1-B CHARACTERISTICS OF INSURANCE CONTRACTS

Question 1

Six Special Characteristics of Insurance Contracts- Personal

Answer 1

1. Protects the policyholder from financial losses
2. It does not protect property from becoming damaged
3. Coverage follows the person, not the property

Question 2

Six Special Characteristics of Insurance Contracts- Adhesion

Answer 2

1. Insurer is responsible for the terms of the contract
2. Insured has no say in the wording
3. Courts favor the insured in the event of an ambiguity
   DOCTRINE OF REASONABLE EXPECTATIONS
4. The contract should be interpreted as a reasonable person would interpret it.

Question 3

Six Special Characteristics of Insurance Contracts- Good Faith

Answer 3

Meaning:
1. Applicants are expected to completely honest about the risk to the insurer.
2. The insurer must rely on applicants not to conceal or misrepresent pertinent facts.
ex. If you didn’t mention you had a heart condition, the policy can be voided.

Question 4

Six Special Characteristics of Insurance Contracts- Aleatory

Answer 4

Aleatory: Depending on an unknown future event.
1. Neither party can know future losses
2. Insurer only has to pay if and when losses occur.
3. Policyholders could pay more in premiums than they ever get for claims or insurer could pay more in claims than it receives.

Question 5

Six Special Characteristics of Insurance Contracts- Unilateral

Answer 5

In contract,
1. The insurer has an obligation to pay for covered losses.
2. The insured has no obligation as he/she can just stop paying premium

Question 6

Six Special Characteristics of Insurance Contracts- Conditional

Answer 6

Meaning,
1. The insurer only has to perform if certain conditions are met (such as covered loss)
2. The insured must fulfill all conditions listed in the policy.

Question 7

4 Sections of a Policy- Declarations

Answer 7

Always The First Section
1. Names of both parties
2. Policy #
3. Locaation & Description of insured item
4. Value of insured item
5. Dates of the policy (beginning & end)
6. Amount and limit of coverage
7. Deductible
8. Premium

Question 8

4 Sections of a Policy- Insuring Agreement

Answer 8

Summarizes:
1. What is covered
2. Which causes of loss are covered
3. Any services provided
4. Any exclusions to coverage
5. The maximum limit of Policy Coverage in dollars

Question 9

4 Sections of a Policy- Conditions

Answer 9

Insurer Specifies any limits or qualifications the policyholder must meet.
ex. Requiring security at a jewelry store

Question 10

4 Sections of a Policy- Exclusions

Answer 10

Common exclusions
1. Earthquakes
2. Flooding
3. War
4. Nuclear hazards
5. Intentional acts

Question 11

Parts of insurance contract - Definitions

Answer 11

1. Not essential, but common in policies
2. Defines terms used to write policy including:
   Collision, Decay, Like kind and quality”

Question 12

Parts of Insurance Contract- Endorsement

Answer 12

1. Add or reduce insurance coverage
2. Change policy provisions
3. Change the premium price after the policy period ends
   SYNONYMS: RIDER, ADDENDUM, ATTATCHMENT

Question 13

What’s a certificate of Insurance?

Answer 13

1. Includes basic details of insurance policy
2. Constitutes proof of coverage
3. Often required for drivers