Ch. 2 Flashcards
Contract of Adhesion
A ________________ describes a contract that has been prepared by one party (the insurance company) with no negotiation between the applicant and insurer. The applicant adheres to the terms of the contract on a “take it or leave it” basis when accepted
Agent
An ______________ represents themselves and the insurer at the time of application
Aleatory contract
An ________ is a legal agreement that the parties involved do not have to perform a particular action until a specific, triggering event occurs
Apparent Authority
________________ is the power of an agent to act on behalf of a principal, even though not expressly or impliedly granted
Competent Party
A ______________________ is one who is capable of understanding the contract being agreed to. All parties must be of legal competence, meaning they must be of legal age, mentally capable of understanding the terms, and not influenced by drugs or alcohol
Concealment
________________ is the failure of the applicant to disclose a known material fact when applying for insurance
Conditional policy
A insurer’s promise to pay benefits after an event in contract
Consideration
__________________ is the part of an insurance contract setting forth the amount of initial and renewal premiums and frequency of future payments
Express Authority
_______________________ is the explicit authority granted to the agent by the insurer, as written in the agency contract
Estoppel
_______________ is the legal impediment to one party denying the consequences of its own actions or deeds if such actions or deeds result in another party acting in a specific manner or if certain conclusions are drawn
Fiduciary
The responsibility an insurance producer has to account for all premiums collected and provide sound financial advice to clients. A __________________ is in a position of trust with regards to the funds of their clients and the insurer
Fraud
_________________ includes the deliberate knowledge of or intentional deceit to make false statements to be compensated by an insurance company
Implied Authority
_________________ is an authority not explicitly granted to the agent in the contract of agency, but which common sense dictates the agent has. It enables the agent to carry out routine responsibilities
Indemnity Contract
Insurer pays an amount equal to the loss
Insurable Intrest
_______________________ is the financial, economic, and emotional impact associated with a person experiencing a specified loss. A person has an insurable interest in a loss if they have more to gain by not suffering the loss
Legal Purpose
_________________________ means an insurance contract must be legal in nature and not in opposition to public policy
Insurance Policy
An ______________________ is a written contract in which one party promises to indemnify another against loss that arises from an unknown event
Policy Rider or Endorsement
A ________________________- is an amendment added to an insurance contract that overrides terms in the original policy; may add or remove coverages, change deductibles, or revise any other policy feature
Parol Evidence Rule
______________________ involves parties put their agreement in writing, all previous verbal statements come together in that writing, and a written contract cannot be changed or modified by parol (oral) evidence
Material Misrepresentation
A ______________________ is a false statement made by an applicant that would influence an insurer in determining whether or not to accept the risk
Reasonable Expectations
________________________means the insured is entitled to coverage under a policy that any sensible and prudent person would expect it to provide
Representations
___________________ are statements made by the applicant that they consider to be true and accurate to the best of the applicant’s belief
Subrogation
_________________________ is the right for an insurer to pursue a third party that caused an insurance loss to the insured
Unilateral
_______________________ contracts mean only one party, the insurer, makes any kind of enforceable promise
Utmost Good Faith
_______________________ involves the belief that both the policy owner and the insurer must know all material facts and relevant information, and as such, they will provide each other with all material facts and relevant information
Valued Contract
Pays a fixed sum regardless (Life insurance contracts are valued contracts)
Voidable Contract
An agreement that something in a contract can be set aside (if apporved by the court)
Waiver
A __________________ is the voluntary giving up of a legal, given right
Warranty
A __________________ is a statement made by the applicant that is guaranteed to be true in every respect. It becomes part of the contract and, if found to be untrue, can be grounds for revoking the contract
Tort Law
To provide full compensation for proved harm
What is the consideration given by an insurer in the consideration clause of a life policy?
Promise to pay a death benefit to a named beneficiary
Taking receipt of premiums and holding them for the insurance company is an example of:
Fiduciary Responsibility
If a contract of adhesion contains complicated language, to whom would the interpretation be in favor of?
Insured
A life insurance policy would be considered a wagering contract WITHOUT:
Premium Payment
What consists of an offer, acceptance, and consideration?
Contract
Stranger Originated Life Insurance has been found to be in violation of which of the following contractual elements?
Legal purpose (Insurable interest)
The consideration clause of an insurance contract includes:
The schedule and amount of premium payments
When must insurable interest be present in order for a life insurance policy to be valid?
When the application is made
Stranger-Originated Life Insurance
Life insurance arrangements where investors persuade individuals (typically seniors) to take out new life insurance
B purchases a $500,000 life insurance policy and pays $900 in premiums over the first six months. B dies suddenly and the beneficiary is paid $500,000. This exchange of unequal values reflects which of the following insurance contract features?
Aleatory
The 3 types of negligence?
Simple, gross, Willful & Wanton
Gross Negligence
Disregarding the need to act in a reasonable manner regardless of the potential for harm
Willful & Wanton Negligence
Considered even more severe
Insurance contracts are known as __________ because certain future conditions or acts must occur before any claims can be paid
Conditional
Simple Negligence
The failure to act in a reasonable or prudent manner
Solicitor
Gathers insurance applicants but cannot issue them a policy
Most insurance is considered to be
a personal contract or personal agreement between the insurer and the insured
Insurance contracts are
Aleatory
What 4 things does a legally valid and binding contract contain?
Offer & acceptance, consideration, Legal purpose, competent parties
_________ __________ are required to make a full, fair, and honest disclosure of the risk to the agent and insurer
Insurance applicants
Policy
A written contract in which one party promises to indemnify another against loss that arises from an unknown event
An insurance contract is either a:
Valued contract or an indemnity contract
______means the contract is made null and void
Rescission
There are two parties to an insurance contract:
The insured & insurer
