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Insurance > Ch. 2 > Flashcards

Ch. 2 Flashcards

1
Q

Contract of Adhesion

A

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

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2
Q

Agent

A

An ______________ represents themselves and the insurer at the time of application

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3
Q

Aleatory contract

A

An ________ is a legal agreement that the parties involved do not have to perform a particular action until a specific, triggering event occurs

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4
Q

Apparent Authority

A

________________ is the power of an agent to act on behalf of a principal, even though not expressly or impliedly granted

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5
Q

Competent Party

A

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

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6
Q

Concealment

A

________________ is the failure of the applicant to disclose a known material fact when applying for insurance

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7
Q

Conditional policy

A

A insurer’s promise to pay benefits after an event in contract

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8
Q

Consideration

A

__________________ is the part of an insurance contract setting forth the amount of initial and renewal premiums and frequency of future payments

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9
Q

Express Authority

A

_______________________ is the explicit authority granted to the agent by the insurer, as written in the agency contract

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9
Q

Estoppel

A

_______________ 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

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10
Q

Fiduciary

A

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

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11
Q

Fraud

A

_________________ includes the deliberate knowledge of or intentional deceit to make false statements to be compensated by an insurance company

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12
Q

Implied Authority

A

_________________ 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

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13
Q

Indemnity Contract

A

Insurer pays an amount equal to the loss

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14
Q

Insurable Intrest

A

_______________________ 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

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15
Q

Legal Purpose

A

_________________________ means an insurance contract must be legal in nature and not in opposition to public policy

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15
Q

Insurance Policy

A

An ______________________ is a written contract in which one party promises to indemnify another against loss that arises from an unknown event

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16
Q

Policy Rider or Endorsement

A

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

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16
Q

Parol Evidence Rule

A

______________________ 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

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16
Q

Material Misrepresentation

A

A ______________________ is a false statement made by an applicant that would influence an insurer in determining whether or not to accept the risk

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17
Q

Reasonable Expectations

A

________________________means the insured is entitled to coverage under a policy that any sensible and prudent person would expect it to provide

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18
Q

Representations

A

___________________ are statements made by the applicant that they consider to be true and accurate to the best of the applicant’s belief

19
Q

Subrogation

A

_________________________ is the right for an insurer to pursue a third party that caused an insurance loss to the insured

20
Q

Unilateral

A

_______________________ contracts mean only one party, the insurer, makes any kind of enforceable promise

21
Q

Utmost Good Faith

A

_______________________ 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

22
Q

Valued Contract

A

Pays a fixed sum regardless (Life insurance contracts are valued contracts)

23
Q

Voidable Contract

A

An agreement that something in a contract can be set aside (if apporved by the court)

24
Q

Waiver

A

A __________________ is the voluntary giving up of a legal, given right

25
Q

Warranty

A

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

26
Q

Tort Law

A

To provide full compensation for proved harm

27
Q

What is the consideration given by an insurer in the consideration clause of a life policy?

A

Promise to pay a death benefit to a named beneficiary

28
Q

Taking receipt of premiums and holding them for the insurance company is an example of:

A

Fiduciary Responsibility

29
Q

If a contract of adhesion contains complicated language, to whom would the interpretation be in favor of?

A

Insured

30
Q

A life insurance policy would be considered a wagering contract WITHOUT:

A

Premium Payment

31
Q

What consists of an offer, acceptance, and consideration?

A

Contract

32
Q

Stranger Originated Life Insurance has been found to be in violation of which of the following contractual elements?

A

Legal purpose (Insurable interest)

33
Q

The consideration clause of an insurance contract includes:

A

The schedule and amount of premium payments

34
Q

When must insurable interest be present in order for a life insurance policy to be valid?

A

When the application is made

35
Q

Stranger-Originated Life Insurance

A

Life insurance arrangements where investors persuade individuals (typically seniors) to take out new life insurance

36
Q

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?

A

Aleatory

37
Q

The 3 types of negligence?

A

Simple, gross, Willful & Wanton

38
Q

Gross Negligence

A

Disregarding the need to act in a reasonable manner regardless of the potential for harm

39
Q

Willful & Wanton Negligence

A

Considered even more severe

39
Q

Insurance contracts are known as __________ because certain future conditions or acts must occur before any claims can be paid

A

Conditional

40
Q

Simple Negligence

A

The failure to act in a reasonable or prudent manner

41
Q

Solicitor

A

Gathers insurance applicants but cannot issue them a policy

42
Q

Most insurance is considered to be

A

a personal contract or personal agreement between the insurer and the insured

43
Q

Insurance contracts are

A

Aleatory

44
Q

What 4 things does a legally valid and binding contract contain?

A

Offer & acceptance, consideration, Legal purpose, competent parties

45
Q

_________ __________ are required to make a full, fair, and honest disclosure of the risk to the agent and insurer

A

Insurance applicants

46
Q

Policy

A

A written contract in which one party promises to indemnify another against loss that arises from an unknown event

47
Q

An insurance contract is either a:

A

Valued contract or an indemnity contract

48
Q

______means the contract is made null and void

A

Rescission

49
Q

There are two parties to an insurance contract:

A

The insured & insurer

Insurance (20 decks)

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