NY Heath & Life Chapter 3: Legal Concepts of Insurance
Questions With Complete Solutions
Agency Law: List the four principles of agency law. Correct
Answer 1) Agent acts = principal acts, 2) Contracts by agent =
contracts by principal, 3) Payments to agent = payments to
principal, 4) Agent knowledge = insurer knowledge.
Agency Law: What is the relationship between agent and
insurer? Correct Answer Acts of the agent within authority
are acts of the principal (the insurer).
Agent as Fiduciary: Why is an agent considered a fiduciary?
Correct Answer They hold a position of financial trust and
confidence for both consumers and insurers.
Agent Authority: What are the three types of authority? Correct
Answer Express, implied, apparent.
Agents vs Brokers: Who can bind coverage? Correct Answer
Agents can; brokers cannot.
Agents vs Brokers: Who do they represent? Correct Answer
Agents represent the insurer; brokers represent the buyer.
Aleatory Contract: Why is an insurance contract aleatory?
Correct Answer One party may recover more in value than they
paid; outcomes are unequal and depend on uncertain future
events.
, Apparent Authority: What is it? Correct Answer Authority
that appears to exist based on principal's actions/words, even if
not real.
Cancellation: What is it? Correct Answer Voluntary
termination of an insurance contract by one party.
Competent Parties: List examples of individuals barred from
entering into a contract. Correct Answer Minors,
insane/mentally incompetent individuals, persons under the
influence of drugs/alcohol, coerced persons, enemy aliens, and
convicts (varies by state law).
Competent Parties: What does it mean for parties to be legally
competent? Correct Answer They must be mentally sound,
sober, of legal age, and not disqualified on legal grounds.
Concealment: What is it? Correct Answer Failure to disclose
a known material fact; insurer may rescind if proven material.
Conditional Contract: Why are insurance contracts conditional?
Correct Answer Insurer's obligations depend on certain
conditions being met (e.g., notice of claim, proof of loss).
Consideration: What is consideration in contracts? Correct
Answer An exchange of value that binds the agreement.
Consideration: What is the applicant's consideration? Correct
Answer Premiums paid and representations made.
Questions With Complete Solutions
Agency Law: List the four principles of agency law. Correct
Answer 1) Agent acts = principal acts, 2) Contracts by agent =
contracts by principal, 3) Payments to agent = payments to
principal, 4) Agent knowledge = insurer knowledge.
Agency Law: What is the relationship between agent and
insurer? Correct Answer Acts of the agent within authority
are acts of the principal (the insurer).
Agent as Fiduciary: Why is an agent considered a fiduciary?
Correct Answer They hold a position of financial trust and
confidence for both consumers and insurers.
Agent Authority: What are the three types of authority? Correct
Answer Express, implied, apparent.
Agents vs Brokers: Who can bind coverage? Correct Answer
Agents can; brokers cannot.
Agents vs Brokers: Who do they represent? Correct Answer
Agents represent the insurer; brokers represent the buyer.
Aleatory Contract: Why is an insurance contract aleatory?
Correct Answer One party may recover more in value than they
paid; outcomes are unequal and depend on uncertain future
events.
, Apparent Authority: What is it? Correct Answer Authority
that appears to exist based on principal's actions/words, even if
not real.
Cancellation: What is it? Correct Answer Voluntary
termination of an insurance contract by one party.
Competent Parties: List examples of individuals barred from
entering into a contract. Correct Answer Minors,
insane/mentally incompetent individuals, persons under the
influence of drugs/alcohol, coerced persons, enemy aliens, and
convicts (varies by state law).
Competent Parties: What does it mean for parties to be legally
competent? Correct Answer They must be mentally sound,
sober, of legal age, and not disqualified on legal grounds.
Concealment: What is it? Correct Answer Failure to disclose
a known material fact; insurer may rescind if proven material.
Conditional Contract: Why are insurance contracts conditional?
Correct Answer Insurer's obligations depend on certain
conditions being met (e.g., notice of claim, proof of loss).
Consideration: What is consideration in contracts? Correct
Answer An exchange of value that binds the agreement.
Consideration: What is the applicant's consideration? Correct
Answer Premiums paid and representations made.
