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Insurance Law

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This chapter is from the book

Exam Prep Answers

  1. A is correct. Express authority is spelled out in an agent's written contract.
  2. D is correct. Apparent authority is the authority an agent appears to have because of past actions that have not been challenged by the insurance company.
  3. B is correct. Implied authority is not expressly stated in an agent's contract but it is actual authority related to common business practices, such as accepting premiums for the insurer.
  4. A is correct. Under the principal of estoppel, a pattern of past behavior may prevent the insurer from exercising a right it might have had if it had exercised it earlier.
  5. B is correct. A producer has a duty to act with a reasonable degree of care when representing an insurer.
  6. C is correct. Valid contracts do not need to be in writing. Oral contracts are legally binding.
  7. A is correct. The premium is the consideration given by the insured in exchange for the insurer's promise to pay if a loss occurs.
  8. A is correct. All life insurance policies include an insuring clause, conditions, and exclusions. There is no requirement for a policy folder.
  9. B is correct. An aleatory contract is one that depends on chance or an uncertain outcome. Ken may have received far more in benefits than he paid as premiums, but others who pay premiums may never have a loss and never receive even a dollar in benefits.
  10. B is correct. The act of submitting an application with a premium payment is an offer that is still subject to acceptance by the insurer.
  11. D is correct. By not accepting the initial offer and offering alternative terms, the insurer has made a counter offer.
  12. B is correct. The failure to disclose known facts is concealment. Intentionally giving false answers or misstating facts would be misrepresentation, and possibly fraud.
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