Chapter 2 Flashcards
A ___________ is an agreement between two or more parties that is enforceable by law.
Contract
In order to be
valid, the contract must be made by ____________ who have legal capacity to enter into the
contract.
competent parties
The contract must be entered into for a ________ in good faith.
Legal purpose
The contract must
include an ___________ composed of an offer and acceptance.
agreement
The contract must also include the
exchange of value, known as ________________.
consideration
Insurance contracts are ___________________ because the insurer writes the contract on a take-
it-or-leave-it basis, but any ambiguities in the contract will be interpreted in favor of the insured.
contracts of adhesion
Insurance contracts are also _______________, as the uncertainty of loss means there will be an
unequal exchange of value.
aleatory contracts
_________________ are statements made by the applicant on the application that are believed to be
true at the time of application.
Representations
Representations are different from ____________, which are guaranteed to be
true.
warranties
__________________ are false statements contained in the application. If a representation or
misrepresentation affects the insurer’s acceptance of the risk, it is said to be _____________.
*Misrepresentations
* material
Material
misrepresentations and breached warranties may _____________ the policy.
void
Contracts of insurance provide protection in the event an _____________ (a sudden, unforeseen, and
unintended event) or an _______________ (an accident that includes continuous exposure to the same
generally harmful conditions) causes a loss.
*accident
* occurrence
The policy that responds first is known as ____________________.
primary
insurance
A policy that responds only after that policy’s limits are exhausted is known as __________________.
excess
insurance
If a loss does take place, the insurance policy is responsible for returning the insured to
the same financial or physical condition that existed prior to loss, which is known as the ____________________.
principle of
indemnity
______________ must exist at the time of loss, though the insured will likely need to prove
their interest in the policy prior to obtaining coverage.
Insurable interest
Before an insurer is able to issue an insurance
policy, it may issue a _______________, which is a temporary contract to provide insurance coverage for a
limited amount of time before the issuance of the full policy.
binder
Evidence that insurance coverage at
certain amounts is in place is provided by a _____________________.
certificate of insurance
The _______________________
includes the name of the named insured, a description of the property, the type of business insured,
where the insured property is located, when the policy is in effect (known as the policy period),
and any applicable limits and deductibles.
Declarations page
*The who, what, when, why, & how much (way to remember declarations page).
The ______________ is the insurer’s promise to pay
the insured and includes the covered perils.
Insuring Agreement
The ________________ section specifies the obligations of the
insured and insurer.
Conditions
The ________________ section lists the perils not covered by the policy.
Exclusions
Policies often automatically include ____________________ without increasing the premium.
Additional Coverages
If the
insured wants to add coverages that are not included in the policy, change limits, or otherwise alter
the policy, they may add _____________, usually for an additional charge.
endorsements
