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Exam 9: Fundamental Legal Principles

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Question 31

Multiple Choice

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What is the practical effect of an insurance contract being a contract of adhesion?

A) The insurer can refuse to pay claims if the insured has not complied with all policy provisions.
B) The insured can assign the policy only with the insurer's consent.
C) The insurer can sue the insured for failure to pay any premiums.
D) The policy is interpreted in the insured's favor if the policy contains any ambiguities or uncertainties.

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Question 32

Multiple Choice

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Which of the following statements about consideration in an insurance contract is (are) true? I.The insured's total consideration is submission of a completed application. II.The insurer's consideration is the promise to do those things specified in the policy.

A) I only
B) II only
C) both I and II
D) neither I nor II

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Question 33

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David owns a liquor store in a high-crime area. In order to obtain a reduced insurance premium, David promised to have a burglar alarm operating at the store when the store was closed. This agreement, which was incorporated into the insurance contract, is an example of a

When must an insurable interest legally exist in property insurance for an insured to receive payment for a loss from the insurer?

The principle of utmost good faith is supported by all of the following legal doctrines EXCEPT

A contract in which the values exchanged are not equal because chance is involved is called a(n)

Which of the following types of insurance policies can usually be assigned without the insurer's consent? I.Life insurance II.Property insurance

When Ben applied for life insurance, he was asked on the application if he smoked or used tobacco products. Ben answered "No." In reality, Ben smokes two packs of cigarettes a day. The policy was issued at the "preferred, nonsmoker rate." If Ben dies 6 months after the policy is issued, upon what grounds will the insurer be able to legally deny the claim?

Which of the following statements about subrogation is true?

When must an insurable interest legally exist in life insurance?

Charles Blake told Wendy that he was an agent for Easy Pay Life Insurance Company. He presented no credentials. He asked Wendy some questions about her health and activities, and recorded the answers on scrap paper. He collected a $250 cash premium from Wendy. When Wendy did not receive a policy from Easy Pay, she contacted the company. Easy Pay said they do not have an agent named Charles Blake. Easy Pay is not responsible for Wendy's loss of $250 because

Kim purchased a one-year property insurance policy. She agreed to pay half the premium when she bought the coverage, and the other half six months later. If Kim fails to pay the second premium, the insurer cannot sue her for the premium because insurance contracts are

Why does the insured get the benefit of the doubt if an insurance policy contains any ambiguities or uncertainties?

Some states have a law that requires payment of the face amount of insurance to the insured if a total loss to real property occurs from a peril specified in the law. These laws are called

All of the following statements about subrogation are true EXCEPT

Why can an insurer refuse to pay a claim if an insured fails to abide by the policy provisions?

Why are insurance contracts said to be contracts of adhesion?