CLU Life Insurance Legal Aspects 2

Question 1

Under the doctrine of reasonable expectations, courts will generally interpret an ambiguous insurance policy in favor of:

Accepted Answer

The insured's reasonable expectations

Answer

Courts apply the reasonable expectations doctrine to resolve ambiguities in favor of what a reasonable insured would expect the policy to cover.

Question 2

A life insurance policy is classified as a unilateral contract because:

Accepted Answer

Only the insurer makes a legally enforceable promise

Answer

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.

Question 3

The incontestability clause in a life insurance policy typically becomes effective after:

Accepted Answer

2 years from the policy issue date

Answer

Most states require the incontestability clause to take effect after two years, after which the insurer cannot void the policy for misrepresentation.

Question 4

Which legal principle prevents an insurer from denying a claim after it has previously accepted premiums with knowledge of a policy violation?

Accepted Answer

Estoppel

Answer

Estoppel prevents an insurer from asserting a defense when its prior conduct (accepting premiums) induced reliance by the insured.

Question 5

When a life insurance applicant misstates their age on the application, the standard policy remedy is to:

Accepted Answer

Adjust the death benefit to what the premium would have purchased at the correct age

Answer

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.

CLU - Chartered Life Underwriter Practice Test

CLU - Chartered Life Underwriter Practice Test

CLU Life Insurance Legal Aspects 2