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Q:
A lapsed legacy will occur if the testator predeceases the legatee.
Q:
A legatee is a person who receives a gift of real property under a will.
Q:
One who dies with a valid will has died intestate.
Q:
An executor is a personal representative appointed by a court for a decedent who dies without a will.
Q:
An executor is a personal representative named in a will.
Q:
Ruth, an elderly woman, has been diagnosed with lung cancer. She realizes her condition may worsen, and that there is a chance that at some point she will become so weak the only way she will be able to breathe is with the help of medical machinery. She does not want to be kept alive in such a "vegetative state." What are Ruth's options?
Q:
Aaron owns a certificate of deposit with Beth, his sister, and an apartment building with Carl, his brother, in both cases as a joint tenant. Aaron, a partner with Debra in Aaron & Debra Accountants, obtains a life insurance policy with Debra as the designated beneficiary.Aaron 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. Aaron, on his own 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 Aaron's estate and be distributed under the will? If not, how will these items be distributed and to whom?
Q:
Mike creates a trust to prevent his son, Nat, the beneficiary, from assigning 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.
Q:
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. a charitable trust.
b. an inter vivos trust.
c. a resulting trust.
d. an illegal trust.
Q:
Diana creates a trust by her will to come into existence on her death. This is
a. a constructive trust.
b. an inter vivos trust.
c. a resulting trust.
d. a testamentary trust.
Q:
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.
Q:
Irma dies intestate, survived by her granddaughter Joy and her brother Ken. Joy and Ken are Irma's
a. collateral heirs.
b. constructive heirs.
c. inter vivos heirs.
d. lineal descendants.
Q:
Donna dies intestate. Intestacy laws, which determine how Donna's estate will be distributed, are also known as
a. estate administration laws.
b. probate laws.
c. nuncupative statutes.
d. statutes of descent and distribution.
Q:
Don executes a will leaving half of his farm to his spouse Edy and the rest to his sons, Frank and Greg, in equal shares. The will disinherits a third son, Hal. Don and Edy divorce, but Don dies before changing his will. Under the Uniform Probate Code
a. Edy receives half of the farm, and Frank and Greg share the rest.
b. Edy 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.
Q:
Karen 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.
Q:
Bob executes a will, telling the witnesses that the document they are about to sign is his "last will and testament." After Bob's death, the will is admitted for probate. Carol, his lawyer, reads the will to his heirs. The publication of the will is
a. Bob's declaration to the witnesses.
b. Bob's execution of the will.
c. Carol's reading of the will to Bob's heirs.
d. the admission of the will for probate.
Q:
Rick is asked to be a witness to Sam's will. Before attesting to the will,
a. Rick does not have to read the will or be informed of its contents.
b. Rick must read the will and recite its contents.
c. Sam must orally tell Rick of the will's contents.
d. Sam's attorney must read the will aloud to Rick.
Q:
On her deathbed, Jenny tells her relatives that on her death, Ken is to have all of her personal possessions. Jenny has made
a. a formal will.
b. an inter vivos gift.
c. an intestate will.
d. a nuncupative will.
Q:
In Case 50.1, Estate of Klauzer, the court resolved a dispute over the division of an estate by
a. analyzing the text of the will to determine the testator's intent.
b. examining the circumstances under which the will was drafted and executed.
c. applying the state statute governing intestate succession.
d. Both a and b.
Q:
In his will, Carl makes a gift of his collection of sports memorabilia to Don, a fellow collector. A lapsed legacy will occur if
a. Carl revokes the will.
b. Don dies before Carl or before the gift is made.
c. the collection consists of items procured by illegal means.
d. the will is invalidated for lack of testamentary capacity.
Q:
Clark opens an account for $100,000 at First State Bank. The account provides that its funds, which represent most of Clark's assets, are held in trust for Gail, the bank employee who opens the account and who retains the card required to access it. Less than a year later, Clark dies, and Gail withdraws the funds. These facts indicate
a. a living trust.
b. a nuncupative will.
c. descent by election.
d. undue influence.
Q:
Jerry, a twenty-year-old, wants to execute a will before he takes a mountain-climbing trip in the Sierra Nevadas. 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.
Q:
Gina's assets are insufficient to pay in full all of the bequests provided for in her will. In this situation,
a. an abatement occurs, by which the legatees received reduced benefits.
b. each beneficiary, in the order in which he or she is named in the will, is paid in full until the assets are depleted, and the others get nothing.
c. the assets are distributed under intestacy laws.
d. the assets are sold and the proceeds distributed per capita.
Q:
In her will, Sara makes a gift of "my pearl necklace" to Tina. This is
a. a general bequest.
b. a general devise.
c. a specific bequest.
d. a specific devise.
Q:
According to Lou's will, specific gifts are made, and taxes and other estate expenses and debts are paid. The assets of Lou's estate that remain are
a. a lapsed legacy.
b. a general bequest.
c. an abatement.
d. the residuum.
Q:
Rob applies to Standard Insurance Company for a life insurance policy. On the application, Rob understates his age. Rob obtains the policy, but for a lower premium than he would have had to pay had he disclosed his actual age. The policy includes an incontestability clause. Five years later, Rob dies. Can Standard refuse payment on the policy?
Q:
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 insurance 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.
Q:
Clinical Medical Associates obtains an insurance policy that protects its members against malpractice claims brought against them by their patients. This is
a. casualty insurance.
b. fidelity insurance.
c. liability insurance.
d. life insurance.
Q:
Tina pays a premium to United Insurance Corporation for fire insurance against the loss of Vital Office Building. Tina sells the building to Wayne. The building burns down. United must pay the proceeds of the policy to
a. neither Tina nor Wayne.
b. Tina and Wayne.
c. Tina only.
d. Wayne only.
Q:
Fred misstates his age in applying for a life insurance policy with Gamma Insurance Company. Due to this "error," Gamma can
a. adjust the amount of the premium or the benefits.
b. cancel the policy.
c. file criminal charges against Fred for fraud.
d. "misstate" the amount payable to the policy's beneficiary.
Q:
Sally obtains a life insurance policy with no cash surrender value and names her son Theo as the beneficiary. This is
a. endowment insurance.
b. limited-payment life insurance.
c. term insurance.
d. whole life insurance.
Q:
Rich Insurance Company wants to cancel a life insurance policy issued to Sam. Normally, Rich could cancel the policy
a. if Sam misstated his age in the application only.
b. if Sam misstated his age in the application or the cancellation is based on "optional" information that Sam provided at Rich's request.
c. if the cancellation is based on "optional" information that Sam provided at Rich's request only.
d. under any circumstances.
Q:
Micro Insurance Company has a valid reason to cancel a policy that Micro issued to National Sales Company. In most states, Micro could cancel the policy on
a. advance oral notice only.
b. advance written notice only.
c. advance oral or written notice.
d. no advance notice.
Q:
Holly obtains an insurance policy from Imperial Insurance Corporation (IIC). IIC may cancel, or refuse to renew, the policy because of
a. Holly's appearance as a witness against IIC only.
b. Holly's national origin or race only.
c. Holly's appearance as a witness against IIC, or her national origin or race.
d. not Holly's appearance as a witness against IIC, or her national origin or race.
Q:
Mike obtains a homeowner's policy from All-Homes Insurance Company. If the terms of the policy are ambiguous,
a. a court will rewrite them to accurately expresses the parties' intent.
b. the ambiguous terms will be interpreted against All-Homes.
c. the ambiguous terms will be interpreted against Mike.
d. the policy will be unenforceable.
Q:
Verity Insurance Corporation issues a fire insurance policy to Worldwide Shipping, Inc., to cover its warehouses. Later, a dispute arises between the parties over the terms. If the terms are construed as ambiguous,
a. a court will reform the policy.
b. the policy will be unenforceable.
c. the terms will be interpreted against Verity.
d. Verity will have to pay punitive damages.
Q:
Cathy obtains from Dependable Insurance Company a policy that provides that if a dispute arises between the parties concerning the settlement of a claim, the dispute must be submitted to an impartial third party, not a court, for resolution. This is
a. an antilapse clause.
b. an arbitration clause.
c. an appraisal clause.
d. an incontestability clause.
Q:
Ordinary Business, Inc., (OBI) obtains a fire insurance policy from Precise Insurance Company (PIC) on a $400,000 warehouse. The policy includes an 80-percent coinsurance clause. OBI insures the property for $320,000. In a fire, the warehouse suffers $200,000 in damage. OBI can recover
a. $400,000.
b. $320,000.
c. $200,000.
d. $80,000.
Q:
Ann obtains from Beta Insurance Company a policy that provides that after it has been in force for a certain time, Beta cannot question statements made in the application. This is
a. an antilapse clause.
b. an arbitration clause.
c. an appraisal clause.
d. an incontestability clause.
Q:
Allen 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. Allen submits the application.
b. Business Insurance accepts the first premium.
c. Business Insurance issues the policy.
d. the application specifies as the effective date.
Q:
Business Corporation (BC) buys Construction Equipment Company (CEC) and obtains insurance from Diverse Insurers, Inc., to cover a loss of any equipment. BC sells CEC. Nine months later, CEC's equipment is stolen. BC can recover
a. nothing.
b. the amount of BC's initial investment in CEC.
c. the amount of the loss up to the dollar limits of the policy.
d. the total amount of the loss.
Q:
Amy is a partner in the software design firm Broadband, Inc., which obtains key-person insurance on Amy's life in the amount of $1 million from Delta Insurance Company. Amy quits Broadband to join Custom Applications, Inc., a different software firm. Amy dies. Delta must pay the $1 million to
a. Amy's spouse Ed because he had an insurable interest in Amy's life at all times.
b. Broadband because it had an insurable interest in Amy's life when it obtained the policy.
c. Customer Applications because it had an insurable interest in Amy's life when she died.
d. no one because Amy was not working for Broadband when she died.
Q:
Beth obtains a life insurance policy from Consumers Insurance Company, naming her spouse Don as the beneficiary. Beth and Don are divorced. There is no provision in the policy about divorce. On Beth's death, Consumers must
a. not pay Don because he and Beth divorced.
b. not pay Don because he has no insurable interest in Beth's life.
c. pay Don.
d. pay Beth's estate.
Q:
Myra obtains an insurance policy under which Normal Insurance Company, the insurer, agrees to pay $100,000 to Myra's beneficiary on Myra's death. This is
a. casualty insurance.
b. fire insurance.
c. life insurance.
d. title insurance.
Q:
International Corporation (IC) makes and sells kitchen appliances. To cover injuries to consumers if the appliances prove defective, IC should obtain
a. group insurance.
b. health insurance.
c. liability insurance.
d. life insurance.
Q:
Action Sales Corporation obtains an insurance policy that covers losses to Action Sales caused by fire. This is
a. casualty insurance.
b. fire insurance.
c. life insurance.
d. title insurance.
Q:
Automobile insurance insures against liability for personal injury and property damage resulting from the operation of the insured vehicle.
Q:
A life insurance policy typically terminates on the death of the insured, and no benefits are payable.
Q:
To avoid payment on a claim, an insurance company may raise any defense that would be valid in any action for breach of contract.
Q:
Life insurance can be canceled for nonpayment of premiums.
Q:
Property insurance can be canceled for nonpayment of premiums.
Q:
An insurance company may cancel an insured's policy if the insured appears as a witness in a case against the company.
Q:
If a provision in an insurance policy is ambiguous, the provision will be interpreted against the insurance company.
Q:
An antilapse clause provides that an insurance policy will not lapse if no payment is made on the date due.
Q:
Under an incontestability clause, once an insurance company issues a policy, the insured cannot contest any statements made in the policy.
Q:
A homeowner who insures a home for 80 percent of its value can recover only 80 percent of the cost for damage to it, under a coinsurance clause.
Q:
Insurance policies are governed by principles of contract law.
Q:
Insurance coverage is always effective the moment an insurance broker accepts the applicant's first payment toward the premium.
Q:
Few states regulate the insurance industry by statute.
Q:
An insurance agent ordinarily works for the insurance company.
Q:
An insurable interest in property must exist when a policy is purchased.
Q:
A spouse may have an insurable interest in his or her spouse's life.
Q:
A business firm may have an insurable interest in the life of a key employee.
Q:
Insurance is classified according to the nature of the risk involved.
Q:
All-risk insurance is property insurance that covers damage resulting from all risks not specifically excluded.
Q:
Risk management involves the transfer of certain risks from a party to an insurance company through a contractual agreement.
Q:
Computer Electronics Corporation (CEC) discovers a defect in its newly developed, recently marketed hard drives. CEC decides to recall the product and replace it with another. CEC's insurance policy with Delta Business Insurance Company will cover any harm to customers that occurs before the drives are returned. Is it likely that the policy will also pay for the recall and replacement? If so, what type of policy does CEC have?
Q:
Ace Investments, Inc., is the mortgagee for a warehouse owned by Best Storage, Inc. Ace obtains an insurance policy from Complete Insurance Corporation (CIC) to cover the warehouse. Best also obtains a policy from CIC to cover the warehouse. Later, Best sells the warehouse to Delta Company but keeps the policy. Delta also obtains a policy from CIC to cover the warehouse. Ace agrees to act as Delta's mortgagee. A fire totally destroys the warehouse. Who can recover for the loss?
Q:
Lee obtains a $250,000 life insurance policy from Mutual Insurance Company. On Lee's death, Mutual will pay $250,000 to
a. Lee's beneficiary.
b. Lee's employer.
c. Lee's heir.
d. the state.
Q:
Sue obtains a life insurance policy with no cash surrender value and names her son Tom as the beneficiary. This is
a. casualty insurance.
b. decreasing-term life insurance.
c. health insurance.
d. term life insurance.
Q:
Edie obtains a homeowners' insurance policy with First State Insurance Company. First State can cancel the policy
a. if Edie appears as a witness in a case against First State.
b. if Edie fails to pay the premiums.
c. if Edie makes changes that add to the home's value.
d. under no circumstances.
Q:
Omega Insurance Company has a valid reason to cancel part of a policy that Omega issued to Professional Sales, Inc. In most states, Omega could effect this cancellation on
a. advance oral notice only.
b. advance written notice only.
c. advance oral or written notice.
d. neither advance oral nor written notice.
Q:
Ken obtains a property insurance policy from Loyal Insurance Company. Loyal may cancel, or refuse to renew, the policy because of
a. Ken's fraud with respect to the condition of the property only.
b. Ken's gross negligence with respect to the hazard insured against only.
c. Ken's fraud with respect to the condition of the property, or his gross negligence with respect to the hazard insured against.
d. nothing Ken does.
Q:
Allied Company obtains policies with Best-Rate Insurance, Inc., and Cover-All Corporation against the risk of loss of Allied's office building in a fire. Each policy includes a multiple-insurance clause. A fire partially destroys the building. Allied can collect from Best-Rate
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.
Q:
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. an antilapse clause.
b. an arbitration clause.
c. an appraisal clause.
d. an incontestability clause.
Q:
Burt obtains from Capital 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.
Q:
Eagle Transport Corporation wants to insure its warehouse to obtain the maximum possible recovery for the lowest possible premium. 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.
Q:
Rollo applies for, and obtains, a life insurance policy from Standard Insurance Company that contains an incontestability clause. This clause provides that Standard cannot contest statements made in the application
a. after the policy has been in effect for a specified period of time.
b. as soon as the policy is issued.
c. before the policy is issued.
d. under any circumstances.
Q:
Retail Stores, Inc., an applicant for a liability insurance policy, contacts Sam, an insurance broker. Sam obtains coverage for Retail Stores through Total Business Insurance, Inc. (TBI). Sam is an agent for
a. Retail Stores.
b. Sam
c. TBI.
d. Retail Stores, Sam, and TBI.
Q:
Super Shipping Corporation applies to Tropic Insurance Company for a fire insurance policy on Super's warehouse. On the application, Super misrepresents the age of the property to obtain a lower premium. When a fire destroys the warehouse, Tropic can
a. deny payment, because a fire destroyed Super's warehouse.
b. deny payment, because of Super's fraud in the application.
c. not deny payment, because a fire destroyed Super's warehouse.
d. not deny payment, because the application is not part of the policy.