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Xcel Chapter 3 Exam with correct Answers
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Xcel Chapter 3 Exam with correct Answers
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Xcel: Chapter 3 Exam with correctAnswers
What are the elements a contract must contain in order to be legally binding? - Answers
-Offer and acceptance, consideration, and competent parties
Define "offer and acceptance". - Answers -A definite, unqualified proposal is made by
one party and the other party accepts the exact terms.
Define "consideration". - Answers -The value (payment) given in exchange for the
promises sought (payment of benefits).
Define "legal purpose". - Answers -The object of the contract and the reason the parties
entered into the agreement must be legal.
What are "competent parties"? - Answers -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.
Define "aleatory". - Answers -The unequal exchange of value or consideration for both
parties.
Define "Adhesion". - Answers -When the contract, which can be modified by company,
has been prepared by the insurance company with no negotiation between the applicant
and the insurer, and the applicant adheres to it on a "take it or leave it" basis.
What makes an insurance policy a unilateral contract? - Answers -Only the insurer is
legally bound.
What is a "valued contract"? - Answers -A contract in which the insurer pays a stated
sum regardless of the actual loss incurred.
What is an "indemnity contract"? - Answers -A contract in which the insurer pays an
amount equal to the loss.
Intentional withholding of material facts that would affect an insurance policy's validity is
called what? - Answers -Concealment.
What are an applicant's statements concerning occupation, hobbies, and personal
health history regarded as? - Answers -Representation.
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