1.Review scenario 1: An insurance policy prepared by the insurer and accepted largely as written is what type of contract?
Insurance policies are contracts of adhesion because the insurer drafts the form and the applicant generally accepts or rejects it as written.
Example: A client or producer applies this rule in a policy situation. The correct concept is Adhesion. Insurance policies are contracts of adhesion because the insurer drafts the form and the applicant generally accepts or rejects it as written.
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2.For review, identify contract characteristic means only the insurer makes a legally enforceable promise to pay covered claims.
Insurance is unilateral because the insurer promises performance if covered conditions are met; the insured is not legally forced to keep paying premiums.
Example: A client or producer applies this rule in a policy situation. The correct concept is Unilateral. Insurance is unilateral because the insurer promises performance if covered conditions are met; the insured is not legally forced to keep paying premiums.
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3.Review scenario 3: Premiums and possible policy benefits may be unequal in value. This illustrates which contract characteristic?
Insurance is aleatory because the values exchanged can be unequal and depend on an uncertain event.
Example: A client or producer applies this rule in a policy situation. The correct concept is Aleatory. Insurance is aleatory because the values exchanged can be unequal and depend on an uncertain event.
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4.Review scenario 4: A life policy pays only when policy conditions are satisfied. This illustrates that insurance contracts are:
Insurance contracts are conditional because the insurer's duty to perform depends on compliance with policy conditions.
Example: A client or producer applies this rule in a policy situation. The correct concept is Conditional. Insurance contracts are conditional because the insurer's duty to perform depends on compliance with policy conditions.
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5.Review scenario 5: Why is a life insurance contract called a personal contract?
Life insurance is based on personal characteristics and insurability; it is not a property contract that automatically follows ownership of an asset.
Example: A client or producer applies this rule in a policy situation. The correct concept is It insures the applicant's individual risk rather than transferring the policy automatically with property. Life insurance is based on personal characteristics and insurability; it is not a property contract that automatically follows ownership of an asset.
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6.For review, determine when must insurable interest generally exist for a life insurance policy.
For life insurance, insurable interest is generally required when the policy is issued, not necessarily at the insured's death.
Example: A client or producer applies this rule in a policy situation. The correct concept is At policy inception. For life insurance, insurable interest is generally required when the policy is issued, not necessarily at the insured's death.
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7.Review scenario 7: Statements on an insurance application that are believed true to the best of the applicant's knowledge are usually called:
Application answers are generally representations rather than absolute guarantees.
Example: A client or producer applies this rule in a policy situation. The correct concept is Representations. Application answers are generally representations rather than absolute guarantees.
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8.Review scenario 8: Intentionally withholding a material fact that should be disclosed is called:
Concealment is the intentional failure to disclose a material fact relevant to underwriting.
Example: A client or producer applies this rule in a policy situation. The correct concept is Concealment. Concealment is the intentional failure to disclose a material fact relevant to underwriting.
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9.Review scenario 9: In a life insurance contract, the applicant's premium and truthful application statements are part of:
Consideration is what each party gives in exchange; for the applicant it includes premium and application representations.
Example: A client or producer applies this rule in a policy situation. The correct concept is Consideration. Consideration is what each party gives in exchange; for the applicant it includes premium and application representations.
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10.For review, identify item is NOT one of the basic elements required for a valid insurance contract.
A valid contract requires agreement, consideration, competent parties, and legal purpose. Subrogation is not a basic formation element.
Example: A client or producer applies this rule in a policy situation. The correct concept is Subrogation. A valid contract requires agreement, consideration, competent parties, and legal purpose. Subrogation is not a basic formation element.
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