Hs 311 Insurance, Ch 6--T/f

Front 1

T/F
An insurance contract is of little value to the policyowner unless a claim for coverage is presented.

Back 1

False. Policyowners realize the immediate benefits of relief from anxiety and freedom from worry about financial losses.

Front 2

T/F
Insurance transfers the financial risk of losses to the insurer.

Back 2

True

Front 3

T/F
A valid offer to buy life insurance may be transmitted orally.

Back 3

False. A written application and the first premium payment are usually submitted by the applicant as the offer to the insurer through the agent, who issues a conditional receipt.

Front 4

T/F
A 16-year-old client can always void his auto insurance policy because he is still a minor.

Back 4

False. Clients under the age of 21 (18 in some states) are considered minors and can void many types of insurance contracts and get a full refund of premiums paid. However, state laws may hold that 16-year-olds have the legal capacity to enter into binding auto insurance contracts.

Front 5

T/F
An insurance contract is a bilateral contract.

Back 5

False. An insurance contract is a unilateral contract.

Front 6

T/F
Property and liability insurance policies are freely assignable by policyowners without the insurer's approval.

Back 6

False. Because they are personal agreements between the insurer and the policyowner, property and liability insurance policies are not freely assignable by policyowners. They have to obtain the insurer's approval to affect a transfer. Life insurance policies, however, are freely assignable by policyowners.

Front 7

T/F
An example of a condition precedent in an insurance contract is that the insured is required to cooperate with the insurer in defending a liability claim.

Back 7

False. This is an example of a condition subsequent.

Front 8

T/F
Most insurance contracts are contracts of adhesion.

Back 8

True

Front 9

T/F
If there is an ambiguous clause in an insurance contract, the courts will typically interpret the clause in favor of the policyowner.

Back 9

True

Front 10

T/F
Under a contract of indemnity, the insurer pays an amount that reflects the amount of the loss up to the policy limit, subject to other policy provisions.

Back 10

True

Front 11

T/F
Life insurance policies are considered contracts of indemnity.

Back 11

False. Life insurance contracts are valued contracts and are not contracts of indemnity.

Front 12

T/F
Under the principle of subrogation, if the insurer indemnifies the insured for a loss, the insurer obtains whatever rights the insured had against responsible third parties

Back 12

True

Front 13

T/F
The misrepresentation or concealment of a material fact by an applicant for insurance will void a contract that the insurer has issued to the applicant.

Back 13

False. The misrepresentation or concealment of a material fact by an applicant for insurance will not void the contract but will make it voidable by the insurer.

Front 14

T/F
An innocent misrepresentation by an applicant for insurance constitutes fraud.

Back 14

False. Fraud involves an active intent to deceive. The applicant making the statement must know that it is false or make the statement in reckless disregard of whether it is true or false.

Front 15

T/F
Some exclusions are found in insurance policies because the risks are typically covered by other insurance.

Back 15

True

Front 16

T/F
The requirement that the insured must cooperate with the insurer in legal proceedings against the insured by a third-party claimant is an example of a condition subsequent.

Back 16

True

Front 17

T/F
Under an initial deductible, the insurer will pay for all losses up to a specified deductible amount.

Back 17

False. Under an initial deductible, the insurer will pay for losses only after they exceed a specified deductible amount. The insured must absorb all losses up to that specified amount.

Front 18

T/F
As a general legal principle, whenever the wording in an endorsement or rider conflicts with the terms of the policy to which it is attached, the endorsement or rider takes precedence.

Back 18

True