What recourse does an insurer have if violation of a material warranty

California Insurance License Exam Practice Test

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Question 1 of 5.

What recourse does an insurer have if violation of a material warranty on the part of the insured is discovered?

A. Hearing by the Insurance Commissioner to determine the severity of the misrepresentation and to determine appropriate course of action.

B. Hearing by a court of law to determine the appropriate course of action the insurer may take.

C. None, if discovered after the policy has been in force for over 12 months.

D. Rescission of the policy.

Explanation: If an insurer discovers a material misrepresentation or breach of warranty, the primary remedy is to rescind the policy, effectively voiding it from its inception, as if it never existed. This must typically be done within the contestability period (usually two years) and requires proof that the misrepresentation was material. While regulators or courts may be involved in disputes, the fundamental contractual remedy available to the insurer is rescission.

Question 2 of 5.

Which policy covering two or more individuals terminates after paying benefits only on the second death?

A. Family policy.

B. Joint life policy.

C. Survivorship life policy.

D. Limited payment whole life policy.

Explanation: A survivorship life policy, also known as a second-to-die policy, pays the death benefit only upon the death of the second insured. This contrasts with a joint life policy, which pays on the first death. A family policy typically covers multiple family members with benefits payable on any covered death. A limited payment whole life policy is for a single life and has a limited premium payment period, not related to multiple lives.

Question 3 of 5.

All of the following are requirements of a contract EXCEPT

A. the contract must have a legal purpose.

B. there must be equal consideration between the parties.

C. the parties to the contract must be legally competent.

D. there must be an offer and acceptance of the contract terms.

Explanation: Consideration in a contract requires that each party provides something of value, but the law does not require that the consideration be of equal value. The key is that there is a bargained-for exchange, not that the values are equivalent. The other options are fundamental elements of a valid contract: legality, competency, and offer and acceptance.

Question 4 of 5.

According to the California Insurance Code, the Commissioner can disapprove a licensee's request to use a fictitious name for any of the following reasons EXCEPT the

A. name is the licensee's actual name.

B. use of the name would be misleading.

C. name is too similar to a name already filed.

D. name implies that the licensee is an underwriter.

Explanation: The Commissioner can disapprove a fictitious name if it is misleading, too similar to an existing name, or implies the licensee is an insurer/underwriter. However, a licensee is generally permitted to use their own actual name without seeking approval for a fictitious name, making this the exception.

Question 5 of 5.

A husband and wife have a disabled child who is financially dependent upon them. The death of one parent would not result in financial disaster for the child, but the death of both parents would. Which policy should they purchase?

A. Juvenile policy.

B. First-to-die policy.

C. Second-to-die policy.

D. Family protection policy.

Explanation: A second-to-die policy (survivorship life) is designed to pay a benefit only upon the death of the second insured. This is ideal for situations where the financial need arises after both individuals are deceased, such as providing for a dependent child after both parents have passed away. A first-to-die policy pays on the first death, which is not the primary concern here. Juvenile and family protection policies do not specifically address this two-life dependency scenario.