Deck 37: Insurance, wills, and Trusts

Question 1

An insured's lack of an insurable interest is an absolute defense against payment.

Answer 1

True

Question 2

Under a coinsur?ance clause,a homeowner who insures a home for 80 percent of its value can recover only 80 percent of the cost for damage to it.

Answer 2

False

Question 3

A person has an insurable interest in property if he or she would sustain a financial loss from damage to the property.

Answer 3

True

Question 4

An applicant for insurance has a duty to disclose only material facts that the insurer asks for.

Question 5

State law may mandate that an incontestability clause be included in an insur?ance policy.

Question 6

An insurer has a duty to avoid the payment of claims.

Question 7

An executor is a personal representative appointed by a court for a dece?dent who dies without a will.

Question 8

A coinsurance clause provides that two or more people will be covered by the same life insurance policy.

Question 9

A person can insure anything in which he or she has an insurable interest.

Question 10

Insurance coverage is never effective until a formal written policy is issued.

Question 11

A party must own property to have an insurable interest in it.

Question 12

If a life insurance applicant pays a premium but dies before the physical exam,there is obviously no coverage.

Question 13

An insurance application is usually not part of the insurance contract.

Question 14

Misstatements or misrepresentations in an application for insurance can void a policy.

Question 15

The words used in an insurance contract are interpreted against the party who applied for the policy.

Question 16

A loss sustained between the time of application and the delivery of an insurance policy may not be covered.

Question 17

Because insurance law follows contract law,bad faith tort actions against insurers are not allowed.

Question 18

A business firm may have an insurable interest in the life of a key employee.

Question 19

If no heirs are found,the property of a decedent is transferred to a charitable organization.

Question 20

Insurance is classified according to the amount of the payment on a claim.

Question 21

A divorce occurring after the execution of a will revokes dispositions of property to the former spouse.

Question 22

A spendthrift trust provides for a beneficiary's transfer of his or her right to future payments of trust funds.

Question 23

Mena applies for a homeowners' insurance policy on her house with Neighbors Insurance Company through Obie,an agent who works for Neighbors.In this transaction,Obie is

A) an agent for both parties.
B) Mena's agent, and not Neighbors's agent.
C) Neighbors's agent, and not Mena's agent.
D) not an agent.

Question 24

In most states,a person must be sixteen years of age to execute a valid will.

Question 25

A testator is a decedent who dies without a will.

Question 26

A will must normally be attested to by two or three witnesses.

Question 27

Bret obtains a fire insurance policy on his rental house with Continental Insurance Company.Like all insurance,this policy is an arrangement for

A) avoiding the assumption of responsibility.
B) predicting a potential loss based on unknown factors.
C) shifting the imposition of liability.
D) transferring and allocating risk.

Question 28

Reno is the beneficiary of a life insurance policy on Sula's life obtained from Thayer Insurance Company.The underwriter of this policy is

A) Reno.
B) Sula.
C) Thayer.
D) the agent or broker through whom the policy was obtained.

Question 29

If no children or grandchildren survive a decedent who dies without a will,a surviving spouse is entitled to the entire estate.

Question 30

Dhani is the beneficiary of a life insurance policy on Elmo's life obtained from Famed Insurance Company.The insured under this policy is

A) Dhani.
B) Elmo.
C) Famed.
D) the agent or broker through whom the policy was obtained.

Question 31

To "publish" a will means to record it in the appropriate county office.

Question 32

The trustee is the person for whose benefit a trust is held.

Question 33

The word "Mom" can qualify as a signature on a will.

Question 34

A will is probated in part to establish its validity.

Question 35

A constructive trust is "constructed" by a property owner to fulfill certain unique functions outside the usual bounds of a trust.

Question 36

To execute a valid will,a testator must remember the "natural objects of his or her bounty."

Question 37

Undue influence can occur when a named beneficiary is in a position to influence the making of a will.

Question 38

An express trust is created or declared in explicit terms.

Question 39

Grace applies for a homeowners' insurance policy on her house with Heroic Insurance Company through Ian,a broker.In this transaction,Ian is

A) an agent for both parties.
B) Grace's agent, and not Heroic's agent.
C) Heroic's agent, and not Grace's agent.
D) not an agent.

Question 40

A nuncupative will is an oral will.

Question 41

Donald applies for a life insurance policy with Equity Insurance Company through Fletch,an agent who works for Equity.Donald pays the initial premium.Fletch writes a binder,which

A) acknowledges the application and promises to consider it.
B) attests to the truth of each statement in the application
C) evidences receipt of the payment of the initial premium.
D) indicates that a policy is pending and states its essential terms.

Question 42

Eighty-year-old Clark exhibits confusion,forgetfulness,and disorienta?tion.Dave,Clark's doctor,believes that the symptoms indicate dementia.Elsa,who has significant contact with Clark,believes that he is in a state of men?tal decline.These facts indicate

A) an urgency that Clark distribute his assets.
B) Clark's lack of capacity.
C) Dave's misdiagnosis.
D) Elsa's intent to take advantage of Clark.

Question 43

In his will,Vigor makes a gift of $10,000 to Wylie.This is

A) a general bequest.
B) an abatement.
C) a residuary.
D) a specific devise.

Question 44

Edy obtains a homeowners' insurance policy with First Source Insurance Company.First Source can cancel the policy

A) if Edy appears as a witness in a case against First Source.
B) if Edy fails to pay the premiums.
C) if Edy makes changes that add to the home's value.
D) under no circumstances.

Question 45

Gigi,a twenty-year-old,wants to execute a will before she undertakes a moun?tain-climbing trip on a peak in the Himalaya Mountains.In most states,the legal age for executing a will is

A) sixteen years of age.
B) eighteen years of age.
C) twenty-one years of age.
D) twenty-five years of age.

Question 46

Rolling Transport & Storage Corporation wants to insure its warehouse to obtain the maximum possible recovery for the lowest possible pre?mium.To obtain the maximum recovery under a coinsurance clause,the percentage of the value of the property that should be insured is

A) 80 percent.
B) 90 percent.
C) 100 percent.
D) 120 percent.

Question 47

Isabel obtains a fire insurance policy on her home from Justice Insurance Company.The home is lost in a fire,but the parties dispute the amount of Justice's liability under an ambiguous clause in the policy.A court would most likely

A) interpret the clause against Isabel.
B) interpret the clause against Justice.
C) rewrite the clause and apply it as rewritten.
D) strike the clause from the policy.

Question 48

According to the terms of Carmen's will,specific gifts are made,and taxes and other es?tate expenses and debts are paid.The assets of Carmen's estate that remain are

A) a bequest.
B) a legacy.
C) an abatement.
D) the residuum.

Question 49

Trustworthy Insurance,Inc.,has a valid reason to cancel a policy issued to USA Sales Company.In most states,Trustworthy could cancel the policy with

A) oral notice.
B) oral or written notice.
C) no notice.
D) written notice.

Question 50

The assets in Dong's estate,including the value of his home on Elm Street and its contents,are insufficient to pay in full all of the gifts provided for in his will.His heirs will receive

A) full payment in order of seniority until the assets are exhausted.
B) nothing-the assets will descend to the state.
C) reduced benefits.
D) the option of distributing the assets according to their wishes.

Question 51

Speedy Shipping Corporation applies to TransInsurance Company for a fire insurance pol?icy on Speedy's warehouse.On the application,Speedy misrepresents the age of the property to obtain a lower premium.When a fire soon destroys the ware?house,TransInsurance can

A) deny payment, because a fire destroyed Speedy's warehouse.
B) deny payment, because of Speedy's fraud in the application.
C) not deny payment, because a fire destroyed Speedy's warehouse.
D) not deny payment, because the application is not part of the policy.

Question 52

Holly obtains an insurance policy from Inviolable Insurance Corporation (IIC).IIC may cancel,or refuse to renew,the policy because of

A) Holly's appearance as a witness against IIC.
B) Holly's national origin.
C) Holly's race.
D) none of the choices.

Question 53

Clayton dies without a will.The distribution of Clayton's property,including his farm near Lincoln,Nebraska,is prescribed by

A) a court-appointed executor.
B) federal probate statutes.
C) state intestacy laws.
D) the degree of consanguinity between Clayton and his next of kin.

Question 54

Kerin obtains a property insurance policy for her art collection from Lawton Insurance Company.Kerin can cancel the policy

A) at any time.
B) only at the end of a period for which a premium has been paid.
C) only if Kerin no longer has an insurable interest in the property.
D) only on advance written notice.

Question 55

Lost in a canyon near Gila,Arizona,Hester writes her will in crayon,on a paper bag,while Ivan states orally how he wants his estate distributed.Most states do not permit

A) an olographic will.
B) a nuncupative will.
C) a will written on a paper bag.
D) a will written in crayon.

Question 56

Ginny obtains a health-insurance policy for her family from Hope Insurance Company.The policy includes an incontestability clause.Under such a clause,after a policy has been in force for a specified period or time,such as two or three years

A) Ginny cannot contest Hope's insurable interest.
B) Ginny cannot contest Hope's refusal to pay a claim under the policy.
C) Hope cannot contest Ginny's eligibility for continued coverage.
D) Hope cannot contest Ginny's statements in the application.

Question 57

Kelsy obtains a business liability insurance policy from Luminous Insurance Company for Kelsy's Framing & Art Supplies store.When an event occurs that gives rise to a claim,Luminous has a duty to

A) investigate to determine the facts.
B) file a suit against Kelsy so that a court can settle the claim.
C) find a third party on whom to impose liability.
D) refund any unearned amount of the premium.

Question 58

Root & Branch Lumber Company obtains a fire insurance policy from Statistical Insurers,Inc.,on a $400,000 warehouse.The policy includes an 80-percent coinsurance clause.Root & Branch insures the property for $320,000.In a fire,the warehouse suffers $200,000 in damage.Root & Branch can recover

A) $400,000.
B) $320,000.
C) $200,000.
D) $80,000.

Question 59

Keri's will states,"I give to my sister Liz my condominium in Malibu,California." This is

A) a general bequest.
B) an abatement.
C) a residuary.
D) a specific devise.

Question 60

EZ Rentals Company wants to insure the equipment that it rents to the public.To obtain insurance,EZ must have an insurable inter?est in the equipment

A) at any time.
B) at the time a loss occurs.
C) at the time a policy is obtained.
D) continuously from the time a policy is obtained to the time a loss occurs.

Question 61

Patty,who is divorced,owns a house.She has no reasonable expectation of benefit from the life of Quinn,her ex-spouse,but she applies for insur?ance on his life anyway.She also obtains a fire insurance policy on the house,which she later sells.Five years later,Quinn dies and the house is destroyed in a fire.Can Patty obtain payment on either the death of Quinn or the loss of the house? Explain.

Question 62

Mason creates a trust to prevent his son,Newt,the beneficiary,from assign?ing his rights to future payments of income from the trust.This is

A) a charitable trust.
B) a constructive trust.
C) a spendthrift trust.
D) an illegal trust.

Question 63

Juli types onto a computer what she intends to be "My Will" and prints it out.Juli has capacity."My Will" is

A) invalid.
B) valid if Juli signs it.
C) valid if Juli signs it and has three witnesses sign it.
D) valid if Juli signs it, has three witnesses sign it, and files it in a cer?tain state office.

Question 64

Dieter's will provides for a distribution of his assets on his death.Who will "distribute" Dieter's property,and what are the steps involved?

Question 65

Orin creates a living trust to pass his assets,including stock in Petro Oil Company and other business investments,to his heirs.One advantage of this arrangement is that

A) income taxes do not have to be paid on trust earnings.
B) the assets are sheltered from the payment of estate taxes.
C) the assets can be transferred without going through probate.
D) the trust does not come into existence until the grantor's death .

Question 66

Lani is asked to serve as a witness to Mona's will. To qualify,Lani must be

A) a collateral heir.
B) a lineal descendant.
C) eighteen years of age or older.
D) mentally competent.

Question 67

Ratzo is asked to be a witness to Sade's will.Before attesting to the will,

A) Ratzo does not have to read the will or be informed of its contents.
B) Ratzo must read the will and recite its contents.
C) Sade must orally tell Ratzo of the will's contents.
D) Sade's attorney must read the will aloud to Ratzo.

Question 68

Kendall executes a separate written instrument to amend her prior will.This separate document is

A) a codicil.
B) a constructive will.
C) an inter vivos will.
D) a nuncupative will.

Question 69

Dyan executes her will to give "to my nephew Esau my stock in Fargo,Inc." Later,Dyan writes separately,with the same formalities required for a will,to leave the stock to her niece Ginny and cash to Esau.This writing

A) does not affect the will's gift of the stock to Esau.
B) requires a gift of the stock in equal shares to Esau and Ginny.
C) revokes the whole will, which must be redrafted.
D) revokes the will's gift of the stock to Esau.

Question 70

Don executes a will leaving half of his farm to his spouse Elsie and the rest to his sons,Frank and Greg,in equal shares.The will disinherits a third son,Hal.Don and Elsie divorce,but Don dies before changing his will.Under the Uniform Probate Code

A) Elsie receives half of the farm, and Frank and Greg share the rest.
B) Elsie receives half of the farm, and Frank, Greg, and Hal share the rest.
C) Frank and Greg receive the entire estate in equal shares.
D) the state inherits the entire estate.

Question 71

Benny dies without a will,with no surviving spouse or child.Benny's survivors in?clude his granddaughter Callie,his nephew Doug,and his cousin Earl.In most states,his estate would pass to

A) Callie.
B) Doug.
C) Earl.
D) the state.

Question 72

Cliff dies without a will.His survivors include his spouse Dana and his two children,Efrem and Fay.Under applicable laws,Dana will probably receive

A) all of Cliff's estate.
B) none of Cliff's estate.
C) one-half of Cliff's estate.
D) one-third of Cliff's estate.