NPCI - Nevada Property and Casualty Insurance Exam

Question 21: For any contract, including an insurance policy, to be legally valid and enforceable, it must contain certain required elements. Which of the following is one of the essential elements that every valid contract, such as an insurance policy, must contain to be enforceable?

Consideration

Aleatory chance

Subrogation

A deductible

Question 22: One required element of a valid insurance contract is consideration, the exchange of value between the parties to the agreement. From the standpoint of the insured, what does the insured give as consideration under an insurance contract with the insurer?

A promise to pay all future claims

The premium and truthful application statements

The right to inspect the insurer's books

A guarantee that no loss will occur

Question 23: A valid contract requires that the parties entering it be legally competent, meaning they have the legal capacity to contract. Which of the following individuals would generally be considered to LACK the capacity needed to enter a valid insurance contract?

A licensed adult business owner

A sane adult of legal age

A person intoxicated at the time

A financially cautious adult

Question 24: The formation of an insurance contract involves an offer by one party and acceptance by the other. In the usual case, when an applicant submits a completed application along with the initial premium to the insurer, that applicant is performing which step in contract formation?

Issuing a counteroffer

Accepting an offer

Providing consideration only

Making the offer

Question 25: Among the elements required for a valid contract is that the agreement serve a legal purpose and not run contrary to public policy. An insurance policy taken out to cover the risk of a lawful activity satisfies this element, but which of the following would fail it?

A policy insuring a stolen-goods operation

A policy insuring a licensed restaurant

A homeowners policy on a lawful residence

An auto policy on a registered car

Question 26: Insurance contracts have several special characteristics that distinguish them from ordinary contracts. One characteristic is that the dollar amounts the two parties exchange are usually unequal and depend on whether an uncertain event, a loss, actually occurs. This characteristic is described by which term?

Conditional

Unilateral

Aleatory

Adhesion

Question 27: An insurance policy is drafted entirely by the insurer, and the applicant must accept it as written or decline it, with no ability to negotiate its wording. Because of this feature, any ambiguity in the policy language is generally interpreted in the insured's favor. This characteristic is called what?

Indemnity

Aleatory

Utmost good faith

Adhesion

Question 28: An insurance contract requires the insured to fulfill certain duties, such as paying premium and filing a proof of loss, before the insurer is obligated to pay a claim. The characteristic describing a contract in which such conditions must be met is which of the following?

Aleatory

Conditional

Personal

Unilateral

Question 29: In an insurance contract, only one of the two parties makes a legally enforceable promise, while the other party makes no enforceable promise and may simply stop performing at any time. Which characteristic of insurance contracts does this describe about the parties' promises?

Unilateral

Bilateral

Aleatory

Conditional

Question 30: Insurance contracts are said to be based on a higher standard of honesty than ordinary contracts, under which each party is entitled to rely on the other not to conceal important facts or otherwise act deceptively. This mutual duty of honesty is described by which term?

Aleatory

Adhesion

Utmost good faith

Subrogation

Question 31: An insurance policy is generally regarded as a personal contract between the insurer and the specific insured whose risk the company has evaluated. Because of this feature, what is generally required before the policy can be transferred to another person?

Nothing; it transfers freely

Only the insured's signature

Payment of an extra premium

The insurer's written consent

Question 32: Insurance law distinguishes between statements that are merely believed to be true and statements that are guaranteed to be true and become part of the contract. A statement that is guaranteed true, whose breach can void the contract, is known by which of the following terms?

A warranty

A representation

A concealment

An estoppel

Question 33: When an applicant answers the questions on an insurance application, those answers are treated in a particular way under most state laws, as statements the applicant believes to be true rather than absolute guarantees. Statements of this kind are known by which of the following terms?

Endorsements

Warranties

Representations

Conditions

Question 34: Sometimes an applicant does not make a false statement but instead stays silent about an important fact that the insurer was never told. The deliberate failure to disclose a known material fact to the insurer is described by which of the following terms?

Misrepresentation

Concealment

A warranty

Subrogation

Question 35: Not every false statement on an application allows an insurer to void a policy. For a misrepresentation to give the insurer that right, the false statement must have a particular quality regarding the insurer's decision. What quality must the misrepresentation have to void the contract?

It must be about the premium

It must be made under oath

It must be in writing only

It must be material to the decision

Question 36: In insurance law, a party sometimes gives up a legal right it would otherwise be entitled to enforce. The intentional and voluntary surrender of a known right, such as an insurer choosing not to insist on a policy requirement, is described by which of the following terms?

Waiver

Estoppel

Subrogation

Concealment

Question 37: Once an insurer has voluntarily given up a known right, the law generally will not let the insurer bring that right back and use it against the insured later. The legal doctrine that prevents a party from reclaiming a right it has already waived is known as what?

Warranty

Waiver

Estoppel

Indemnity

Question 38: An insurance producer's power to act for the insurer comes in several forms. One form consists of the powers actually spelled out in the producer's written agency agreement with the company. This form of authority is best described by which of the following terms?

Fiduciary authority

Implied authority

Apparent authority

Express authority

Question 39: Beyond the powers a producer's contract explicitly grants, a producer also holds powers that are not written down but are reasonably necessary to carry out the business, in line with general practice. Printing business cards bearing the insurer's logo is an example of which type of authority?

Implied authority

Express authority

Apparent authority

Fiduciary duty

Question 40: Sometimes an insurer can be bound by a producer's actions simply because a customer reasonably believes, from the surrounding circumstances, that the producer has the power to act, even if the insurer never actually granted it. This kind of authority is described by which term?

Express authority

Apparent authority

Implied authority

Contingent authority

NPCI Nevada Property and Casualty Insurance Exam - Set 5 - Part 2

Question 21: For any contract, including an insurance policy, to be legally valid and enforceable, it must contain certain required elements. Which of the following is one of the essential elements that every valid contract, such as an insurance policy, must contain to be enforceable?

Question 22: One required element of a valid insurance contract is consideration, the exchange of value between the parties to the agreement. From the standpoint of the insured, what does the insured give as consideration under an insurance contract with the insurer?

Question 23: A valid contract requires that the parties entering it be legally competent, meaning they have the legal capacity to contract. Which of the following individuals would generally be considered to LACK the capacity needed to enter a valid insurance contract?

Question 24: The formation of an insurance contract involves an offer by one party and acceptance by the other. In the usual case, when an applicant submits a completed application along with the initial premium to the insurer, that applicant is performing which step in contract formation?

Question 25: Among the elements required for a valid contract is that the agreement serve a legal purpose and not run contrary to public policy. An insurance policy taken out to cover the risk of a lawful activity satisfies this element, but which of the following would fail it?

Question 28: An insurance contract requires the insured to fulfill certain duties, such as paying premium and filing a proof of loss, before the insurer is obligated to pay a claim. The characteristic describing a contract in which such conditions must be met is which of the following?

Question 29: In an insurance contract, only one of the two parties makes a legally enforceable promise, while the other party makes no enforceable promise and may simply stop performing at any time. Which characteristic of insurance contracts does this describe about the parties' promises?

Question 30: Insurance contracts are said to be based on a higher standard of honesty than ordinary contracts, under which each party is entitled to rely on the other not to conceal important facts or otherwise act deceptively. This mutual duty of honesty is described by which term?

Question 31: An insurance policy is generally regarded as a personal contract between the insurer and the specific insured whose risk the company has evaluated. Because of this feature, what is generally required before the policy can be transferred to another person?

Question 32: Insurance law distinguishes between statements that are merely believed to be true and statements that are guaranteed to be true and become part of the contract. A statement that is guaranteed true, whose breach can void the contract, is known by which of the following terms?

Question 33: When an applicant answers the questions on an insurance application, those answers are treated in a particular way under most state laws, as statements the applicant believes to be true rather than absolute guarantees. Statements of this kind are known by which of the following terms?

Question 34: Sometimes an applicant does not make a false statement but instead stays silent about an important fact that the insurer was never told. The deliberate failure to disclose a known material fact to the insurer is described by which of the following terms?

Question 35: Not every false statement on an application allows an insurer to void a policy. For a misrepresentation to give the insurer that right, the false statement must have a particular quality regarding the insurer's decision. What quality must the misrepresentation have to void the contract?

Question 36: In insurance law, a party sometimes gives up a legal right it would otherwise be entitled to enforce. The intentional and voluntary surrender of a known right, such as an insurer choosing not to insist on a policy requirement, is described by which of the following terms?

Question 37: Once an insurer has voluntarily given up a known right, the law generally will not let the insurer bring that right back and use it against the insured later. The legal doctrine that prevents a party from reclaiming a right it has already waived is known as what?

Question 38: An insurance producer's power to act for the insurer comes in several forms. One form consists of the powers actually spelled out in the producer's written agency agreement with the company. This form of authority is best described by which of the following terms?

Question 40: Sometimes an insurer can be bound by a producer's actions simply because a customer reasonably believes, from the surrounding circumstances, that the producer has the power to act, even if the insurer never actually granted it. This kind of authority is described by which term?

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