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Personal Lines Insurance > Ch. 2 Insurance Contracts > Flashcards

Ch. 2 Insurance Contracts Flashcards

1
Q

An agreement between two or more parties that is enforceable by law

A

Legal Contract

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2
Q

What are the essential elements of a legal contract

A

Competent parties, legal purpose, offer and acceptance, and consideration

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3
Q

All parties to a contract must have legal capacity, or competency, to enter into a legal contract

A

Competent Parties

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4
Q

All parties to a contract must enter it for a legal purpose and in good faith

A

Legal Purpose

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5
Q

To form an agreement, one party must make and communicate an offer to the other party, and the second party must accept that offer

A

Agreement

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6
Q

The exchange of value between the parties to the contract that makes the contract binding

A

Consideration

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7
Q

What is indemnity

A

Compensation for a loss

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8
Q

What are contracts of adhesion

A

One party writes the contract, and the other party may not negotiate it

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9
Q

What are aleatory contracts

A

The parties have an unequal exchange of consideration

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10
Q

What are conditional contracts

A

Both parties must perform certain duties to make the contract enforceable

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11
Q

What are unilateral contacts

A

One party is legally bound to contractual obligations

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12
Q

What are personal contracts

A

The contract is between the insurance company and an individual, and it cannot be transferred or assigned to another party

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13
Q

Statements made by the applicant on the application which are believed to be true to the best of the applicant’s knowledge and belief at the time

A

Representations

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14
Q

A false statement contained in the application

A

Misrepresentations

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15
Q

Statements that impact the acceptance of an insurable risk

A

Material Representations

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16
Q

Statements that do not affect the acceptance or rating of the risk

A

Immaterial Representations

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17
Q

A statement that is guaranteed to be true in all aspects

A

Warranties

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18
Q

The willful holding back or failure to communicate material information pertinent to the issuance of the contract or payment of a claim

A

Concealment

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19
Q

A false statement made intentionally to deceive or induce another party to issue a contract, part with something of value, or surrender a legal right

A

Fraud

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20
Q

A voluntary surrender of a known or legal right or advantage

A

Waiver

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21
Q

The judicial consequence that follows a waiver: it denies a contractual right based on prior actions contrary to what the contract states

A

Estoppel

22
Q

What are the basic parts of property and casualty insurance

A

The Declarations page, the Insuring Agreement, Conditions, and Exclusions

23
Q

It describes basic information about the policy that connects the policy to a specific insured and a specific property, including: who, what, when, where, and how much

A

Declarations Page

24
Q

The insurer’s promise of protection to the insured, affirms that the insurer will indemnify the insured for covered losses. The perils insured against are listed here

A

Insuring Agreement

25
Q

It specifies the obligations that the insured and insurer agree to follow for the policy provisions to take effect, as well as other conditions of coverage

A

Conditions Section

26
Q

It specifies the perils that are not insured against or the property that is not covered by the policy

A

Exclusions Section

27
Q

What additional components of property and casualty insurance further define and clarify the policy

A

Limitations, Endorsements, Additional Coverages, and Definitions

28
Q

It reduces coverage without excluding it, such as by providing a smaller amount of insurance (known as a sublimit) that applies to certain losses

A

Limitations Page

29
Q

Policy forms that alter the provisions of an insurance contract typically added to the policy for an additional premium

A

Endorsements Section

30
Q

It states any applicable limit of insurance for each specific coverage, and specifies whether that limit is included within the policy’s limit of liability or in addition to policy limits

A

Additional Coverages Section

31
Q

A section containing words, terms, and phrases that are clearly described and used in an insurance policy

A

Definitions Section

32
Q

Any person, company, or organization protected by an insurance contract is known as an insured

A

Types of Insureds

33
Q

A person, company, or organization designated on the Declarations page of the policy

A

Named Insured

34
Q

The person, company, or organization whose name appears first on the Declarations

A

First named Insured

35
Q

A person, company, or organization not ordinarily protected by a policy but who, through the addition of an endorsement to the policy, is granted status as an insured

A

Additional Insured

36
Q

A sudden, unforeseen, unintended, and unplanned event that results in bodily injury or property damage

A

An Accident

37
Q

An accident, including continuous or repeated exposure to the same generally harmful conditions that result in loss or damage

A

An Occurrence

38
Q

A temporary written or oral legal agreement (contract) issued by an insurance company or a producer to provide short-term insurance

A

A Binder

39
Q

A document that shows evidence that specific types of insurance were purchased by the insured, at certain limits, and that they were in place on the date the certificate of insurance was issued

A

Certificate of Insurance

40
Q

An initial written statement informing the insurer that a loss took place

A

Notice of loss

41
Q

A sworn, formal, detailed statement about a loss that occurred

A

Proof of loss

42
Q

A condition states that insurance coverage only applies to losses occurring when the policy is in force and within a region specified by the policy

A

Policy Period

43
Q

May be limited to the premises, such as only covering property and liability losses at a residence or business building, or it may be more expansive for mobile property and liability claims

A

Policy Territory

44
Q

If the insurer broadens coverage under a new edition of the policy form with no premium increase, that broadening of coverage will apply to existing policies using that form without the need for an endorsement

A

Liberalization Clause

45
Q

The legal process allowing an insurer to seek recovery for a paid claim from a third party responsible for the loss

A

Subrogation

46
Q

The policies share losses by the ratio of applicable limits of insurance each insurer writes compared to the total of all limits available for the loss

A

Pro Rata Liability

47
Q

Some policies require the insurers to share the loss by contributing equal shares until each insurer has paid its limit of insurance

A

Contribution of equal shares

48
Q

If the insurer and the insured disagree about the amount payable for a claim or whether a claim is payable at all, the dispute is settled by…

A

Arbitration

49
Q

If the insurer cancels the policy, a proportionate cancellation of insurance will refund the unearned premium, and the insurer only retains the earned premium

A

Pro Rata Cancellation

50
Q

If the insured cancels the policy, the insurer retains a portion of the unearned premium to cover administrative costs, determined by the insurer’s short-rate table

A

Short-rate Cancellation

51
Q

If the policy is canceled within a certain number of days after being issued, or if the insurer reverses an offer of coverage, the policy may be canceled retroactive to the effective date of the policy, meaning no coverage is provided whatsoever

A

Flat Cancellation

Personal Lines Insurance (4 decks)

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