Personal Lines 2

Elements of a Legal Contract

100

________ of an offer must be unconditional and unqualified. If it is qualified or conditional, no agreement has been reached.

ACCEPTANCE

200

An exchange of value.

Ex:

Insured- Statements made on the application + premium

Insurer- Promises to pay claim ( based on policy)

CONSIDERATION

300

A proposal made by one of the potential parties to the contract.

OFFER

400

For a contract to be binding, both parties must have the legal capacity to make a contract.

COMPETENT PARTIES

500

To be valid, a contract must be for a legal purpose and not contrary to public policy.

LEGAL PURPOSE

Distinct Characteristics of insurance

100

The value received from the contract by each party is unequal.

ALEATORY

200

The contract is intended to restore the insured to the financial state he or she enjoyed prior to the occurrence of a loss.

INDEMNITY

300

Insurance policies are _______ contracts because they require certain conditions to be fulfilled in order for performance under the contract to be enforced.

CONDITIONAL

400

One sided, contracts because only one party is legally bound to perform under the contract.

UNILATERAL

500

Their provisions are written by only one party to the contract, and the other party is required to adhere to them.

ADHESION

2

100

An intentional act designed to deceive and induce another party to part with something.

FRAUD

200

A statement that the applicant believes to be true.

REPRESENTATIONS

300

A statement that is guaranteed to be true, and it may be relied on by the other party.

WARRANTY

400

The failure to disclose known facts.

CONCEALMENT

500

Once a right has been waived, it cannot be reinserted and used against the insured.

ESTOPPEL

3

100

A representation that is actually false.

MISREPRESENTATION

200

Contracts between the insurance co & the applicant or insured.

PERSONAL

300

The other party will not try to conceal pertinent information or act deceptively.

REASONABLE EXPECTATION

400

If the insurance co issues the policy but at a premium higher than the insured applied for, the insurance co has not accepted the insureds offer but has made a _________________.

COUNTEROFFER

500

The false information must have been a determining (or material) factor in the insurers decision to accept the risk.

MATERIAL MISREPRESENTATION

QUESTIONS

100

Which of the following is not an element of a legal contract?

A. Acceptance

B. Offer

C. Legal Purpose

D. Unilateral

D. UNILATERAL

200

Misrepresentations do not necessarily void insurance contracts. To do so, they must be

A. UNILATERAL

B. MATERIAL

C. PERSONAL

D. WARRANTIES

B. MATERIAL

300

Which of the following individuals would be considered a competent party in an insurance contract?

A. A 12 YEAR OLD

B. 21 YEAR OLD, NO JOB AND LIVES AT HOME

C. 30 YEAR OLD,  RECENTLY DIAGNOSED MENTALLY INSANE

D. 25 YEAR OLD WHO HAS BEEN HEAVILY DRINKING

B: 21 YEAR OLD

400

Anthony intentionally lied on his insurance application to obtain coverage. This is an example of

A. FRAUD

B. ESTOPPEL

C. ADHESION

D. CONCEALMENT

A. FRAUD

500

In an insurance contract, the consideration that the insured gives is called

A. THE OFFER

B. THE ACCEPTANCE

C. THE AGREEMENT

D. THE PREMIUM PAYMENT

D. THE PREMIUM PAYMENT