Chapter 2 Legal Concepts of the Insurance Contract Flashcards
Adhesion
A contract of adhesion describes a contract that has been prepared by one party (the insurance company) with no negotiation between the applicant and insurer. The applicant adheres to the terms of the contract on a “take it or leave it” basis when accepted.
Agent
An agent represents themselves and the insurer at the time of application.
Aleatory
An aleatory contract presents the potential for an unequal exchange of value or consideration between both parties. Aleatory contracts are conditioned upon the occurrence of an event.
Apparent Authority
is the appearance of the insurer providing the agent authority to perform unspecified tasks based on the agent-insurer relationship.
Broker
A Broker represents themselves and the insured (i.e., the client or customer) at the time of application.
Competent Party
is one who is capable of understanding the contract being agreed to. All parties must be of legal competence, meaning they must be of legal age, mentally capable of understanding the terms and not influenced by drugs or alcohol.
Concealment
Concealment is the failure of the applicant to disclose a known material fact when applying for insurance.
Conditional
A conditional policy describes the insurer’s promise to pay benefits depends on the occurrence of an event covered by the contract.
Consideration
is the part of an insurance contract setting forth the amount of initial and renewal premiums and frequency of future payments.
Applicants
provide the insurer with a completed application and initial premium as consideration for insurance.
Estoppel
is the legal impediment to one party denying the consequences of its own actions or deeds if such actions or deeds result in another party acting in a specific manner or if certain conclusions are drawn.
Express Authority
Express authority is the explicit authority granted to the agent by the insurer, as written in the agency contract.
Fiduciary
The responsibility an insurance producer has to account for all premiums collected and provide sound financial advice to clients. A fiduciary is in a position of trust with regards to the funds of their clients and the insurer.
Fraud
Fraud includes the deliberate knowledge of or intentional deceit to make false statements to be compensated by an insurance company.
Implied Authority
is an authority not explicitly granted to the agent in the contract of agency, but which common sense dictates the agent has. It enables the agent to carry out routine responsibilities.