Chapter 2- Insurance Contracts

Question 1

Principle of Indemnity

Answer 1

When a loss occurs, an individual should be restored to the approximate financial condition he was in before the loss; no more, no less

Question 2

Principle of Indemnity:

PERSONAL CONTRACT

Answer 2

Contract does not insure the property, it insures the person

Question 3

ALEATORY CONTRACT

Answer 3

Contingent on certain event that provides unequal value transfer.
(E.g. You can pay premiums and never have a loss or visa versa)

Question 4

ADHESION POLICY

Answer 4

One party has greater power over the other.

E.g. Provisions of contract are prepared by the insurer- insured does not take part in drafting contract prep

Question 5

UNILATERAL CONTRACT

Answer 5

One-sided contract. Only provider is legally bound to perform its side of the contract

Question 6

DOCTRINE OF REASONABLE EXPECTATIONS

Answer 6

The policy includes coverage that an average person would reasonably expect it to include.
(E.g. Courts usually side with insured in cases of policy ambiguity)

Question 7

CONTRACT OF UTMOST GOOD FAITH

Answer 7

Both parties rely on the other to hold up their end.

Question 8

CONDITIONAL

Answer 8

Insured must notify of loss; carrier must carry out valuation based on specifics of policy.

Question 9

PARTS OF THE INSURANCE CONTRACT

Answer 9

Declarations
Insuring Agreement 
Conditions
Exclusions
Definitions

Question 10

DECLARATIONS

Answer 10

Named insured, address, amount of coverage, description of property, cost of policy

Question 11

INSURING AGREEMENTS

Answer 11

In general what is covered, type of property covered and against what perils

Question 12

CONDITIONS

Answer 12

Ground rules for policy. The responsibility of Insured and Carrier.

Question 13

EXCLUSIONS

Answer 13

Losses not covered

Question 14

DEFINITIONS

Answer 14

Meanings of certain terms

Part of policy