XCEL CHAPTER 3 EXAM QUESTIONS
AND ANSWERS
Define "consideration". - ANSWER-The value (payment) given in exchange for the
promises sought (payment of benefits).
Define "legal purpose". - ANSWER-The object of the contract and the reason the
parties entered into the agreement must be legal.
What are "competent parties"? - ANSWER-1) An insurer that has been licensed and
authorized by the state(s) in which it conducts business and
2) An applicant who is presumed capable of understanding the contract they agreed
to.
The deeds and actions of a producer indicate what kind of authority? - ANSWER-
Apparent authority
Bob and Tom start a business. Since each partner contributes an important element
to the success of the business, they decide to take life insurance policies out on
each other, and name each other as beneficiaries. Eventually, they retire and
dissolve the business. Bob dies 12 months later. The policies continue in force with
no change. Both partners are still married at the time of Bob's death. In this situation,
who will receive Bob's policy proceeds? - ANSWER-Tom
In an insurance contract, the element that shows each party is giving something of
value is called what? - ANSWER-Consideration
Parol Evidence Rule - ANSWER-When parties put their agreement in writing, all
previous verbal statements come together in that writing and cannot be changed by
parol (verbal) evidence.
A professional liability for which producers can be sued for mistakes of putting a
policy into effect is called what? - ANSWER-Errors and omissions
The power given to an individual producer that is not specifically addressed in his/her
contract is considered what type of authority? - ANSWER-Implied authority
What are the elements a contract must contain in order to be legally binding? -
ANSWER-Offer and acceptance, consideration, and competent parties
Define "offer and acceptance". - ANSWER-A definite, unqualified proposal is made
by one party and the other party accepts the exact terms.
Define "aleatory". - ANSWER-The unequal exchange of value or consideration for
both parties.
AND ANSWERS
Define "consideration". - ANSWER-The value (payment) given in exchange for the
promises sought (payment of benefits).
Define "legal purpose". - ANSWER-The object of the contract and the reason the
parties entered into the agreement must be legal.
What are "competent parties"? - ANSWER-1) An insurer that has been licensed and
authorized by the state(s) in which it conducts business and
2) An applicant who is presumed capable of understanding the contract they agreed
to.
The deeds and actions of a producer indicate what kind of authority? - ANSWER-
Apparent authority
Bob and Tom start a business. Since each partner contributes an important element
to the success of the business, they decide to take life insurance policies out on
each other, and name each other as beneficiaries. Eventually, they retire and
dissolve the business. Bob dies 12 months later. The policies continue in force with
no change. Both partners are still married at the time of Bob's death. In this situation,
who will receive Bob's policy proceeds? - ANSWER-Tom
In an insurance contract, the element that shows each party is giving something of
value is called what? - ANSWER-Consideration
Parol Evidence Rule - ANSWER-When parties put their agreement in writing, all
previous verbal statements come together in that writing and cannot be changed by
parol (verbal) evidence.
A professional liability for which producers can be sued for mistakes of putting a
policy into effect is called what? - ANSWER-Errors and omissions
The power given to an individual producer that is not specifically addressed in his/her
contract is considered what type of authority? - ANSWER-Implied authority
What are the elements a contract must contain in order to be legally binding? -
ANSWER-Offer and acceptance, consideration, and competent parties
Define "offer and acceptance". - ANSWER-A definite, unqualified proposal is made
by one party and the other party accepts the exact terms.
Define "aleatory". - ANSWER-The unequal exchange of value or consideration for
both parties.
