Xcel Life Insurance: Chapter Two Quiz
This flashcard set explains important legal features of insurance contracts, such as aleatory and adhesion contracts, insurable interest, warranties, and the insurer’s consideration. It highlights how insurance involves unequal value exchange and is governed by strict legal rules.
insurance policies are considered aleatory contracts becauase
performance is conditioned upon a future occurrence
this means there is an element of chance and potential for unequal exchange of value or consideration for both parties. an aleatory contract is conditioned upon the occurrence of an event
Key Terms
insurance policies are considered aleatory contracts becauase
performance is conditioned upon a future occurrence
this means there is an element of chance and potential for unequ...
a contract where one party either accepts or rejects the terms of a contract written by another party is called a contract of
adhesion
what is the consideration given by an insurer in the Consideration clause of a life policy?
promise to pay a death benefit to a named beneficiary
a policy of adhesion can only be modified by whole?
the insurance company
insurance policies are offered on a “take it or leave it” basis which make them
contracts of adhesion
a life insurance policy would be considered a wagering contract WITHOUT
insurable interest
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| Term | Definition |
|---|---|
insurance policies are considered aleatory contracts becauase | performance is conditioned upon a future occurrence this means there is an element of chance and potential for unequal exchange of value or consideration for both parties. an aleatory contract is conditioned upon the occurrence of an event |
a contract where one party either accepts or rejects the terms of a contract written by another party is called a contract of | adhesion |
what is the consideration given by an insurer in the Consideration clause of a life policy? | promise to pay a death benefit to a named beneficiary |
a policy of adhesion can only be modified by whole? | the insurance company |
insurance policies are offered on a “take it or leave it” basis which make them | contracts of adhesion |
a life insurance policy would be considered a wagering contract WITHOUT | insurable interest |
which of these is considered a statement that is assured to be true in every respect? | warranty |
a life insurance arrangement that circumvents insurable interest statues is called | Investor-originated life insurance (IOLI) this is done with an investor persuades an individual to take out life insurance specifically for the purpose of selling the policy to the investor. The investor compensates the insured and makes the premiums, then collects the death benefit when the insured dies |
Q purchases a $500,000 life insurance policy and pays $900 in premiums over the first six months. Q dies suddenly and the beneficiary is paid $500,000. this exchange of unequal values reflects which of the following insurance contract features? | aleatory the amount the insured will pay in premiums is unequal to the amount that the insurer will pay in the event of a loss |
E and F are business partners. Each takes out a $500,000 life insurance policy on the other, naming himself as primary beneficiary. E and F eventually terminate their business, and four months later E dies. Athough E was married with three children at the time of death the primary beneficiary is still F. however, an inurable interest no longer exists. Where will the proceeds from E’s life insurance policy be directed to? | F |
which of these arrangements allows one to bypass insurable interest laws? | IOLI- invest originated life insurance |
which of these is NOT a type of agent authority? | principal |
life and health insurance policies are | unilateral contracts |
who makes the legally enforceable promises in a unilateral insurance policy? | insurance company |
at what point does an informal agreement become a binding contract? | when consideration is provided by one of the parties on the contract |
statements made on a insurance application that are believed to be true to the best of the applicants knowledge are called | representations |
if a contract of adhesion contains complicated language to whom would the interpretation be in favor of? | insured |
in regards to representations or warranties, which of these statements is True? | if material to the risk, false representations will NOT void a policy |
in an insurance contract, the insurer is the only party who makes a legally enforceable promise. What kind of contract is this? | unilateral |
STOLI has been found to be in violation of which of the following contractual elements? | legal purpose “insurable interest” |
when must insurable interest be present in order for a life insurance policy to be valid? | when the application is made |
which of these arrangements allows one to bypass insurable interest laws? | investor-originated life insurance |
taking receipt of premiums and holding them for the insurance company is an example of | fiduciary responsibility |
what is the consideration given by an insurer in the consideration clause of a life policy? | promise to pay a death benefit to a named beneficiary |
the consideration clause of an insurance contract includes | the schedule and amount of the premium payments |