Deck 29: Insurance, wills, and Trusts

Question 1

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

Answer 1

False

Question 2

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

Answer 2

True

Question 3

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

Answer 3

False

Question 4

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

Question 5

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

Question 6

An insurance application is part of the insurance contract.

Question 7

The consideration paid to an insurer to obtain an insurance policy is the premium.

Question 8

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

Question 9

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

Question 10

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

Question 11

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

Question 12

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

Question 13

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

Question 14

Liability insurance protects against liability imposed on the insured as a result of injuries to the person or property of another.

Question 15

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

Question 16

In defense against payment,an insurance company can raise any of the de-fenses that would be valid in an ordinary action on a contract.

Question 17

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

Question 18

A business firm may have an insurable interest in the life of any of its employees,except a key employee.

Question 19

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

Question 20

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

Question 21

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

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

Question 22

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

Question 23

A testator is a decedent who dies without a will.

Question 24

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

Question 25

A nuncupative will is a will that is completely in the handwriting of the testator.

Question 26

A divorce revokes an entire will.

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

An express trust is created or declared in explicit terms.

Question 29

A will is probated in part to establish its validity.

Question 30

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

Question 31

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 32

To "publish" a will means to release it to the media.

Question 33

Shingle & Tile Roofing Contractor,LLC,obtains an insurance policy against liability for injuries or losses sustained by employees during the course of their employment.The policy covers claims not covered by workers' compensation insurance.This is

A)casualty insurance.
B)fidelity or guaranty insurance.
C)key-person life insurance.
D)employer's liability insurance.

Question 34

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

Question 35

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

Question 36

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

Question 37

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

Question 38

An "X" can qualify as a signature on a will.

Question 39

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

Question 40

Doctors Medical Associates obtains an insurance policy that protects its members against negligence claims by their pa-tients.This is

A)casualty insurance.
B)fidelity or guaranty insurance.
C)malpractice insurance.
D)workers' compensation insurance.

Question 41

Garth dies without a will.The distribution of Garth's property,including his eleven forested acres near Hope,Arkansas,is prescribed by

A)a court-appointed executor.
B)federal probate statutes.federal probate statutes.
C)state intestacy laws.
D)Garth's relatives.

Question 42

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 43

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 44

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 45

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 46

According to the terms of Diego's will,specific gifts are made,and taxes and other es-tate expenses and debts are paid.The assets of Diego's estate that remain are most likely to be distributed

A)by codicil.
B)holographically.
C)per capita.
D)through a residuary clause.

Question 47

The assets in Hong'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 48

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 49

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 50

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 51

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 52

Feta is a partner in the game design firm GR8 Games,Inc.,which ob-tains key-person life in-surance on Feta in the amount of $1 million from Halo Insurance Company.Feta quits GR8 Games to join Icy Applications,Inc.Feta dies.Under the principle of insurable interest,Halo must pay the $1 million to

A)Feta's spouse Jo.
B)GR8 Games.
C)Icy Applications.
D)no one.

Question 53

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 54

Edy obtains a property insurance policy with First Source Insurance Company for Edy's fishing trawler.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 trawler's value.
D)under no circumstances.

Question 55

Skyler dies after having made a valid will.Skyler has died

A)in escheat.
B)in probate.
C)intestate.
D)testate.

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

Kelsey obtains a business liability insurance policy from Loyal Insurance Company for Kelsey's Framing & Art Supplies store.When an event occurs that gives rise to a claim,Loyal 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 58

Myles obtains a property insurance policy from Nova Insurance Company for Myles's restored 1957 Chevy.Nova can cancel the policy

A)if Myles increases the risk assumed by the Nova.
B)if Myles files a claim under the policy.
C)if Myles appears as a witness in a case brought against Nova.
D)under no circumstances.

Question 59

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

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

Question 60

Philomena dies without a will.A court appoints Quigley to handle the probate of Philomena's estate.The administrator of the estate is

A)Philomena's closest blood relative.
B)Philomena.
C)Quigley.
D)the court.

Question 61

Sherman dies without a will,survived by his granddaughter Roxy and Roxy's brother Pio.Roxy and Pio are Sherman's

A)collateral heirs.
B)settlors.
C)trustees.
D)lineal descendants.

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

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 64

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 65

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

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

Question 66

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 67

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

A)a codicil.
B)a holographic will.
C)a living will.
D)a nuncupative will.

Question 68

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 69

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 70

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 71

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.

Question 72

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?