Law 2 - Business Law
Chapter 52 Insurance Law Quiz
1. Bill goes to State Farm and takes out a life insurance policy. He meets with Tom, an employee of State Farm, and signs the contract. Who is the underwriter in this relationship?
Law 2 - Business Law
Chapter 52 Insurance Law Quiz
1. Bill goes to State Farm and takes out a life insurance policy.
He meets with Tom, an employee of State Farm, and signs the contract.
Who is the underwriter in this relationship?
a. Bill
b. Tom
c. State Farm
d. none of the above
2. Frank is an insurance agent who works for State Farm. He regularly meets with clients and signs insurance contracts with them. For whom is Frank acting as an agent?
a. State Farm
b. clients
c. both A and B
d. none of the above
3. Mel owns a number of portable toilets, which he rents out for concerts in the Southwest. What type of insurance can he purchase to cover the toilets themselves?
a. casualty
b. accident
c. floater
d. group
4. Mike's business makes loans to small businessmen who are just beginning their businesses. A major problem for Mike is the risk that too many of his clients will go bankrupt and not repay his loans. What type of insurance will best benefit Mike?
a. casualty
b. credit
c. fidelity
d. key-person
5. Marty is a shark hunter. He wants to have life insurance for his wife during his career, which is very high risk. He wants to spend as little as possible. What should he buy?
a. normal life insurance
b. term life insurance
c. all-risk insurance
d. accident insurance
6. On which of the following persons is Marty likely to be able to take out a life insurance policy?
a. his wife
b. his business partner
c. his grandfather
d. all of the above
7. Which of the following may take out property insurance on an apartment unit?
a. the landlord
b. the tenant
c. both A and B
d. none of the above
8. Mel takes out key-person insurance on his business partner Stan. This policy will pay Mel if Stan
a. is murdered while still a member of the partnership.
b. is murdered after he quits the firm.
c. both A and B
d. none of the above
9. Andy applies for health insurance. Which of the following is/are the company allowed to do?
a. require a medical examination
b. deny coverage
c. both A and B
d. none of the above
10. Sandy visits a broker, and signs a contract for $100,000 in health insurance. The broker is lazy, and puts off actually calling State Farm (with whom he usually works) to procure a policy for Sandy. Sandy is in a car wreck which leads to high medical bills before the broker takes any action. Who will have to pay her medical bills?
a. State Farm
b. the broker
c. Sandy
d. both B and C
11. An insurance company may raise _______________ defenses than are available for an ordinary contract action.
a. more
b. fewer
c. the same number of
d. It varies from state to state.
12. Assume Utah requires insurance companies to include an incontestability clause in all insurance contracts that takes effect three years from the time a contract is signed. John takes out a life insurance policy in 1997, and checks "no" in the box asking if he has any diseases. John knows that he has AIDS. In 2001, the insurance company may challenge John's insurance if
a. they can prove he knowingly lied on his application.
b. they have an express clause that extends their time period
for uncovering cases of fraud.
c. John's illness required payments before 2000.
d. all of the above
13. Alice's house burns to the ground. She claims her losses total $110,000. Her insurance company believes she is overestimating her losses, and offers to pay $80,000. If this case never goes to court, who will have the final say in determining the amount to be paid?
a. Alice
b. appraisers
c. the insurance company
d. none of the above
14. Sandy visits a State Farm agent, and signs a contract for $100,000 in health insurance. The agent is lazy, and puts off actually calling State Farm's home office to procure a policy for Sandy. Sandy is in a car wreck which leads to high medical bills before the broker takes any action. Who will have to pay her medical bills?
a. State Farm
b. the broker
c. Sandy
d. both B and C
15. Andy has two policies for $25,000 each insuring his home against fire loss. His house burns, causing $25,000 damage. Which of the following is true?
a. Andy can collect $25,000 from either company, but
not both.
b. Andy may collect $25,000 from both companies.
c. Andy may collect $12,500 from each company.
d. none of the above
16. Fred's insurance policy contains a typical antilapse clause. A payment was due on January 1, which he failed to make. If Fred never makes the payment, what is likely the earliest date on which the insurance company can cancel Fred's insurance?
a. January 1
b. February 1
c. April 1
d. after a reasonable period of time
17. Joe is injured in an unusual car wreck. He believes the terms in his insurance policy should be interpreted to give him coverage. His insurer thinks otherwise. Joe will be covered if
a. he can show he honestly thinks he should be covered
b. he can show that the policy terms are ambiguous
c. he can show either A or B
d. he will not be able to gain coverage
18. Which of the following insurance policies have a cash-surrender value?
a. whole life
b. limited-payment life
c. term
d. both A and B
19. Jan misstates her age on her life insurance policy as 45. She is in fact 54. Her premiums for the past year totaled $1,000, but premiums for a 54-year-old would have been $1,500. If her insurer discovers the error, what will happen?
a. nothing
b. She will have to pay the additional $500 in premiums.
c. Her coverage will be canceled.
d. Her coverage will be canceled retroactively, and her
premiums will be returned.
20. Al buys a life insurance policy in 1990, and names his daughter as beneficiary. In 1997, his daughter wins the lottery, and has little need for insurance money. Which of the following people may Al name as a new beneficiary under the old policy?
a. his wife
b. his son
c. both A and B
d. none of the above
21. In which of the following situations will insurance coverage be canceled?
a. The insured desires cancellation.
b. The insured fails to make consecutive payments of premiums.
c. The insured contracts a life threatening illness, such
as AIDS.
d. both A and B
22. Which of the following types of damages are covered by a typical fire insurance policy?
a. lightening
b. smoke, if from a fire department
c. water, if from a fire department
d. all of the above
23. Al's fire policy covers "hostile" fires only. For which of the following fires can Al recover under his policy?
a. a fire started by Alex Arsonist
b. a fire started by faulty wiring
c. both A and B
d. none of the above
24. Al's home and possessions are worth $220,000. He has an open fire insurance policy for $250,000. His home is badly damaged by a fire, and actual losses are $200,000. How much will Al receive under the policy?
a. $200,000
b. $220,000
c. $250,000
d. none of the above
25. Ann has an insurance policy that covers her home on Brownacre. She sells the property to Mel, and assigns her rights in the fire insurance to Mel. Later, the house burns to the ground. Who will be able to recover under the insurance policy?
a. Ann
b. Mel
c. both A and B
d. none of the above