1-B Characteristics Of Insurance Contracts

Question 1

6 Characteristics of INSURANCE policies:

Answer 1

1. ) are PERSONAL Contracts
2. ) are Contracts of ADHESION
3. ) assume UTMOST GOOD FAITH
4. ) are ALEATORY
5. ) are Unilateral
6. ) are Conditional

Question 2

Explain a PERSONAL contract

Answer 2

The policy protects YOU from financial losses; not the car…from damages
(Coverage follows the person, not the property)

Question 3

Explain contract of ADHESION

Answer 3

• insurer is the only party responsible for terms of the contract
• insured has no say in wording
• courts favor insured; in event of ambiguity

Question 4

Doctrine of Reasonable Expectations:

Answer 4

Contract should be interpreted reasonably

Question 5

Explain how contracts assume UTMOST GOOD FAITH

Answer 5

• applicants expected to be honest

Question 6

Explain ALEATORY contracts

Answer 6

• depend on an unknown future event
• neither party can know future losses
• policy holder could end up paying more or insurer could end up paying more

Question 7

Explain UNILATERAL contracts

Answer 7

• insurer has an OBLIGATION to pay covered losses

- insured doesn’t; can stop paying premium to void contract

Question 8

Explain CONDITIONAL contracts

Answer 8

• insurer only has to perform if certain conditions are met

- insured MUST fulfill all conditions listed in policy

Question 9

If I wanted to add someone to my policy, what section of my policy could that information be found?

Answer 9

Endorsement section