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Chapter 2 - The Insurance Contract Practice Quiz

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P & C Licensing Exam Prep: Ch 2 The Insurance Contract

Question 1 of 25

4

An insurance policy has a distinguishing set of features that reflects the nature of this unique contract. Choose the characteristics of an insurance contract from the list below. (choose all that apply)

Select one or more of the following:

  • Aleatory

  • Warranty

  • Contract of Adhesion

  • Representation

  • Unilateral

  • Conditional

  • Reasonable Expectation

  • Personal

  • Indemnity and Subrogation

  • Utmost Good Faith

Explanation

Question 2 of 25

4

Four elements must be present for a contract to be legally enforceable. Name the four elements by choosing from the choices below.

Select one or more of the following:

  • Consideration, Legal Purpose, Agreement, and Legally Competent Parties

  • Adhesion, Conditional, Subrogation, and Bipartisanship

  • Consideration, Agreement, Conditions, and Adhesion

Explanation

Question 3 of 25

4

In the following statement, choose which of the four elements of a valid contract is MISSING:
Thomas agrees to burn down Jason's bar & grille restaurant for $10,000.

Select one or more of the following:

  • Competent Parties

  • Legal Purpose

  • Offer and Acceptance

  • Consideration

Explanation

Question 4 of 25

4

In the following statement, choose which of the four elements of a valid contract is MISSING:
Melissa's insurance policy is canceled for nonpayment of premium.

Select one or more of the following:

  • Competent Parties

  • Legal Purpose

  • Offer and Acceptance

  • Consideration

Explanation

Question 5 of 25

4

In the following statement, choose which of the four elements of a valid contract is MISSING:
JAG Insurance Company denies Craig's application for auto insurance. Which element is missing?

Select one or more of the following:

  • Competent Parties

  • Legal Purpose

  • Offer and Acceptance

  • Consideration

Explanation

Question 6 of 25

4

In the following statement, choose which of the four elements of a valid contract is MISSING:
Matthew, age 17, signs a lease for an apartment in Highland Park Estates for a term of 12 months with an option to renew at the end of the 12-month period, provided he has demonstrated a good payment history.

Select one or more of the following:

  • Legal Purpose

  • Competent Parties

  • Offer and Acceptance

  • Consideration

Explanation

Question 7 of 25

4

List the purpose of each part of an insurance policy.
A) The list who is insured, what property or risk is covered, when and where coverage is effective, and how much coverage applies.
B) describe what is covered and the perils the policy insures against.
C) The explain the rights and duties of the insured and the insurer under the policy.

Drag and drop to complete the text.

    Declaration
    Insuring Agreements
    conditions
    Endorsements
    Definitions
    waivers
    material facts

Explanation

Question 8 of 25

4

The insurer must be able to rely on the insured's being forthcoming with all material facts needed to properly analyze or underwrite the risk.

Select one of the following:

  • True
  • False

Explanation

Question 9 of 25

4

The insurer makes up all of the terms and conditions in a contract.

Select one of the following:

  • True
  • False

Explanation

Question 10 of 25

4

The insurer is the one who writes the contract and is legally obligated; so, in the event of dispute with a question about an ambiguity in the contract, the court will rule in favor of the insurer.

Select one of the following:

  • True
  • False

Explanation

Question 11 of 25

4

A waiver means involuntarily giving up a known contractual right.

Select one of the following:

  • True
  • False

Explanation

Question 12 of 25

4

Estoppel means trying to prevent someone from exercising a known right based on this or her previous actions.

Select one of the following:

  • True
  • False

Explanation

Question 13 of 25

4

(Virginia Law) Contracts are usually in a written form, but in the insurance industry it is not unusual for agents to place coverage in force before the insurer has an opportunity to issue the policy. This action is called binding coverage and can be done verbally or in writing. In the state of Virginia, the BINDER is good for what length of time?

Select one of the following:

  • 30 Days

  • 15 Days

  • 60 Days

  • 90 Days

Explanation

Question 14 of 25

4

Payment of a deposit or provisional premium is required to bind coverage.

Select one of the following:

  • True
  • False

Explanation

Question 15 of 25

4

A binder is a temporary contract of insurance and is valid for a short period of time. Binders cease at the earliest of the following listed circumstances or occurrences. (choose all that apply)

Select one or more of the following:

  • The expiration date as shown on the binder

  • A warranty is nullified due to the insurer's omission of reasonable expectation

  • Rejection of the application by underwriting

  • The insurer waives a contractual right without state approval

  • Issuance of the policy

  • The insurer omits the premium from the binder

Explanation

Question 16 of 25

4

The agent has binding authority.

Select one of the following:

  • True
  • False

Explanation

Question 17 of 25

4

On the recommendation of her father, Bonnie decided to submit an application for insurance coverage to NIG Insurance Co. The agent asked her about her past driving record, which did include 3 speeding tickets in the last 2 years. Bonnie wanted to get the coverage, so on the application, she checked the "yes" box to the question, "Have you had any moving violations in the last 3 years?". This act, as defined under Utmost Good Faith, is an example of what?

Select one of the following:

  • Material Fact

  • Representation

  • Concealment

Explanation

Question 18 of 25

4

Select from the dropdown lists to complete the text.

INSTRUCTIONS: Read the following policy excerpts and label them as 1) declarations, 2) insurance agreements, 3) conditions, exclusions. or definitions.
1. Named insured and mailing address: Leah Bachman, 11491 Bretson Rd., Elysium, VA 22616. ( definitions, declaration )
2. In this policy, "property damage" means physical injury to or destruction of property. ( Definitions, Declarations )
3. This policy does not cover any loss caused by earthquake. ( Declaration, Exclusion )
4. This policy may be canceled if the insured does not pay premiums when due. ( Insuring Agreements, Conditions )
5. This policy covers personal property owned or used by the insured. ( Insuring Agreements, Definitions )

Explanation

Question 19 of 25

4

Match the term describing an insurance contract with the statement that explains or defines it from the choices below.
STATEMENT: Prepared by one party, with little or no opportunity for bargaining by the other party.

Select one of the following:

  • Aleatory

  • Adhesion

  • Unilateral

Explanation

Question 20 of 25

4

Match the term describing an insurance contract with the statement that explains or defines it from the choices below.
STATEMENT: Insurer relies on insured's statements and insured relies on insurer's ability to fulfill its promises.

Select one of the following:

  • Indemnity

  • Utmost Good Faith

  • Conditional

  • Aleatory

Explanation

Question 21 of 25

4

Match the term describing an insurance contract with the statement that explains or defines it from the choices below.
STATEMENT: Dependent on an uncertain event.

Select one of the following:

  • Conditional

  • Aleatory

  • Unilateral

Explanation

Question 22 of 25

4

Match the term describing an insurance contract with the statement that explains or defines it from the choices below.
STATEMENT: Insures a person.

Select one of the following:

  • Indemnity

  • Conditional

  • Personal

Explanation

Question 23 of 25

4

Match the term describing an insurance contract with the statement that explains or defines it from the choices below.
STATEMENT: After a loss occurs, an individual is restored to the approximate financial condition she was in before the loss.

Select one of the following:

  • Indemnity

  • Aleatory

  • Utmost Good Faith

Explanation

Question 24 of 25

4

Match the term describing an insurance contract with the statement that explains or defines it from the choices below.
STATEMENT: One-sided contract; only the insurance company is legally bound to perform under the contract.

Select one of the following:

  • Unilateral

  • Conditional

  • Adhesion

Explanation

Question 25 of 25

4

Match the term describing an insurance contract with the statement that explains or defines it from the choices below.
STATEMENT: Includes conditions that both the insured and the insurer must comply with.

Select one of the following:

  • Adhesion

  • Utmost Good Faith

  • Conditions

Explanation

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