Massachusetts State Life Insurance Practice Exam

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Study for the Massachusetts State Life Insurance Exam. Use our flashcards and multiple choice questions, each with hints and explanations. Prepare confidently for your test!

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What condition will an insurance contract become null and void?

  1. If it contains illegal terms or violates public policy

  2. If the insurer offers a lower premium later

  3. If the insured changes their mind about coverage

  4. If both parties disagree on terms after signing

The correct answer is: If it contains illegal terms or violates public policy

An insurance contract will become null and void if it contains illegal terms or violates public policy. This stems from the principle that a contract cannot be legally enforceable if its purpose violates the law or moral standards recognized by society. For instance, if a policy were to cover activities that are illegal, such as insuring a crime, it would not be valid because courts will not enforce contracts that go against the legal framework or public interest. A contract needs to be formed around lawful agreements to maintain its validity. Therefore, any stipulation within the contract that names an illegal activity or seeks to contravene established norms will render the entire contract unenforceable. This is a fundamental concept in contract law that ensures the integrity of agreements and upholds legal and ethical standards in the marketplace.