ch.2- Insurance contracts Flashcards
3 major categories of risk (PPL)
- personal risk (health/life)
- property risk (property lost/damaged)
- liability risk (persons actions)
4 options of dealing with risk (CART)
- Controlling
- Avoidance
- Retention
- Transfer
controlling risk
- taking measures to reduce frequency/severity of losses
- reduces/mitigates risk
Avoidance of risk
not practical
Retention of risk (incl deductible)
- retention/self insurance
- less expensive (premium?)
- few ppl can afford to finance own losses
- deductibles: partial retention of risk
Transfer of risk
- transfer all/some risk
- most popular option
types of risk (2)
- speculative risk
- pure risk
speculative risk
- chance of financial loss/gain
- NOT insurable
Pure risk
- Chance of financial loss only
- no gain
- INSURABLE
contract
agreement btwn 2 or more ppl enforceable by law
5 elements of Common law contracts
(A Cool Cat Gets Lucky)
- Agreement
- Consideration
- Legality of object
- Legal capacity of parties
- Genuine intention
3 ADDITIONAL essential elements to insurance contracts
(In It’s Underwear)
- Insurable Interest
- Indemnity (Salvage,Subrogation, Contribution)
- Utmost good faith
Status of contract where essential elements missing
- void
- voidable
Void
Unable in law to support purpose which it was inteded
as if it never existed
Voidable
void to wrongdoer, not the wronged
Bind insurer on risk
broker committed insurer to provide contract of insurance on the matter
documents used to make changes (SE/rF)
- separate policies
- endorsements/riders
- floaters
endorsements/riders
acknowledges a change in terms
floaters
coverage for property w/ high degree of mobility
separate policies
for additional coverage
