Insurance MCQ

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 Answer: B) at the time of application

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 Answer: C) statements made in the application and the premium

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 Answer: D) an offer and acceptance of the contract terms

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 Answer: B) Equal consideration is required between the involved parties

The deeds and actions of a producer indicate what kind of authority? A) Express B) Apparent C) Implied D) Conditional Answer: B) Apparent

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 business. Bob dies 12 months later. The policies continue in force with no change. Both partners are still married at the time of Bob's death. In this situation, who will receive Bob's policy proceeds? A) Tom's spouse B) Bob's estate C) Bob's spouse D) Tom Answer: D) Tom

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 Answer: C) Only the insurer is legally bound

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 Answer: A) express authority

The importance of a representation is demonstrated in what rule?  A) Insurable interest B) Law of adhesion C) Materiality of concealment D) Consideration clause Answer: C) Materiality of concealment

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 Answer: C) Indemnity contract

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 provisions to a contract Answer: C) the authority to represent the insurer

What are an applicant's statements concerning occupation, hobbies, and personal health history regarded as? A) warranty B) guarantee C) representation D) collateral Answer: C) representation

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 Answer: C) Insurable interest

Which contract element is insurable interest a component of? A) Competent parties B) Offer and acceptance C) Consideration D) Legal Purpose Answer: D) Legal purpose

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 Answer: B) A paid premium

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 Answer: B) Implied authority

Ambiguities in an insurance policy are always resolved in favor of the  A) insured B) producer C) insurer D) underwriter Answer: A) insured

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 Answer: C) there must be legal reasons for entering into the contract

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) Authority given to handle claims and process payments D) Authority given to an agent to act outside the scope of the agency agreement Answer: 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

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 kind of enforceable promise Answer: C) the terms must be accepted or rejected in full