires all of the following EXCEPT
Offer and acceptance
Competent parties
Consideration
Written evidence
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In insurance, an offer is usually made when
The agent hands the policy to the policyholder
An agent explains a policy to a potential applicant
The application is submitted (In insurance, the offer is usually made by the applicant in the form of the applic
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Special features of insurance contracts include all of the following EXCEPT
conditional
aleatory
unilateral
estoppel
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An agreement without legal effect is
estoppel
parole evidence
fraudulent
Void ( A void contract is simply an agreement without legal effect. In essence, it is not a contract at all, for it lacks one of the elements specified by law for a valid contract. A
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The authority that an insurer gives to its agent by means of the agent's contract is known as
Implied authority
Express authority (Express authority is written in the contract between the insurer and the agent. Implied authority is assumed and not written
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A professional liability for which producers can be sued for mistakes of putting a policy into effect is called
fiduciary bond
errors and omissions (Errors and omissions is a professional liability for which producers can be sued for mistakes of putting a
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All are competent parties who can enter into insurance contracts EXCEPT
Applicants
Trusts and estates
Business entities
Those under influence of alcohol (Applicants, trusts and estates, and business entities are all considered competent parties. The exclu
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What is implied authority defined as?
Authority given in writing to an agent in the agency agreement
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 (Implied
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In an insurance contract, the element that shows each party is giving something of value is called
offer
acceptance
Consideration (Consideration is the element of an insurance contract which demonstrates that each party is giving something of value.)
purp
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Because an insurance contract has been prepared by an insurance company with no negotiation, it is considered
a unilateral contract
a contract of adhesion (Insurance contracts are contracts of adhesion. This means that the contract has been prepared by on
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Insurable interest must exist at what time?
At the time of application (It is important to note that insurable interests must exist upon issuance of a life or health insurance contract. It does not have to continue throughout the duration of the policy no
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Which of the following is a unique characteristic of an insurance contract?
Offer and Acceptance
Conditional (An insurance contract is conditional in that certain conditions must be met before the contract can be legally enforced.)
Consideration
Competent
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The authority given by an insurer or employer to a licensee to transact insurance or adjust claims on their behalf is called
Authorization (Authority is the actions and deeds an agent is authorized to conduct on behalf of an insurance company, as specifie
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An agent is an individual who has been authorized by an insurer to be its representative and to perform all of the following acts EXCEPT
solicit applications for insurance
collect premiums from policyowners
authorize payment of certain claims (Agents do n
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Which of the following statements regarding utmost good faith in insurance contracts is CORRECT?
The concept of utmost good faith (that there is no attempt to conceal, disguise, or deceive) applies only to the insurer.
Although a warranty is a statement,
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When an agent is provided the materials from his/her company, which category of authority is the one which allows those items to be used?
Intended
Implied
Apparent (Apparent authority is the appearance or assumption of authority based on the actions, word
...
Which of the following statements about authority is NOT correct?
Express authority is granted by means of the agent's contract.
Express authority is determined by a principal's conduct. (Express authority is the authority an insurance company grants to a
...
Which of the following is an example of legal consideration?
Politeness
Application and initial premium ( Consideration can be defined as something of value given in exchange for the promises sought. In an insurance contract, consideration is given by the
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All of the following are true about aleatory contracts EXCEPT
Consideration may be unequal
The outcome depends on chance or uncertain event
Only one party makes a legally enforceable offer ( Insurance contracts are aleatory, which means there is an unequa
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