Ch3: Legal Concepts of the Insurance Contract

Question 1

4 Elements of Legal Contract

Answer 1

Offer and acceptance, Competent parties, legal purpose and consideration

Question 2

Aleatory

Answer 2

Insurance contracts are aleatory, which means that there is not an equal exchange of value, premiums paid by insured are are small in relation to the amount that will be paid by the insurance company in the event of a loss

Question 3

Adhesion

Answer 3

aka “take it or leave it” agreements, because they’re prepared by only one party, the insurance company

Question 4

Unilateral

Answer 4

A Unilateral contract is a one sided agreement, in which only one party, the insurance company is legally bound to do anything

Question 5

Conditional

Answer 5

Insurance contracts are conditional, because certain conditions must be met by all parties when a loss occurs, otherwise the contract would not be legally enforceable

Question 6

Indemnity

Answer 6

Health insurance is an indemnity contract. It only pays the amount equal to the loss