Chapter 1 - Insurance Contract and Terms Flashcards
adverse selection
insuring of risks that are more prone to losses than the average risk.
What is insurance?
The transfer of risk of loss. The cost of an uninsured’s loss is transferred over to the insurer and spread among other insured.
Domicile
Insurers location of incorporation.
What is insurers consideration?
The promise to pay for losses.
Applicant Consideration?
The payment of a premium and statements on the application.
What are representations?
Statements that are believed to be true. Insured’s statements on the application are representations.
What is conditional receipt?
The applicant may be covered as early as the date of the application.
Sources for underwriting?
The application is the main source underwriters use.
Consumer report vs Investigative consumer report?
Applications must be notified in writing whenever the insurer requests an investigative consumer report.
MIB
Medical Information Bureau - insurers cannot deny an applicant solely on information in the MIB report.
4 Elements of a contract:
Agreement - offer and acceptance
Consideration - premiums and representations on the part of the insured; Payment of claims on the part of the insurer.
Competent parties - of legal age, sound mental capacity and not under influence
Legal purpose - Insurable interest and consent.
Two parts of agreement:
Offer and acceptance
Two parts to considerations:
Premiums and representations from the insured.
Payment of claims from the insurer.
Four terms to describe an insurance contract.
Adhesion - one party prepares, the other party accepts.
Aleatory - exchange of unequal amounts.
Conditional - Certain conditions must be met.
Unilateral - only one party of the contract is bound to do anything.
What are the three risk classifications?
Standard
substandard (rated)
preferred
