P & C Licensing Exam Prep: Ch 2 The Insurance Contract

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An insurance policy has a distinguishing set of features that reflects the nature of this unique contract. Choose the characteristics of an insurance contract from the list below. (choose all that apply)

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Four elements must be present for a contract to be legally enforceable. Name the four elements by choosing from the choices below.

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In the following statement, choose which of the four elements of a valid contract is MISSING:
Thomas agrees to burn down Jason's bar & grille restaurant for $10,000.

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In the following statement, choose which of the four elements of a valid contract is MISSING:
Melissa's insurance policy is canceled for nonpayment of premium.

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In the following statement, choose which of the four elements of a valid contract is MISSING:
JAG Insurance Company denies Craig's application for auto insurance. Which element is missing?

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In the following statement, choose which of the four elements of a valid contract is MISSING:
Matthew, age 17, signs a lease for an apartment in Highland Park Estates for a term of 12 months with an option to renew at the end of the 12-month period, provided he has demonstrated a good payment history.

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List the purpose of each part of an insurance policy.
A) The ❌ list who is insured, what property or risk is covered, when and where coverage is effective, and how much coverage applies.
B) ❌ describe what is covered and the perils the policy insures against.
C) The ❌ explain the rights and duties of the insured and the insurer under the policy.

Declaration

Insuring Agreements

conditions

Endorsements

Definitions

waivers

material facts

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The insurer must be able to rely on the insured's being forthcoming with all material facts needed to properly analyze or underwrite the risk.

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The insurer makes up all of the terms and conditions in a contract.

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The insurer is the one who writes the contract and is legally obligated; so, in the event of dispute with a question about an ambiguity in the contract, the court will rule in favor of the insurer.

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A waiver means involuntarily giving up a known contractual right.

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Estoppel means trying to prevent someone from exercising a known right based on this or her previous actions.

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(Virginia Law) Contracts are usually in a written form, but in the insurance industry it is not unusual for agents to place coverage in force before the insurer has an opportunity to issue the policy. This action is called binding coverage and can be done verbally or in writing. In the state of Virginia, the BINDER is good for what length of time?

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Payment of a deposit or provisional premium is required to bind coverage.

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A binder is a temporary contract of insurance and is valid for a short period of time. Binders cease at the earliest of the following listed circumstances or occurrences. (choose all that apply)

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The agent has binding authority.

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On the recommendation of her father, Bonnie decided to submit an application for insurance coverage to NIG Insurance Co. The agent asked her about her past driving record, which did include 3 speeding tickets in the last 2 years. Bonnie wanted to get the coverage, so on the application, she checked the "yes" box to the question, "Have you had any moving violations in the last 3 years?". This act, as defined under Utmost Good Faith, is an example of what?

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INSTRUCTIONS: Read the following policy excerpts and label them as 1) declarations, 2) insurance agreements, 3) conditions, exclusions. or definitions.
1. Named insured and mailing address: Leah Bachman, 11491 Bretson Rd., Elysium, VA 22616. ( definitions, declaration )
2. In this policy, "property damage" means physical injury to or destruction of property. ( Definitions, Declarations )
3. This policy does not cover any loss caused by earthquake. ( Declaration, Exclusion )
4. This policy may be canceled if the insured does not pay premiums when due. ( Insuring Agreements, Conditions )
5. This policy covers personal property owned or used by the insured. ( Insuring Agreements, Definitions )

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Match the term describing an insurance contract with the statement that explains or defines it from the choices below.
STATEMENT: Prepared by one party, with little or no opportunity for bargaining by the other party.

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Match the term describing an insurance contract with the statement that explains or defines it from the choices below.
STATEMENT: Insurer relies on insured's statements and insured relies on insurer's ability to fulfill its promises.

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Match the term describing an insurance contract with the statement that explains or defines it from the choices below.
STATEMENT: Dependent on an uncertain event.

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Match the term describing an insurance contract with the statement that explains or defines it from the choices below.
STATEMENT: Insures a person.

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Match the term describing an insurance contract with the statement that explains or defines it from the choices below.
STATEMENT: After a loss occurs, an individual is restored to the approximate financial condition she was in before the loss.

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Match the term describing an insurance contract with the statement that explains or defines it from the choices below.
STATEMENT: One-sided contract; only the insurance company is legally bound to perform under the contract.

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Match the term describing an insurance contract with the statement that explains or defines it from the choices below.
STATEMENT: Includes conditions that both the insured and the insurer must comply with.

Chapter 2 - The Insurance Contract Practice Quiz

P & C Licensing Exam Prep: Ch 2 The Insurance Contract

An insurance policy has a distinguishing set of features that reflects the nature of this unique contract. Choose the characteristics of an insurance contract from the list below. (choose all that apply)

Four elements must be present for a contract to be legally enforceable. Name the four elements by choosing from the choices below.

In the following statement, choose which of the four elements of a valid contract is MISSING: Thomas agrees to burn down Jason's bar & grille restaurant for $10,000.

In the following statement, choose which of the four elements of a valid contract is MISSING: Melissa's insurance policy is canceled for nonpayment of premium.

In the following statement, choose which of the four elements of a valid contract is MISSING: JAG Insurance Company denies Craig's application for auto insurance. Which element is missing?

The insurer must be able to rely on the insured's being forthcoming with all material facts needed to properly analyze or underwrite the risk.

The insurer makes up all of the terms and conditions in a contract.

The insurer is the one who writes the contract and is legally obligated; so, in the event of dispute with a question about an ambiguity in the contract, the court will rule in favor of the insurer.

A waiver means involuntarily giving up a known contractual right.

Estoppel means trying to prevent someone from exercising a known right based on this or her previous actions.

Payment of a deposit or provisional premium is required to bind coverage.

A binder is a temporary contract of insurance and is valid for a short period of time. Binders cease at the earliest of the following listed circumstances or occurrences. (choose all that apply)

The agent has binding authority.

Match the term describing an insurance contract with the statement that explains or defines it from the choices below. STATEMENT: Prepared by one party, with little or no opportunity for bargaining by the other party.

Match the term describing an insurance contract with the statement that explains or defines it from the choices below. STATEMENT: Insurer relies on insured's statements and insured relies on insurer's ability to fulfill its promises.

Match the term describing an insurance contract with the statement that explains or defines it from the choices below. STATEMENT: Dependent on an uncertain event.

In the following statement, choose which of the four elements of a valid contract is MISSING:
Thomas agrees to burn down Jason's bar & grille restaurant for $10,000.

In the following statement, choose which of the four elements of a valid contract is MISSING:
Melissa's insurance policy is canceled for nonpayment of premium.

In the following statement, choose which of the four elements of a valid contract is MISSING:
JAG Insurance Company denies Craig's application for auto insurance. Which element is missing?

Match the term describing an insurance contract with the statement that explains or defines it from the choices below.
STATEMENT: Prepared by one party, with little or no opportunity for bargaining by the other party.

Match the term describing an insurance contract with the statement that explains or defines it from the choices below.
STATEMENT: Insurer relies on insured's statements and insured relies on insurer's ability to fulfill its promises.

Match the term describing an insurance contract with the statement that explains or defines it from the choices below.
STATEMENT: Dependent on an uncertain event.

Match the term describing an insurance contract with the statement that explains or defines it from the choices below.
STATEMENT: Insures a person.

Match the term describing an insurance contract with the statement that explains or defines it from the choices below.
STATEMENT: After a loss occurs, an individual is restored to the approximate financial condition she was in before the loss.

Match the term describing an insurance contract with the statement that explains or defines it from the choices below.
STATEMENT: One-sided contract; only the insurance company is legally bound to perform under the contract.

Match the term describing an insurance contract with the statement that explains or defines it from the choices below.
STATEMENT: Includes conditions that both the insured and the insurer must comply with.