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What legal principle allows the beneficiary to collect the death benefit despite the insurer's claim of unpaid premiums?

  1. Implied Authority

  2. Estoppel

  3. Express Authority

  4. Adverse Selection

The correct answer is: Estoppel

The principle of estoppel plays a crucial role in situations where a beneficiary seeks to collect a death benefit despite the insurer's claims regarding unpaid premiums. Estoppel, in this context, refers to a legal doctrine that prevents a party from asserting a fact or claim that is inconsistent with a previous statement or behavior when another party has relied on that action to their detriment. In the case of life insurance, if the insurer has accepted premiums and allowed the policy to remain in force, it may be estopped from denying the payment of benefits due to alleged unpaid premiums. This is based on the premise that the insurer's acceptance of premiums implies that the policy is valid, and beneficiaries can reasonably rely on that implication. If the insurer then tries to deny the claim based on unpaid premiums, it would contradict its earlier acceptance of the payments, leading to potential unfairness towards the beneficiary. In contrast, implied and express authority pertain to the powers granted to agents and are not directly related to the beneficiary's right to collect under the terms of a policy when premiums are in dispute. Adverse selection is more about the insurer’s risk management concerning the applicants for insurance, rather than a principle that would support a beneficiary’s right to claim benefits despite unpaid premiums. Thus,