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Insurance and Contract Law
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Questions in this quiz (49)
1Insurance policies are legal contracts and are subject to the general law of contracts.
- ATrue
- BFalse
2To remember the 5 elements that must be present to form a valid legal contract - The acronym CLOAC stands for what?
- AConsideration
- BLegal Purpose
- COffer
- DAcceptance
- ECompetent Parties
3_______ refers to an exchange of value. Each party to an insurance contract must give something of valuable to the other.
ex. the insured provides _______ in the form of paying the premium and making truthful statements on the application.
in return, the insurer provides __________ in the form of a promise to pay the loss if they occur. *think of money- AConsideration
- BAcceptance
4Consideration ='s Money and statement made on application
- ATrue
- BFalse
5To be valid, a contract must be for ________ and not contrary to public policy.
Example- an agreement to purchase stolen goods would not be a valid contract b/c it lacks _____. The purpose of the insurance contract is the transfer of _____ risk.- ALegal Purpose
- BCompetent Parties
6Legal Purpose = Risk transfer doesn't violate the law
- ATrue
- BFalse
7An ____ is a proposal made by one of the potential parties to the contract. An insured who submits a completed application to an insured along with a payment for the first premium is making an _______ to become insured by the insurer.
- AOffer
- BAcceptance
8________ of an offer must be unconditional and unqualified. If _____ is qualified or conditional, no agreement has been reached.
- AAcceptance
- BOffer
9If the insurance company issues the policy but at a premium higher than the insured applied for, the insurance company has not accepted the insured's offer but has made a _________ to the insured.
If the insured is willing to pay the higher premium, the insured has accepted the insurance company's offer and an agreement has been made.- AAcceptance
- BCounteroffer
10Which of the following describe "Offer (made by insured)
- AInsured submits application and first month premium to insurer
- BInsurer accepts or insurer declines the risk
11Which of the following describe Counteroffer (made by insurer)
- AAgrees to issue policy but with higher premium or restrictions/exclusions
- BInsured either accepts conditions or withdraws their application
12Which of the following are considered competent parties?
- ALegal age (usually 18)
- BMentally Sane
- CSober
13Which of the following terms describes a legal agreement between two competent parties that promises a certain performance in exchange for a certain consideration?
- AAn offer
- BAn acceptance
- CA contract
- DA consideration
14Which of the following is not an element of a legal contract?
- AOffer
- BAcceptance
- CLegal Purpose
- DUnilateral
15Which of the following describe Adhesion?
- APolicy written by the insurance company
- BAdhesion ='s GLUE
- CInsured has no input
- DIf not clear, court will take the side of the insured
16Insurance policies are contracts of ADHESION. Their provisions are written by only one party to the contract, and the other party is required to adhere (or stick like glue) to them.
- ATrue
- BFalse
17Insurance contracts are written with no input from the insured. If there is any doubt regarding the wording of a contract of adhesion, the courts will interpret the meaning in favor of the insured since the insured has little or no input into the wording of a contract; therefore the insured cannot be held responsible for any unclear contract language
- ATrue
- BFalse
18Which of the following describe ALEATORY?
- AUnequal Value
- BPay small premium and have a large claim, or pay premiums for many years without a claim
19The insured may pay premiums for many years and never receive and money from the insurance if a loss does occur.
On the other hand, the insured may only pay a relatively small premium and receive thousands in return, if a covered loss occurs shortly after the policy goes into effect. *ALEATORY- ATrue
- BFalse
20Tim pays an annual premium of $1000 for his homeowners insurance. His house burns down and is a total loss after the policy is in force for 2 years. The insurer will be paying much more for the loss of the home compared to the $2000.
Such unequal receipt of value is the defining feature of an ALEATORY CONTRACT.- ATrue
- BFalse
21Insurance is a contract of UTMOST GOOD FAITH. This means that each party is entitled to a REASONABLE EXPECTATION that the other party will not try to conceal pertinent information or act deceptively. Violation will void the contract.
- ATrue
- BFalse
22Which describe Utmost Good Faith
- AThe insured and insurance company have a right to expect honesty from each other
- BViolation can void the claims of the offending party under a contract of utmost good faith
23Which of the following describe Unilateral?
- AInsured may cancel the contract anytime
- BInsurer must pay covered losses
- Conly one party is legally bound to perform under the contract.
- DAs long as the insured keeps the contract in force by paying the premiums, the insurer is required by law to pay for any covered losses that occur
24Insurance policies, such as auto or homeowners, are PERSONAL contracts. They are contracts between the insurer and the insured; in most cases, they are non-transferable. with a homeowners policy, for example, the insurer evaluates not only the conditions of the property but also the insured as a risk. A different person or family could represent a different risk, so the contract does not allow a change of insureds.
- ATrue
- BFalse
25Insurance policies are CONDITIONAL contracts b/c they require certain conditions to be fulfilled in order for performance under the contract to be enforced.
ex- conditional ='s insured must pay the premium for coverage and file a claim if a loss occurs- ATrue
- BFalse
26Insurance policies are contracts of INDEMNITY meaning the contract is intended to restore tge insured to the financial state prior to the loss- NO MORE, NO LESS
The principal of restoring an insured to his or her pre-loss financial state is known as INDEMNIFICATION.- ATrue
- BFalse
27A REPRESENTATION is a statement that the applicant believes to be TRUE.
statements made on application by the insured are representations. and a MISREPRESENTATION is a representation that is actually false- ATrue
- BFalse
28Misrepresentations do not necessarily void insurance contracts. In order to void a contract, they must be MATERIAL MISREPRESENTATIONS- that is, the false information must have been a determining (or material) factor in the insurer's decision to accept the risk.
*if the material would have resulted in a higher premium or rejected the app. then the information is material.- ATrue
- BFalse
29A WARRANTY is a statement that is guaranteed to be true, and it may be relied on by the other party.
*If the warranty isnt kept, then there is a breach of warranty that voids the contract.- ATrue
- BFalse
30Representations vs Misrepresentations
Select which of the following are True statements:- ARepresentations- believed to be true *statements on applications are considered representations
- BMisrepresentations- information given that is not true but would not affect the insurance company's decision
- CMaterial Misrepresentations - information given that is not true and DOES affect the insurer's decision
31Which below are true about a warranty in reference to an insurance contract?
- AAlways made by the insurance company, a breach of warranty may void the contract
- BMay be made by the insured, a breach of warranty may void the contract
32______ is a failure to disclose known facts and the insurer may be able to void the insurance contract if they can prove that an applicant or insured intentionally _____ a material fact.
- AConcealment
- BFraud
- CWaiver
33Which of the following are true regarding CONCEALMENT regarding an insurance contract or policy?
- AFailure to disclose
- BConcealing or hiding information
- CIf intentional, and the information is material (important) coverage could be voided
- DIf NOT intentional, coverage can NOT be voided
34______ is an intentional act designed to deceive and induce another party to part with something of value.
_______*Includes intentional misrepresentation and concealment of material information.
****intentional act to cheat another****- AFraud
- BConcealment
- CWaiver
35A dishonest vehicle owner who was involved in the accident may take it as an opportunity to fix previous damage to the automobile or receive treatment on his back unrelated to the accident. is an example of ________
- AFraud
- BConcealment
36______ is defined as the intentional and voluntary giving up of a known right.
ex: if a policy is issued to insure a building without the company ever asking the age of the building, the insurance company has acted as if the age doesn't matter - then the insurance company created a ____- AWaiver
- BEstoppel
37_____ means that once a right has been waived, it cannot be reinserted and used against the insured.
ex: if the building that was insured without the insured asking the age burned down, and the insurance company tried to deny the claim by stating that they would not have insured the building if they would've known it was built in 1864. ___ says they must pay the claim b/c they created a waiver by not asking about the buildings age.- AEstoppel
- BFraud
- CWaiver
38Jill is filling out an insurance application with information that she believes to be true. The information that she is providing is considered
- Aa representation
- Ba misrepresentation
- Ca warranty
39a guarantee that something is true is
- Aa warranty
- Ba representation
- Ca misrepresentation
40an insurance contract is prepared by one party (the insurance company) with little or no opportunity for the other party (the insured)to bargain. This characteristic is called
- Aconditional
- Bunilateral
- Caleatory
- Dadhesion
41in insurance, an insured may pay premiums for many years without having a loss, or an insured may suffer a loss and get a larger amount of money from the insurance company than he has paid in premiums. For this reason, an insurance contract is
- Aaleatory
- Bunilateral
- Cpersonal
- Dconditional
42IN an insurance contract, the consideration that the insured gives is called
- Athe premium payment
- Bthe offer
- Cthe acceptance
- Dthe agreement
43which of the following individuals would be considered a competent party in an insurance contract?
- ACurt, who turns 12 at the end of the year
- BStephen, who is 21, has a job and lives with parents
- Cmaria, who has been drinking heavily at a bar prior to meeting with her insurance agent
- DAlexis, who recently was diagnosed as mentally insane
44An agreement between two parties is also called
- Aadhesion
- Baleatory
- Coffer and acceptance
- Dunilateral
45Anthony intentionally lied on his insurance application to obtain coverage. This is an example of
- Aconcealment
- Bfraud
- Cestoppel
- Dadhesion
46the failure to disclose known facts is
- Aa material misrepresentation
- Bconcealment
- Cwaiver
- Dfraud
47A statement that is guaranteed to be true is
- Aa warranty
- Ba representation
- Can impersonation
- Da misrepresentation
48Misrepresentations do not necessarily void insurance contracts. Top do so, they must be
- Amaterial
- Bunilateral
- Cpersonal
- Dwarranties
49Allison's auto insurance policy is due on the 10th of each month. Ever since she has had the policy, she has sent the premium in on the 16th of the month. The insurer has been accepting the premium this was for the past 5 years. A new CEO takes over and decides to cancel Allison's policy for a nonpayment of premium. Allison contests this decision and legally gets the policy reinstated. The decision to reinstate the policy is an example of
- Aestoppel
- Bwaiver
- Cadhesion
- Daleatory
Information
- Description
- Insurance is a transfer of the risk of loss from the insured to the insurer in exchange for a payment. AND in insurance, the insurance policy is a contract between the insurer and the policyholder
- Author
- KYLE COLVIN
- Language
- English
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- 18
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