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LOMA 311 MODULE 4 EXAM
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LOMA 311 MODULE 4 EXAM ...
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LOMA 311 MODULE 4 EXAMIndividual life insurance contracts can be classified as ANSWER - Informal
contracts that do not require any special procedures to be valid. The legally
appropriate consideration for a life insurance contract includes the applicant's
submission of an insurance application and payment of the initial premium, as well
as the insurer's pledge to provide contractual benefits.
- Unilateral contracts in which only one party, the insurer, makes legally binding
guarantees life insurance contracts are unilateral contracts in which only the insurer
makes a legally enforceable guarantee to pay policy benefits if the covered events
occur. As a result, the applicant must provide enough consideration in exchange for
the insurer's contractual obligations. ++++Legally appropriate consideration for a
life insurance contract is the applicant's submission of an insurance application and
payment of the initial premium.
-Aleatory contracts in which one party (the policy owner) delivers something of
value to another party (the insurer) in exchange for a conditional promise.
- Adhesion contracts that one party (the insurer) writes and that the other party (the
applicant) must accept or reject as a whole without any haggling between the
parties.
To construct a legitimate life insurance contract, the parties must meet four
requirements. - ANSWER: (1) The parties must mutually agree to the contract, (2)
they must exchange legally acceptable consideration, (3) they must have
contractual capacity, and (4) the contract must be for a lawful
purpose.======+=============Insurance agents usually have the power to
take initial premium payments on behalf of an insurer. However, most insurance
agencies lack the authority to receive renewal premium payments. Furthermore,
except binding an insurer to provide interim coverage under a premium receipt, an
agent lacks the actual ability to engage in binding life insurance contracts on an
insurer's behalf.++Agents are normally authorized to issue premium receipts to
applicants who complete an application and pay the initial premium. Depending on
the terms of the receipt, the insurer may be contractually required to give temporary
insurance coverage. Except obligating an insurer to provide interim coverage under
,a premium receipt, an agent is generally not entitled to enter into binding life
insurance contracts on an insurer's behalf.
Offer and Acceptance: ANSWER The insurer may accept an applicant's offer by
(1) issuing a policy with the same terms as indicated in the applicant's offer and (2)
delivering the policy to the applicant. When a legitimate contract is established, the
applicant becomes the policyholder.
If an applicant fails to pay the initial premium when submitting an insurance
application, she has not made an offer. Rather, she has invited the insurance to
submit an offer. The insurer can make an offer of contract.
by issuing a policy and providing it to the applicant. It is important to note that the
insurance issued and delivered by the insurer may not be the same as the one
requested by the applicant. The applicant may accept the insurer's offer by
accepting the insurance and paying the initial premium.
Counteroffer - ANSWER When an insurer issues a policy with conditions other
than those requested, it has rejected the initial offer and made a counteroffer.
An insurer frequently makes a counteroffer when categorizing the prospective
insured as a greater risk than what the prospective insured has applied for.
Withdrawing an offer - ANSWER: An offeror can normally withdraw an offer at
any moment before the offeree accepts it. Thus, an applicant who has applied for an
insurance policy,
The person who paid the original payment has the right to withdraw the offer at
any moment prior to the insurer accepting it. If an applicant withdraws an offer, the
insurer is generally required to refund the premium paid.
Rejecting an offer: ANSWER A contract is a consensual partnership, thus the
offeree has the right to reject the other party's offer or counteroffer. An insurance
,applicant has the right to reject any offer provided by an insurer and receive a
return of the original payment paid until the offer is accepted.
Contractual Capacity: ANSWER An insurance contract is valid only if the parties
to it have contractual ability. Insurers who are licensed to do business in the
applicable state have the legal authority to enter into insurance contracts in that
state.
State laws limit minors' ability to obtain life insurance:
-The age when minors can enter into valid and binding insurance contracts.
The age range varies from 14 to 16, depending on the state.
- The forms of insurance that minors can acquire differ by state legislation. Some
States allow children to buy life and health insurance on their own.
lives, and other states allow minors to obtain life and health insurance.
On any individual in whose life or health the minor has an insurable interest.
- The laws governing who can be nominated as the beneficiary of a life insurance
policy obtained by a minor for her own life differ. Many states, for example,
require that the beneficiary of such a policy be the minor's parent or legal guardian,
spouse, child, brother or sister.
Canada, Singapore, and Malaysia: 16 or older.
Singapore and Malaysia 10-16, with written consent.
, Lawful Purpose: Insurable Interest - Answer The goal of an agreement is illegal if
it is contrary to public policy or a common law standard. To be valid, an informal
contract must have a legal purpose.
In the United States, for a contract to be legitimate, the policyowner must have an
insurable interest in the insured person at the time the life insurance policy is
issued. In general, an insurable interest occurs when a person stands to benefit if
the insured lives and stands to lose something if the insured dies.
ANSWER: Policyowner insures another person's life. When a person applies for
insurance on someone else's life, the applicant
Generally, she must furnish the insurer with evidence that she has an insured.
Interested in the insured's life.
Business interactions that generate insurable interest:
-Partners are each thought to have an insurable interest in the lives.
of the remaining partners.
- An employer has an insurable interest in the welfare of its core employees.
- A creditor has an insurable stake in the lives of its borrowers.
Consent Requirements: ANSWER In most states, a parent can insure the life of a
minor child without the youngster's agreement.
In a few states, one spouse may insure the life of the other spouse without the
insured's agreement.
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