2 - Ch 35

Question 1

The insurance contract - the parties

Answer 1

promiser is the insurer or underwriter

promise is made to the insured or policyholder in a written contract called a policy

Contracts ordinarily made though an insurance agent who works for one company or an insurance broker, an independent contractor

Question 2

insurable interest

Answer 2

insurance interest in property: exists when the destruction of the property will cause a direct loss to the insured

insurable interest in life: beneficiary must have an insurable interest when they purchase the policy (would suffer loss from the death)

Question 3

the contract

Answer 3

the application as part of the contract: insured is bound by all statements; policy can be voided during the 2 year. contestability period for misrepresentations

statutory provision as part of the contract: when a statue requires certain provision or coverage, it is assumed as part of all insurance contracts

Question 4

Antilapse and cancellation statutes and provisions

Answer 4

life insurance has a 30-31 day grace period

Question 5

modification of contract

Answer 5

can be done with agreement of insured and insurer. New policy not required

Question 6

interpretation of contract

Answer 6

in case of ambiguity, provision is interpreted against the insurer

Question 7

burden of proof f

Answer 7

in a dispute person bringing suit has burden of prove there was a loss. Exceptions to coverage are generally strictly interpreted against insurer

Question 8

insurer bad faith

Answer 8

insurer is liable for damages

Question 9

time limitations of insured

Answer 9

insured must comply with time limits on a claim

Question 10

subrogation of insurer

Answer 10

in some cases, insured has a claim against a third person for the harm covered by the insurance policy

Question 11

business liability insurance

Answer 11

commercial general liability policies are broad “all risk” policies

product liability, wrongful termination, sexual harassment, advertising damages, employee dishonesty, trademark infringement and cleanup costs

liability insurance for directors and officers, products and against malpractice also available

Question 12

marine insurance

Answer 12

ocean marine: covers ships and cargoes
-liability insurance covers damage to another ship or its cargo
-freight insurance insures payment for transportation charges
-“all risk” policy consolidates all coverage

inland marine: protects goods transported by land, by air, or inland and coastal waterways

Question 13

Fire and homeowners insurance

Answer 13

fire insurance: must be an actual, hostile fire that is the cause of the loss
-coinsurance: clause requires the insured to maintain coverage up to a certain amount or percentage of value
-assignment: cannot be done without the consent of the insured
-occupancy: provisions are strictly construed because they relate to the something

provides fire, theft, and liability protection in a single contract

Question 14

automobile insurance

Answer 14

perils covered: liability, medical expenses, uninsured motorist, loss or damage to the covered automobile

covered persons: named insured, family members, and anyone else driving with the permission of the insured

use and operation: does not require the auto be in motion

notice and cooperation: insured must give notice and cooperate with the insurer

no-fault insurance: when insured is injured, insurer makes payment regardless or fault unless injuries exceed a certain amount. In that case suit may be brought against party at fault

Question 15

Life insurance

Answer 15

term insurance is for a set number of years and terminates. If insured dies, payment is made; otherwise contract expires. Little or no cash surrender value

whole life insurance provides lifetime protection and an investment element. Part of the premium builds up cash surrender value

endowment insurance pays face amount if insured dies within the policy period. otherwise, face amount is paid to insured at the end of the period

double indemnity pays double if death is due to an accident. Disability is incapacity from bodily injury or disease to engage in any occupation

exclusions: double indemnity generally not applicable for deaths due to suicide, narcotics, intentional acts, crime, war or aircraft operation

the beneficiary: receives proceeds on insured’s death and the insured reserves the right to change the beneficiary without consent. Beneficiary may be barred from claiming the policy

incontestability clause: generally, policy becomes incontestable after stipulated period of time and insurer must pay the stipulated sum upon the death of the insured