Exam 2

Question 1

What are the 5 legal aspects of the insurance contract?

Answer 1

Contract of indemnity, personal contract, contract of adhesion, aleatory contract, good faith

Question 2

contract of indemnity

Answer 2

at the heart of understanding insurance, explains why insurance is not gambling, needs to be put back in the same financial position that occurred prior to the loss, a life insurance policy is not this, obligates one party to pay the damages or losses sustained by another party as a result of certain future occurrences

Question 3

personal contract

Answer 3

insurance policy is assigned to a person to cover their property, expires with sale of the asset - non-transferrable, insurance wants to underwrite a specific person or entity

Question 4

contract of adhesion

Answer 4

“take it or leave it,” accept or decline contract, no negotiations, a contract prepared by the insurance company that is accepted or rejected by the insured, courts typically side with insured person when it comes to a misunderstanding

Question 5

aleatory contract

Answer 5

outcome is effected by chance and the number of dollars given up by the contractual parties are not equal

Question 6

good faith

Answer 6

loss was true, utmost level of trust or no insured people, assume truthful on application and not concealing anything

Question 7

insurance contract

Answer 7

the transfer of risk from the individual to the insurance company is accomplished through a contractual arrangement under which the insurance company, in consideration of the premium paid by the insured and his/her promise to abide by the provisions of the contract, promises to indemnify the insured or pay an agreed amount, in the event of the signified

Question 8

an insured policy is what

Answer 8

an insured contract

Question 9

how is the insurance contract extended

Answer 9

by the individual reaching out to the company, the product is then accepted or declined at face value

Question 10

5 key elements of a contract

Answer 10

offer and acceptance, consideration, legal objective, competent parties, legal form

Question 11

offer and acceptance

Answer 11

definite offer is extended by insurance company, the prospect then accepts or denies at face value, must be spelled out and exact and other party must accept it in exact terms, offer made by consumer and acceptance is when the policy is issued

Question 12

legal objective

Answer 12

insurable ownership (interest) in the item

Question 13

competent parties

Answer 13

the basic principle is that some parties are not capable of understanding the contract they would enter into so therefore are not bound by these agreements- under 18 years old can easily void a contract like with car insurance

Question 14

legal form

Answer 14

has to be a legal document

Question 15

express

Answer 15

give authority from company to agent, spells out the relationship

Question 16

implied

Answer 16

incidental authority needed to express exact authority, there inherently will be implied authority, doesn’t exactly spell it out

Question 17

apparent

Answer 17

believe that one can do the job, however does not have coverage to do so, think coverage is provided

Question 18

Father of Life Insurance

Answer 18

Solomon Huebner

Question 19

human life value

Answer 19

the capitalized monetary worth of the earning capacity resulting from the economic focuses that are incorporated within our being

Question 20

three key life insurance terms

Answer 20

insured person, beneficiary, policy owner

Question 21

insured person

Answer 21

the person who dies and triggers the claim to be made, the individual whose life is being insured, if they die someone or some entity gets paid

Question 22

beneficiary

Answer 22

the person who gains a monetary amount of money in the case the insured person dies, the entity who gets paid, usually a person but can also be a charity organization or business

Question 23

policy owner

Answer 23

the person who pays the premiums and decides the terms and beneficiary of the policy, the person who owns the policy, usually the insured person but not always, has all rights to the policy

Question 24

term life insurance

Answer 24

set up for a specific period of time, no cash value, pure protection, cost typically lower than cash value life insurance, no savings element, cost determined by age or when you choose to renew it

Question 25

whole life insurance

Answer 25

protection for whole life, premiums set amount for life, cash value, typically higher cost than term

Question 26

buy term and invest the rest

Answer 26

people do not normally end up investing the rest and instead they spend and have no investments to show from this

Question 27

types of whole life insurance

Answer 27

universal life, variable life, other cash value life hybrids

Question 28

one unique use of life insurance by Chad

Answer 28

key person insurance- used to cover employees you could not live without

Question 29

what is at the heart of insurance

Answer 29

the transfer of risk

Question 30

how is the transfer of risk from the individual to the insurance company accomplished

Answer 30

through a contractual arrangement under which the insurance company, in consideration of the premium paid by the insured and his/her promise to abide by the provisions of the contract, promises to indemnify the insured or pay an agreed amount, in the event of the specified loss

Question 31

policy

Answer 31

contract between you and the insurance company

Question 32

three types of agency authority

Answer 32

express, implied, apparent

Question 33

consideration of an insurance company

Answer 33

the promise to pay in the event of a covered loss

Question 34

consideration

Answer 34

items of value from one party to another, promise- premium

Question 35

insurance is primarily regulated at what level

Answer 35

the state level

Question 36

the financial loss of life

Answer 36

direct expenses and loss of future income earning potential

Question 37

life insurance is not

Answer 37

a contract of indemnity

Question 38

why do people not purchase life insurance

Answer 38

expense of people passing away

Question 39

how is life insurance different from property and liability insurance

Answer 39

a property policy is a contract of indemnity, life insurance is not because you don’t know how long someone is going to live

Question 40

universal life

Answer 40

similar to whole life, but start earning cash value right off the bat, higher interest rate, interest-sensitive product, cash value is not invested in the market

Question 41

variable universal life

Answer 41

based on market results

Question 42

group term insurance is as good as

Answer 42

your employment