FIN 138 CH. 9 EXAM QUESTIONS ANSWERED CORRECTLY LATEST UPDATE 2026
-Intentional relinquishment of a known right.
-The price each party demands for agreeing to carry out his or her part of the contract.
-Situation when the insurer or its agent leads an insured to believe coverage exists, and thus the
insurer cannot later claim that no coverage existed.
-Situation in which insureds have no input in the design of a policy's terms.
-Agreement that exists before a contract is issued. - Answers -Waiver
-Consideration
-Estoppel
-Adhesion
-Binder
-In an agency, the first party, known as the _____ creates an agency relationship with a second party
by authorizing him or her to make contracts with third parties on his/her/their (the first party's)
behalf.
-The second party to this relationship, the _____ is authorized to make contracts with third parties on
the first party's behalf. - Answers -Principal
-agent
Identify all of the accurate statements about the law of agency.
response - correct
A. The law of agency is significant because the only direct interaction most buyers of insurance have
with the insurance company is through an agent or a broker.
B. The law of agency makes agents liable for misrepresentations on the part of the insurer(s) they
represent
C. The law of agency refers to the legal consequences of people acting on behalf of other people or
organizations.
D. The law of agency makes agents liable for misrepresentations on the part of the insured.
E. The law of agency involves a principle-agent relationship. - Answers A, C, E
_________ enables an agent to secures immediate coverage for an insured without any additional
input from the insurer. - Answers Binding Authority
In a contract, the price each party demands for agreeing to carry out his or her part of the contract is
known as:
- Consideration
- Value
-Subrogation
-representation
-premium - Answers consideration
Fill in the blank my selecting the correct answer from the drop down menu.
When Jaime tells his insurance agent his home has an alarm system, he is making a ______ about his
home's exposure to burglary. - Answers representation
Identify the misrepresentation under which an insurance contract would be voidable.
A. By mistake, you stated in an application for life insurance that you were born in Indianapolis, when
you were actually born in Bloomington, Indiana.
B.You apply for life insurance and state that you are in good health, even though you've just been
diagnosed with a severe heart ailment.
C. You stated in an application for life insurance that you were born on April 16 when in fact you were
born on April 18.
D. You apply for life insurance and state that you are in good health, when in fact, you have a sore
throat.
E. In your application for life insurance you state that your annual income as $100,000, when it is
actually $85,000. - Answers B
Kayla returns home after work to find her basement full of dirty water—the result of a sewer backup.
She calls the agent who represents her homeowner's insurance company and asks if she can add a
water backup coverage endorsement to her homeowners' policy, effective immediately. She answers
all the questions the agent asks, but neglects to mention the dirty water in her basement. The insurer
has the right to void this contract because Kayla is guilty of: - Answers a. concealment
-Intentional relinquishment of a known right.
-The price each party demands for agreeing to carry out his or her part of the contract.
-Situation when the insurer or its agent leads an insured to believe coverage exists, and thus the
insurer cannot later claim that no coverage existed.
-Situation in which insureds have no input in the design of a policy's terms.
-Agreement that exists before a contract is issued. - Answers -Waiver
-Consideration
-Estoppel
-Adhesion
-Binder
-In an agency, the first party, known as the _____ creates an agency relationship with a second party
by authorizing him or her to make contracts with third parties on his/her/their (the first party's)
behalf.
-The second party to this relationship, the _____ is authorized to make contracts with third parties on
the first party's behalf. - Answers -Principal
-agent
Identify all of the accurate statements about the law of agency.
response - correct
A. The law of agency is significant because the only direct interaction most buyers of insurance have
with the insurance company is through an agent or a broker.
B. The law of agency makes agents liable for misrepresentations on the part of the insurer(s) they
represent
C. The law of agency refers to the legal consequences of people acting on behalf of other people or
organizations.
D. The law of agency makes agents liable for misrepresentations on the part of the insured.
E. The law of agency involves a principle-agent relationship. - Answers A, C, E
_________ enables an agent to secures immediate coverage for an insured without any additional
input from the insurer. - Answers Binding Authority
In a contract, the price each party demands for agreeing to carry out his or her part of the contract is
known as:
- Consideration
- Value
-Subrogation
-representation
-premium - Answers consideration
Fill in the blank my selecting the correct answer from the drop down menu.
When Jaime tells his insurance agent his home has an alarm system, he is making a ______ about his
home's exposure to burglary. - Answers representation
Identify the misrepresentation under which an insurance contract would be voidable.
A. By mistake, you stated in an application for life insurance that you were born in Indianapolis, when
you were actually born in Bloomington, Indiana.
B.You apply for life insurance and state that you are in good health, even though you've just been
diagnosed with a severe heart ailment.
C. You stated in an application for life insurance that you were born on April 16 when in fact you were
born on April 18.
D. You apply for life insurance and state that you are in good health, when in fact, you have a sore
throat.
E. In your application for life insurance you state that your annual income as $100,000, when it is
actually $85,000. - Answers B
Kayla returns home after work to find her basement full of dirty water—the result of a sewer backup.
She calls the agent who represents her homeowner's insurance company and asks if she can add a
water backup coverage endorsement to her homeowners' policy, effective immediately. She answers
all the questions the agent asks, but neglects to mention the dirty water in her basement. The insurer
has the right to void this contract because Kayla is guilty of: - Answers a. concealment
