Completing the Application, Underwriting, Delivering Policies, Contract Law
When a policyowner stops paying premiums, allowing a term life policy to lapse, the insurer cannot take legal action to force the owner to continue making payments. Which characteristic of insurance contracts does this limitation reflect?
Answer and explanation
Answer: C. The owner's choice to discontinue premiums does not create an enforceable promise to keep paying. The insurer alone has promised performance while coverage remains in force under its terms, illustrating a unilateral contract.Source: South Carolina Department of Insurance — Prelicensing Education Topic Outline — Life, Accident and Health Topic Outline page 12, Unique Features > Unilateral
More completing the application, underwriting, delivering policies, contract law questions
- A Texas life insurer asks an applicant to take an HIV-related test for underwriting. What must occur before the test?
- After signing an application but before policy delivery, the proposed insured begins taking a newly prescribed heart medication. What should the proposed insured do?
- An adult applies for a policy on his own life and names his sister as beneficiary. Whose signatures does the application ordinarily require?
- An agent observes unusual funding behavior while selling a covered life product. What is the agent's proper AML role?
- An applicant applies without paying any premium. The insurer issues the policy exactly as requested. When is the contract formed?
- An applicant asks whether every answer on a life application is an absolute guarantee of literal accuracy. Which response is correct?
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