Life Insurance Legal Aspects Flashcards
7 cards from real CLU practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Life Insurance Legal Aspects flashcards as text
Under the doctrine of reasonable expectations, courts will generally interpret an ambiguous insurance policy in favor of:
Answer: The insured's reasonable expectations
Courts apply the reasonable expectations doctrine to resolve ambiguities in favor of what a reasonable insured would expect the policy to cover.
A life insurance policy is classified as a unilateral contract because:
Answer: Only the insurer makes a legally enforceable promise
A unilateral contract means only one party (the insurer) makes a legally binding promise to perform—the insured is not legally obligated to pay premiums.
The incontestability clause in a life insurance policy typically becomes effective after:
Answer: 2 years from the policy issue date
Most states require the incontestability clause to take effect after two years, after which the insurer cannot void the policy for misrepresentation.
Which legal principle prevents an insurer from denying a claim after it has previously accepted premiums with knowledge of a policy violation?
Answer: Estoppel
Estoppel prevents an insurer from asserting a defense when its prior conduct (accepting premiums) induced reliance by the insured.
When a life insurance applicant misstates their age on the application, the standard policy remedy is to:
Answer: Adjust the death benefit to what the premium would have purchased at the correct age
The misstatement of age provision adjusts the benefit to what the paid premiums would have purchased at the insured's correct age, rather than voiding the policy.
Which of the following best describes the legal status of an irrevocable beneficiary designation?
Answer: The policyowner needs the beneficiary's written consent to change it
An irrevocable beneficiary has a vested interest in the policy, so the policyowner cannot change the designation or assign the policy without that beneficiary's written consent.
The legal concept of 'adhesion' in insurance contracts means that:
Answer: The contract was drafted by one party and offered on a take-it-or-leave-it basis
A contract of adhesion is drafted exclusively by the insurer; the applicant can only accept or reject it, which justifies courts construing ambiguities against the drafter.