Chapter 2 - Insurance Contracts Flashcards
A sudden, unforeseen, unintended, and unplanned event that result in loss or damage.
Accident
A policy form that alters the policy.
Endorsement
A dispute by the insured and insurer that is decided by a neutral third party.
Arbitration
A contract in which one Party writes the contract, without input from the other party.
Contract of Adhesion
The Four Elements required of a Legal Contract. (Hint: CLOC)
Competent Parties
Legal Purpose
Offer & Acceptance
Consideration
Restored to the same financial or economic condition.
Principal of Indemnity
Voluntary surrender of a known right, claim, or privilege.
Waiver
Prevents denial of a fact.
Estoppel
A false statement contained in an application.
Misrepresentation
A contract in which the exchange of value is unequal.
Aleatory Contract
Must exist at the time of loss in Property and Casualty insurance.
Insurable Interest
Statements in the application guaranteed to be true in all respects.
Warranties
The willful hiding of material facts that is important to a policy or claim.
Concealment
Intentional deception of the truth in order to induce another to part with something of value or to surrender a legal right.
Fraud
A contract in which only one party is legally bound to the contractual obligations
Unilateral Contract
Both parties must perform certain duties to make the contract enforceable. What type of contract is this?
Conditional Contract
Statement made by the applicant on the application which are believed to be true to the best of the applicant’s knowledge
Representation
Both parties bargain in good faith when forming and entering into an insurance contract. The two parties rely upon the statements and promises of the
other, and both assume that no attempt to conceal or deceive has been made.
Utmost Good Faith
Describes basic information about the policy that connects the policy to a specific insured and a specific property(also called the policy’s coverage page)
Contains Who, What, When, Where and How Much
Declarations
The insurer’s promise of protection to the insured, affirming that the insurer will indemnify the insured for covered losses. The perils insured against by the policy are specified here
Insuring Agreement
Specifies the obligations that the insured and insurer agree to follow in order for the policy provisions to take effect, as well as other conditions of coverage
Conditions
Section specifies the perils that are not insured against or the property that is not covered by the policy.
Exclusions
A policy’s exclusions can make sure a policy is limited to its intended purpose. This is known as:
Limitations
Policy forms that alter the provisions of an insurance contract, typically added to the policy for an additional premium.
Endorsements
Coverages automatically included in the policy without an additional premium
Additional Coverages
Section containing words, terms, and phrases that are clearly described and used in an insurance policy.
Definitions
An accident, including continuous or repeated exposure to the same generally harmful conditions that results in loss or damage
Occurrence
Coverage for certain perils or causes of loss that is provided only after the limits of a primary insurance policy are exhausted
Excess Insurance
Any type of coverage that responds to a loss first, before all other coverage responds
Primary Insurance
Two or more policies covering the same exposures for the same policy period and with the same coverage triggers
Concurrent Policies
If two or more policies cover the same exposures but do
not have the same policy periods
Non-concurrent Policies
The termination of a policy before its expiration date, and coverage is not provided as of the effective date of cancellation
Cancellation
A temporary written or oral legal agreement (contract) issued by an insurance company or a producer that provides short-term insurance.
Binder
In the event of a loss or occurrence, the insured must notify the insurer in writing as soon as possible. What is this called?
Notice of Loss
The amount of premium already paid by the insured that applies to the actual number of days coverage was in place
Earned Premium
The amount of premium already paid by the insured that applies to the actual number of days coverage will not be in place after cancellation
Unearned Premium
If a policy is terminated because an insured fails to pay the premium it is _________.
Lapsed
If the insurer cancels the policy, a proportionate cancellation of insurance will refund the unearned premium, and the insurer only retains the earned premium. What type of cancellation is this?
Pro Rata Cancellation
When the insurer chooses not to renew the policy, and coverage ends at the expiration of the policy term. Notice of nonrenewal must also be provided in advance, with requirements set by state law. What is this called?
Non-renewal
If the insured cancels the policy, a financial penalty is put in place, and the insurer retains a portion of the unearned premium to cover administrative costs. The penalty is determined by the insurer’s short-rate table. What type of cancellation is this?
Short-rate Cancellation
If the policy is cancelled within a certain number of days after being issued, or if the insurer reverses an offer of coverage, the policy may be cancelled retroactive to the effective date of the policy, meaning no coverage is provided whatsoever. The insurer must refund the entire policy premium paid by the insured. What type of cancellation is this?
Flat Cancellation
This condition specifies the sum and circumstances under which an insurer charges the insured, usually a business firm, to restore a policy to its initial value after the insurer has paid a claim either to the insured business or to a third party on behalf of the business
Restoration
This condition states that insurance coverage only applies to losses occurring when the policy is in force and within a region specified by the policy.
Policy Period
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. In this case, the coverage territory is typically the United States, its territories and possessions, Puerto Rico, and Canada. Some policies provide worldwide coverage. What is this area called?
Policy Territory
If the insurer broadens coverage under a new edition of the policy form with no increase in premium, that broadening of coverage will apply to existing policies using that form without the need for an endorsement
Liberalization Clause
The legal process allowing an insurer to seek recovery for a paid claim from a third party responsible for the loss.
Subrogation
The insured may not transfer rights of policy ownership without the insurer’s prior written consent
Assignment
Condition specifies the process to be followed when the insured has more than one policy that covers the same loss. If multiple primary policies exist on the same exposure, for example, the policies will coordinate coverage in the event of a loss so as not to overcompensate the insured, and the process of this coordination varies by contract.
Other Insurance
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.
Pro Rata Liability
Some policies require the insurers to share the loss by contributing equal shares until each insurer has paid its limit of insurance.
Contribution by Equal Shares
