Deck 36: Insurance, Wills, and Trusts

Question 1

Risk management is the transfer of certain risks from an individual to an insurance company.

Answer 1

True

Question 2

An incorrect statement as to the age of the insured provides an insurance company with an excuse to avoid payment on the insured's death.

Answer 2

False

Question 3

Insurance coverage is always effective the moment an insurance broker accepts the applicant's first payment toward the premium.

Answer 3

False

Question 4

Property insurance cannot be canceled for nonpayment of premiums.

Question 5

Under an antilapse clause, an insurance policy will not lapse under any circumstances.

Question 6

A business organization cannot obtain insurance on the life of a person, even on the life of an individual who is important to that organization.

Question 7

There is little state regulation of the insurance industry.

Question 8

The words used in an insurance contract are given their ordinary meanings in light of the nature of the coverage involved.

Question 9

Insurance policies are governed by the general principles of contract law.

Question 10

When there is an ambiguity in an insurance policy, the provision generally is interpreted against the insurance company.

Question 11

The insured can cancel a policy at any time.

Question 12

Misstatements or misrepresentations in an application for insurance can affect the amount of a premium but cannot void a policy.

Question 13

An absolute defense against payment exists if the insurer can show that the insured lacked an insurable interest.

Question 14

An incontestability clause prohibits an insurer from contesting statements made in an insurance application until a specified time has elapsed.

Question 15

To probate a will means to release it to the media.

Question 16

Without an insurable interest, there is no enforceable insurance contract.

Question 17

One who dies after having made a valid will is said to have died intestate.

Question 18

Under a multiple insurance 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.

Question 19

A person who obtains insurance from an insurance company's agent is not usually protected until a formal written policy is issued.

Question 20

An insurance company may cancel an insured's policy for any reason and at any time.

Question 21

A trust that a grantor executes orally in contemplation of immediate death is a testamentarytrust.

Question 22

Phil is an insurance broker. This means that Phil is

A)an employee of an insurance company.
B)an independent contractor.
C)not allowed to deal directly with an insurance company.
D)in charge of determining the appropriate premium for an insurance policy.

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 s

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

A testator may revoke a will by intentionally tearing it.

Question 25

A codicil is a clause in a will affirming an administrator's testamentary capacity.

Question 26

A will can be partially revoked.

Question 27

In an abatement, the legatees receive increased benefits.

Question 28

A will can be an informal document and need not follow statutory requirements.

Question 29

A resulting trust arises from the conduct of the parties.

Question 30

When a person dies without a valid will, and no heirs exist, the state will assume ownership of the property.

Question 31

Orin is a doctor with Physicians Health Clinic, which obtains insurance from Quotient Insurance, Inc., on Orin's life. Orin dies. The proceeds of the policy belong to​

A) ​
B) ​
C) ​
D) ​

Question 32

A word such as "Mom" can qualify as a signature on a will.

Question 33

A will is required to be in writing only if real property is being transferred.

Question 34

A valid will is one that represents the maker's intention to transfer and distribute his or her property.

Question 35

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

Question 36

Cooks Delight Corporation makes and sells kitchen appliances. To cover injuries to consumers if the appliances prove defective, Cooks should obtain

A)major medical insurance.
B)disability insurance.
C)liability insurance.
D)life insurance.

Question 37

Per capita is a method of dividing an intestate share of an estate.

Question 38

The debts of a decedent must be satisfied out of his or her estate.

Question 39

Portia is the beneficiary of a life insurance policy on Quentin’s life obtained from Renewall Insurance Company through Stan, an insurance broker. The insured of this policy is

A)Portia.
B)Quentin.
C)Renewall.
D)Stan.

Question 40

A divorce does not necessarily revoke an entire will.

Question 41

Donovan obtains from Equity Insurance Company a policy that provides that if the parties cannot agree on the amount of a loss covered by the policy, an estimate of the value by an impartial third party can be demanded. This is​

A) ​an antilapse clause.
B) ​an arbitration clause.
C) ​an appraisal clause.
D) ​an incontestability clause.

Question 42

Estelle owns and operates a commercial dairy farm with her son Gabe. Estelle applies to obtain an insurance policy from Farm & Ranch Insurance Company to pay $1 million to Gabe on Estelle's death. This is

A) ​a violation of state law.
B) ​an attempt at wagering, but not a violation of state law.
C) ​liability insurance.
D) ​life insurance.

Question 43

In his will, Terrence leaves $10,000 to each of his three children. However, after Terrence dies and all his debts are paid, there is only $9,000 left in his estate. Each child will receive​

A) $10,000.
B) ​$9,000.
C) ​$3,000.
D) ​0.

Question 44

Alain and Bette are partners who own and operate Cakes n' Pies, a chain of dessert restaurants. Their partnership obtains insurance on Alain and Bette's lives. This is

A) ​disability insurance.
B) ​major medical insurance.
C) ​key-person insurance.
D) ​liability insurance.

Question 45

Frank applies to Guard Dog Insurance Company for homeowners' insurance. The company issues a policy, but later discovers that Frank's application includes several misstatements. Most likely, these misstatements can

A) ​affect the coverage under the policy but cannot void the policy.
B) ​bind Frank but cannot affect the coverage.
C) ​not bind Frank or affect the policy.
D) ​void the policy.

Question 46

Adrian applies for, and obtains, casualty insurance coverage from Business Insurance Company for his business, Country Club, Inc. The effective date of the policy is the date​

A) ​Adrian submits the application.
B) ​Business Insurance accepts the first premium.
C) ​Business Insurance issues the policy.
D) ​the application specifies as the effective date.

Question 47

Trial Lawyers, P.A., obtains an insurance policy that protects its members against negligence claims by their clients. This is​

A) ​liability insurance.
B) ​casualty insurance.
C) ​malpractice insurance.
D) ​accident insurance.

Question 48

Paxton makes a gift of real estate in his will to Orinda. This gift is​

A) ​a bequest.
B) ​a devise.
C) ​a legacy.
D) ​a residuary.

Question 49

Commerce & Business Insurance, Inc., has a valid reason to cancel a policy issued to DIY Auto & Truck Parts Company. In most states, Commerce & Business could cancel the policy on​

A) ​advance oral or written notice.
B) ​oral or written notice but only after arbitration.
C) ​no notice.
D) ​advance written-not oral-notice.

Question 50

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 enter a contest sponsored by Hope or its affiliate.
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 51

Shea makes a will. As a person who makes a will, Shea is

A) ​an administrator.
B) ​an executor.
C) ​a beneficiary.
D) ​a testator.

Question 52

Jackie's will states, "I leave my red Corvette to Angela." This is​

A) ​a specific legacy.
B) ​a devise.
C) ​an execution.
D) ​a general legacy.

Question 53

The assets in Doug'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 54

In his will, Bryson makes a gift of $12,000 to Curtis. This is​

A) a general bequest.
B) ​a general devise.
C) ​a specific bequest.
D) ​a specific devise.

Question 55

Kelsey obtains a business liability insurance policy from Loyal Insurance Company for Kelsey's Modeling & Hobby Crafts store. When an event occurs that gives rise to a claim, the insurance company has a duty to​

A) ​investigate to determine the facts.
B) ​file a suit against Kelsey 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 56

Energy Industries, Inc., obtains insurance policies with Fidelity Insurance, Inc., and Good worth Insurance Company against the risk of loss of Energy's property. Each policy includes a multiple insurance clause. A fire partially destroys one of Energy's buildings. Energy can collect from Fidelity​

A) ​all of the loss.
B) ​half of the loss.
C) ​its proportionate share of the loss to the total amount of insurance.
D) ​none of the loss.

Question 57

U-Rents Company wants to insure the equipment that it rents to consumers. To obtain insurance, U-Rents must have an insurable interest in the property​

A) ​at the time U-Rents rents the equipment.
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 58

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

A) ​the bequest.
B) ​the devise.
C) ​the legacy.
D) ​the residuary.

Question 59

Greg obtains from Helpful Insurance Company a policy that provides that Greg has thirty days after a premium's due date to pay it before the policy will be canceled. This is​

A) ​a multiple insurance clause.
B) ​an antilapse clause.
C) ​an appraisal clause.
D) ​an incontestability clause.

Question 60

Anna obtains a business liability insurance policy for her Brew & Bagels Coffee Shop from Choice First Insurance Company. When an event occurs that gives rise to a claim, each party has a duty to

A) ​cooperate in an investigation to determine the facts.
B) ​file a suit against the other so that a court can settle the claim.
C) ​find a third party on whom to impose liability.
D) ​pay any outstanding premium or refund any unearned amount.

Question 61

Adam has two children, Bob (the eldest) and Carol, both of whom predecease Adam. Bob is survived by a daughter, Dina, and Carol by two sons, Ed and Fred. On Adam's death, if the estate is distributed per stirpes​

A) ​Dina will receive the entire estate.
B) ​Dina will receive one-half of the estate, and Ed and Fred will each receive one-fourth.
C) ​each grandchild will receive one-third of the estate.
D) ​the grandchildren will not receive anything.

Question 62

Ruth executes a will naming her nephew Stan as sole beneficiary. Two years later, Ruth executes another will, naming her niece Tammy as sole beneficiary. On Ruth's death

A) ​Stan and Tammy will share the estate in equal shares.
B) ​Stan will be the sole heir.
C) ​Tammy will be the sole heir.
D) ​the estate will pass as if there were no will.

Question 63

Ralph creates a trust by his will for the benefit of Stella and her family to come into existence on Ralph's death. This is​

A) ​a constructive trust.
B) ​a living trust.
C) ​a resulting trust.
D) ​a testamentary trust.

Question 64

For Melinda's will to be valid, she must be mentally competent at the time of

A) death.
B) ​the acquisition of the property to be distributed under the will.
C) ​the making of the will.
D) ​the probate of the will.

Question 65

Maya dies without a will. The distribution of Maya's estate is prescribed by​

A) ​Maya's closest relatives.
B) ​codicil.
C) ​intestacy laws.
D) ​will substitutes.

Question 66

Gus dies intestate. The debts of the estate are paid by Gus's

A) ​estate, after its assets are distributed.
B) ​estate, before its assets are distributed.
C) ​heirs, after the estate's assets are distributed.
D) ​heirs, before the estate's assets are distributed.

Question 67

Edie holds title to Floyd's property under circumstances that, although nothing is express, indicate this is apparently only for Floyd's benefit. This is

A) an illegal trust.
B) ​an living trust.
C) ​a resulting trust.
D) ​a testamentary trust.

Question 68

Ann and Burt are partners in Delta Associates. Burt takes ad-vantage of a partnership opportunity for personal gain that causes Delta's business to suffer. A court orders Burt to hold the profits in trust for the partnership. This is​

A) ​a constructive trust.
B) ​an living trust.
C) ​a resulting trust.
D) ​a testamentary trust.

Question 69

Graham's will leaves $100,000 to his two children, Harry and Ida. When Graham dies, he only has $80,000 to honor his bequests. Harry and Ida each receive $40,000. This is

A) ​a legacy.
B) ​an abatement.
C) ​intestacy.
D) ​a devise.

Question 70

Estimable Credit Company loans funds to Farmland Granaries, LLC, to buy a silo. Estimable obtains an insurance policy from Grangers Insurance, Inc., to cover the silo. Farmland also obtains a policy from Grangers to cover the silo. Later, Farmland sells the silo to Hi-Yield Harvest Company but keeps the policy. Hi-Yield also obtains a pol-icy from Grangers to cover the silo. Estimable agrees to finance Hi-Yield's purchase of the property. A fire totally destroys the silo. Who can recover for the loss?

Question 71

Aron owns a certificate of deposit with Beth, his sister, and an apartment building with Carl, his brother, in both cases as a joint tenant. Aron, a partner with Debra in Aron & Debra Accountants, obtains a life insurance policy with Debra as the designated beneficiary. Aron writes a will that gives particular items of personal property, as well as specific amounts of cash, to his children and his friends. The will leaves the residue of the estate to Eve, Aaron's favorite cousin. Carl dies. Aron, on his deathbed, makes a gift to the United Way. Will the certificate of deposit, the apartment building, the proceeds from the life insurance policy, and the gift to the United Way become part of Aron's estate and be distributed under the will? If not, how will these items be distributed and to whom?​

Question 72

The owners of Designer Apps, Inc., want to execute wills. Eve is fifteen years old, Fran is seventeen, and Gail is nineteen. In most states, those with the capacity to execute a will are​

A) ​all of the owners of Designer Apps.
B) ​Fran and Gail only.
C) ​Gail only.
D) ​none of the owners of Designer Apps.