Alabama Life & Health Insurance Exam - with accurate answers (verified)Graded A

Which of the following would be considered a speculative risk? - Answers-The possibility the painting you bought might be a long-lost masterpiece A speculative risk is one in which there is a chance for either loss or gain. Example: Gambling, Casino's, Lottery, etc. All of the other choices describe pure risk, where there is no chance of gain, only a chance of loss exists. Which is the proper term for a company owned by its policy owners? - Answers-A mutual insurance company A producer who is acting as an agent is representing: - Answers-Always the insurer All of the following are elements of a contract, except: - Answers-Authority All enforceable contracts must include these characteristics: offer and acceptance (agreement), considerations, competent parties, and legal purpose. Authority is not considered one of the elements of a legal contract. Each of the following would be an element in the definition of fraud, except: - Answers-An individual warrants a fact stated on the application A warranted fact is one guaranteed to be true. Although no statement on an application is regarded as warranty, no fraud is involved if a statement is guaranteed to be true. Examples of Fraud - Answers-Intentional material misrepresentation with the intent of causing injury to another party Withholding of known material facts A false statement on the application that is material to the acceptance of the risk A company that is licensed to sell insurance in a particular state is: - Answers-An authorized Company In order to be valid, a contract must be between individuals considered legally able to enter into an agreement. This principle is known as: - Answers-Competent parties An insurance contract is an aleatory contract. This means: - Answers-Equal value is not given by both parties to the contract Aleatory: contract of unequal values exchanged