LOMA 281 - Chapter 3

1.  A life insurance contract is enforceable because the parties to the contract met requirements concerning the substance of the agreement rather than requirements concerning the form of the agreement. In addition, the insurer’s promise to pay the policy benefit is contingent on the death of the insured while the policy is in force. This information indicates that a life insurance contract is

• (1)   a formal, commutative contract
• (2)   a formal, aleatory contract
• (3)   an informal, commutative contract
• (4)   an informal, aleatory contract

2.        Different types of contracts have certain characteristics. In a life insurance contract, only the insurer makes a legally enforceable promise when entering into the contract. This characteristic of an insurance contract identifies it as a

• (1)   bargaining contract
• (2)   unilateral contract
• (3)   contract of adhesion
• (4)   bilateral contract

3.        Hector Avila purchased a life insurance policy on his life from Origami Financial. Mr. Avila purchased the policy after a court had declared him to be mentally incompetent. In this situation, the contract for insurance is

• (1)   void
• (2)   valid and binding on Origami
• (3)   voidable only by Mr. Avila
• (4)   voidable by either Origami or Mr. Avila

4. The following statements are about contractual capacity in the formation of contracts. Select the answer choice containing the correct statement.

• (1)   If an insurer issues a policy to a person who is younger than the permissible age to purchase insurance, the insurer can sue to avoid the policy.
• (2)   To establish a valid contract in most jurisdictions, an individual must first prove his legal capacity in a court of law.
• (3)   An insurer acquires its legal capacity to issue an insurance contract by being licensed or authorized to do business as an insurer by the proper regulatory authority.
• (4)   Corporations are generally presumed to have the same contractual capacity as that of a minor.

5.    The following statements are about the general requirements that must be met for a valid life insurance contract to be formed. Select the answer choice containing the correct statement.

• (1)   In order for an insurance contract to be valid, each party to the contract must give or promise something that is of value to the other party.
• (2)   The requirement of mutual assent can only be satisfied when the parties sign a written agreement to be bound by the terms of the contract.
• (3)   An applicant gives the application and the initial premium and promises to pay the renewal premiums as consideration for a life insurance contract.
• (4)   The requirement of lawful purpose in the making of an insurance contract is fulfilled by the presence of an offer and the acceptance of that offer.

6.  An insurance policy is a contract between the insurer and the policyowner and is subject to the rules of contract law. An insurance policy is also a type of property and, thus, is subject to the principles of property law. In legal terminology, property is classified as either real property or personal property and as either tangible property or intangible property. With regard to these classifications, an insurance policy is classified correctly as

• (1)   tangible real property
• (2)   tangible personal property
• (3)   intangible real property
• (4)   intangible personal property