Module 2 Flashcards
(26 cards)
Which of the following statements about contractual exclusions is FALSE?
a) The insurer applies a specific exclusion clause until the contract is in effect with regard to declared diseases in group insurance.
b) The insurer cannot invoke any exclusions except those clearly indicated under an appropriate heading in an insurance of persons contract.
c) The insurer can exclude from the policy certain diseases known to the participant before the effective date of the contract.
d) The insurer cannot exclude coverage due to an undisclosed disease unless the disease appears within the first two years of the insurance.
In group insurance, a specific exclusion clause concerning declared diseases or ailments applies, in theory, for limited periods of 13 or 26 weeks. After that time, the exclusion is no longer in effect if the participant worked during that time.
The insurer cannot invoke any exclusions except those clearly indicated under an appropriate heading in an insurance of persons contract. The insurer can exclude from the policy certain diseases known to the participant before the effective date of the contract. The insurer cannot exclude coverage due to an undisclosed disease unless the disease appears within the first two years of the insurance.
Which of the following represents the two stages of the formation of a group insurance contract?
a) Offer by the policyholder and acceptance by the insurer
b) Offer by the insurer and acceptance by the life insured
c) Offer by the policyholder and acceptance by the plan member
d) Offer by the insurer and acceptance by the policyholder
The two stages of the formation of a contract are the offer by the policyholder (the application) and the acceptance by the insurer. Once the parties have given their consent, the group insurance policy takes effect on the date determined by the policyholder and the insurer.
Esther owns a $500,000 life insurance policy which does not have a designated beneficiary. However, Esther’s will states that her daughter Melanie is the irrevocable beneficiary of her insurance proceeds. Which of the following is true about this designation?
a) If Esther revokes her will, the transmission of the face amount in the form of the designation of a beneficiary will also be revoked.
b) If a court invalidates the will for a defect of form only, the transmission of the face amount in the form of a designation of beneficiary will be invalidated.
c) Melanie’s designation as an irrevocable beneficiary cannot be revoked even if Esther intends to do so.
d) Melanie’s consent will be required if Esther wishes to make any changes to the will with regards to her insurance proceeds.
If Esther revokes her will, the transmission of the face amount in the form of the designation of a beneficiary will also be revoked.
A will is always revocable, i.e., it can be cancelled. If the testator revokes his will, the transmission of the face amount in the form of a bequest or the designation of a beneficiary is also revoked. It should also be noted that the designation of a beneficiary in a will is always revocable, even if the testator has specified that the designation is irrevocable. It is important to note that a designation or revocation contained in a will does not take precedence over a designation of a beneficiary made prior to the signing of the will unless the will refers to the insurance policy in question or unless the intention of the testator is manifest.
In group insurance, when the policyholder is not the employer, the existence of a mandate given to the policyholder may stem from all of the following, EXCEPT:
a) a deemed disposition.
b) a collective agreement.
c) a statute.
d) a written instrument.
Where the policyholder is not the employer, the existence of a mandate given to the policyholder may stem from a collective agreement, or it may result from a statute (such as a statute that creates a professional order) or from another written instrument that states who has the authority to represent the members.
Ref. 2.7.7.1
When a client has taken out a policy on the life of a third party rather than on his own, he will likely designate a policyholder who will become the owner of the contract if the client dies before the insured. What is the name given to this type of policyholder?
a) A subrogated policyholder
b) A designated policyholder
c) An assigned succession
d) A life insured succession
When the client has taken out a policy on the life of a third party rather than on his own, he may designate a “subrogated” policyholder who will become the owner of the contract (the holder of the policy) if the client dies before the insured.
ean is employed at a manufacturing company and as part of his employment, he is required to participate in his employer’s group insurance policy offered by ABC Insurance. The essential terms of the contract are drafted by ABC Insurance without being freely negotiated with the participants. Which of the following types of contracts is mentioned in this scenario?
a) Contract of adhesion
b) Contract of mutual agreement
c) Contract of instantaneous performance
d) Contract of successive performance
According to the C.C.Q., the main characteristic of a contract of insurance is that it is an adhesion contract based on good faith. In group insurance, the notion of contract of adhesion primarily involves the relationship between the insurer and the participant. The concepts of adhesion and good faith are not the only characteristics of group insurance contracts; there is also the concept of group.
Nick applies for a life insurance policy on the life of his wife, Maria, through his friend, Alex, who is an insurance of persons representative. Alex is aware of Maria’s drinking habits and her recent alcohol-related illness diagnosis. In this case, who has the obligation to inform the insurer about Maria’s alcohol use?
a) Alex
b) Nick
c) Maria
d) No one
Nick has the obligation to inform the insurer about Maria’s alcohol use. The client does not have to declare facts known to the insurer or presumed to be known from their notoriety. The insurance of persons representative knew that the insured had an alcohol problem. Since the insurance representative, knew about the insured’s problems, the insured was not obliged to declare them to the insurance of persons representative. However, the insurance representative must declare these facts to the insurer which, otherwise, could exercise recourse against the representative.
Nilofer is the life insured of a $400,000 life insurance contract and her husband, Jacob, is the beneficiary. If Nilofer dies, how many days does the insurer have to pay the death benefit to Jacob after receiving proof of loss?
a) 30 days
b) 60 days
c) 10 days
d) 7 days
The insurer has a maximum of 30 days in life insurance and 60 days in accident and sickness insurance to pay the insured amount. However, this time limit runs only once the insurer has received all the requested documents (proof of loss).
In Québec, prior to the Act respecting insurance, those designated as beneficiaries under the Husbands and Parents Life Insurance Act were called:
Which of the following insurance policyholders should notify the insurer of an increase of an occupational risk?
a) Steven who holds an individual disability insurance policy
b) Kathy who holds a universal life insurance policy
c) Geetha who owns a whole life insurance policy with cash surrender value
d) Philo who owns a renewable term insurance policy
Steven should notify the insurer if there is an aggravation or increase of an occupational risk because he holds an accident and sickness insurance policy. In life insurance, the client does not have to notify the insurer of an aggravation of the risk, as the assessment of the risk occurs when the contract is entered into. The insured under a life insurance contract is therefore not required to declare, during the contract, that he now has a serious illness.
In Québec, prior to the Act respecting insurance, those designated as beneficiaries under the Husbands and Parents Life Insurance Act were called:
a) preferred beneficiaries.
b) ordinary beneficiaries.
c) familial beneficiaries.
d) relational beneficiaries.
In Québec, prior to the coming into force of the Act respecting insurance on October 20, 1976, there were two categories of beneficiaries: Preferred beneficiaries, i.e., those designated as beneficiaries under the Husbands and Parents Life Insurance Act. Under this statute, a husband could designate his wife as a beneficiary; and ordinary beneficiaries, i.e., those designated as beneficiaries under the Civil Code of Lower Canada.
Sofia is the life insured of a whole life insurance policy which she purchased three years ago. Recently, she was diagnosed with heart disease which increases her risk. Which of the following actions should Sofia take with regard to her increased risk?
a) She need not notify the insurer about the increase in risk because it is a life insurance contract.
b) She should notify the insurer immediately to update her contract.
c) She should notify the insurer immediately to avoid a reduction in the payment of benefits.
d) She need not notify the insurer as the incontestability period has passed.
There is no need for Sofia to notify the insurer about the increase in risk.
In life insurance, the client does not have to notify the insurer of an aggravation of the risk, as the assessment of the risk occurs when the contract is entered into. The insured under a life insurance contract is therefore not required to declare, during the contract, that she now has a serious illness.
Yasmin purchases a $200,000 life insurance contract and names her daughters, Jia, Asifa, and Mira, as the beneficiaries. Yasmin does not specify the share each one will receive. If Jia dies before Yasmin, how much will Asifa and Mira receive upon Yasmin’s death?
a) $100,000 each
b) $70,000 each
c) $66,667 each
d) $50,000 each
If Jia predeceases Yasmin, when Yasmin dies, Asifa and Mira will each receive half of the total insured amount ie. $100,000 each. The client will designate several people as beneficiaries of his insurance. They are referred to as “co-beneficiaries” (art. 2456, para. 2 C.C.Q.). Where one of the co-beneficiaries predeceases the insured, the provisions of the C.C.Q. concerning accretion in matters of successions generally apply.
90-year old Irwin was the life insured of an insurance contract and his son, Harry, was the designated beneficiary. Harry lives abroad and Irwin had not heard from him for more than twelve years. Irwin died recently and Harry is unaware of the insurance contract. What happens if the death benefit remains unclaimed for ten or more years?
a) The insurer must remit the unclaimed insurance proceeds to Revenu Québec and Harry can claim this amount at any time.
b) The insurance proceeds will be paid to Irwin’s estate.
c) After two years of remaining unclaimed, Harry loses his rights over the amount.
d) There is no time limit and the insurer keeps the amount until Harry makes a claim.
The insurer must remit the unclaimed insurance proceeds to Revenu Québec and Harry can claim this amount at any time.
In life insurance, the insurer must remit any life insurance proceeds that qualify as unclaimed property to Revenu Québec. The person entitled to the death benefit may claim this amount from Revenu Québec at any time.
While filling his client’s insurance application form, Paul stresses the importance of information accuracy. He requests his client to give precise information about his age and health without disregarding any relevant information. Which of the following justifies Paul’s actions?
a) An insurance contract is a contract “of the utmost good faith.”
b) An insurance contract is a contract of mutual agreement.
c) An insurance contract is a contract of adhesion.
d) An insurance contract requires insurable interest to be valid.
Good faith governs the parties’ conduct at all stages of the contract, including when it is entered into and during its performance. The degree of good faith required for insurance contracts is higher than for other contracts. As a result, it is said that an insurance contract is a contract “of the utmost good faith. For the client, utmost good faith means being honest and competent, such that even if he is acting in good faith, an inaccurate statement by him could result in a sanction (nullity of the contract). Although this obligation of utmost good faith historically applies to the client at the time of the initial declaration of risk, the insurer is also bound to act with good faith in its obligations.
Vihaan applies for a life insurance policy and his application is approved. He has to pay his premiums as per the contract in order for the beneficiary to be eligible to receive the death benefit. The requirement to pay the premiums shows that an insurance contract is a contract:
a) by gratuitous title.
b) of mutual agreement.
c) of utmost good faith.
d) by onerous title.
The requirement to pay the premiums shows that an insurance contract is a contract by onerous title. An insurance contract is a contract by onerous title, as opposed to a contract by gratuitous title, i.e., the client has to pay the premiums.
Uma is the life insured and her husband, Kumar, is the policyholder and the designated beneficiary of a life insurance policy. Uma does not return from work one day and has been missing for four years now. How many more years will Kumar have to wait for a declaratory judgment of death in order to obtain Uma’s death benefit?
Kumar will have to wait for three more years for a declaratory judgment of death in order to obtain Uma’s death benefit.
In the case of the disappearance of the insured, it may be impossible to prove the insured’s death even though the death seems likely. Where death is uncertain, a declaratory judgment of death can only be obtained after seven years have elapsed since the disappearance.
While filling her life insurance policy application, Vinita conceals information about her recent diagnosis in order to avoid paying hefty premiums. If the insurer comes to know about this concealment after issuing Vinita’s contract, it is most likely to result in all of the following, EXCEPT:
a) an exclusion being applied to the policy.
b) an annulment of the insurance contract.
c) a cancellation of the insurance contract.
d) a reduction of insurance coverage.
The insurer will not apply an exclusion after the policy is issued. The insurer is most likely to terminate or cancel the contract or reduce coverage.
Certain reasons specific to insurance law allow for the termination (annulment) or cancellation of an insurance contract, such as the absence of an insurable interest or misrepresentations, concealment or fraud regarding the risk. Unlike annulment, cancellation only cancels the contract for the future. Once discovered, misrepresentations and concealment can influence the insurer’s appraisal of the risk and then justify the termination (annulment) or reduction of insurance coverage.
Which of the following statements about the requirement of the Act respecting prescription drug insurance is TRUE?
a) All Quebeckers must be covered by prescription drug insurance either through a public or a private insurance plan.
b) An insurer can offer individual prescription drug insurance plans under the Act respecting prescription drug insurance.
c) Quebeckers who are employed must be covered under the Public Prescription Drug Insurance Plan administered by the RAMQ.
d) An insurer cannot offer prescription drug insurance to members of a professional corporation.
All Quebeckers must be covered by prescription drug insurance either through a public or a private insurance plan.
Since January 1, 1997, all Quebeckers must be covered by prescription drug insurance, whether through a private insurance plan or through the public plan administered by the Régie de l’assurance maladie du Québec (RAMQ).
Individual prescription drug insurance is prohibited under the Act respecting prescription drug insurance. An insurer may offer prescription drug insurance to members of a professional corporation. All Quebeckers under the age of 65 who have access to a private plan that is offered to a group in accordance with the law must subscribe to the prescription drug insurance coverage under a group insurance contract.
Ragu purchased a life insurance contract on the life of his wife, Reshma, and named himself as the beneficiary. He also named his son, Avyukt, to be the new beneficiary in case Ragu dies before Reshma. In this case, Avyukt is the:
a) subrogated beneficiary.
b) original beneficiary.
c) contractual beneficiary.
d) successive beneficiary.
Avyukt is the subrogated beneficiary. If the designated beneficiary dies before the client, this designation lapses and the subrogated beneficiary becomes the new designated beneficiary of the insured amount, replacing the designated beneficiary who died before the client.
Which of the following statements accurately represents the rules relating to the formation of a contract?
a) An agreement between the client and the insurer is sufficient for the formation of an insurance contract.
b) A contract of insurance is formed upon acceptance by the client of the insurer’s offer.
c) The place where the contract is formed is the place where the client signed the application form.
d) For an insurance contract to be validly formed, there must be a consensual agreement between the client and the representative.
An agreement between the client and the insurer is sufficient for the formation of an insurance contract. For an insurance contract to be validly formed, there must be a meeting of minds between the client, who submits an insurance application, and the insurer. Under article 2398 C.C.Q., a contract of insurance is formed upon acceptance by the insurer of the client’s application. In addition, the place where the contract is formed is the place where the insurer accepted the application.
Pavitra was the life insured of a life insurance contract owned by her husband Prateek. Pavitra dies under suspicious circumstances a few months after policy purchase and Prateek is the suspect. The insurer denies the death benefit payment to Prateek and the payment is made to Court for settlement. This is an example of:
a) legal exclusion.
b) contractual exclusion.
c) contractual limitation.
d) legal restriction.
This is an example of legal exclusion. An insurance of persons contract contains legal exclusions and contractual exclusions. The client’s intentional fault is considered to be a legal exclusion; it is a risk excluded by law without the contract having to mention it. The example codified in the C.C.Q. is an attempt on the insured’s life by the policyholder, or by the designated beneficiary.
Gaurav applies for an insurance policy and he receives the contract from the insurer. Gaurav feels that the premiums charged are high. He can either accept the contract or reject it as he has no option to negotiate the premiums. This is because insurance contracts are:
a) contracts of adhesion
b) unilateral contracts.
c) commutative contracts.
d) contracts by gratuitous title.
A contract is said to be a contract of adhesion when its essential terms were imposed or drafted by one of the parties, without being freely negotiated. This is generally the case with insurance contracts. In the event of an ambiguity or doubt regarding the interpretation of a contract of adhesion, it will be interpreted in favour of the adhering party.
Ref. 2.1.4
Judy miscalculates her spouse’s age while filling his insurance application form. However, the insurer corrects his age in the policy before issuing the contract. What should the insurer do to account for the discrepancy in age between the application form and the policy?
a) Furnish a separate document indicating the reason for such discrepancy.
b) Inform the client about the need for modification through the agent.
c) Inform the agent about the discrepancy through an in-person meeting.
d) Make a note of this change in the insurer’s client file for future reference.
The insurer should furnish a separate document indicating the reason for such discrepancy. In case of a discrepancy between the insurance policy and the insurance application, the application prevails unless the insurer has, in a separate document, indicated the particulars in respect of which there is a discrepancy to the client. Every difference is not necessarily a discrepancy; there must be some incompatibility or a conflict between the policy and the application.
Who among the following has the right to designate a beneficiary on behalf of the policyholder?
a) No one
b) A mandatary in the event of incapacity
c) A curator
d) A mandatary acting pursuant to a power of attorney
Only the policyholder has the right to designate one or more beneficiaries of the insured amount. Since this is a personal right, a mandatary acting pursuant to a power of attorney, a mandatary in the event of incapacity, a tutor or a curator does not have the right to designate a beneficiary instead of the policyholder (client).
