Chapter 2 Policy Provisions and Contact Law

Question 1

What is an Appraisal

Answer 1

a professional assessment to determine extent of damage

Question 2

What is Earned Premium?

Answer 2

the portion of premium paid in advance that now belongs to the insurer because it applies to the elapsed part of the policy

Question 3

What is Liberalization

Answer 3

the removal or loosening of restrictions

Question 4

what is Negligence

Answer 4

the failure to use the care that a reasonable, prudent person would under the same or similar circumstances

Question 5

What is a Policyowner

Answer 5

the person entitled to exercise the rights and privileges in the policy

Question 6

What is a Third Party

Answer 6

an individual or an entity other than the two parties involved in an insurance contract (insured and insurer)

Question 7

What is Underwriting?

Answer 7

risk selection; the process of reviewing applications for insurance to determine eligibility for coverage

Question 8

What are the 4 Elements of a contract?

Answer 8

1. Agreement- Offer & Acceptance
2. Consideration
3. Competent Parties
4. Legal purpose

Question 9

What is Offer and Acceptance?

Answer 9

Offer is when submitting the application; Acceptance takes place when the insurer’s underwriter approves the application and issues the policy.

Question 10

What is Consideration for both the Insured and Insurer?

Answer 10

for the insured is the payment of prem. and representations for the insurer its the promise to pay in the event of a loss.

Question 11

What is Consideration?

Answer 11

Something of value that each party gives to the other.

Question 12

What are the requirements for Competent parties?

Answer 12

requires both parties to be
*of legal age

• mentally competent to understand the contract

*not under the influence of drugs or alcohol.

Question 13

What is Legal Purpose?

Answer 13

Means the contract must be for a lawful reason and not against public policy.

Question 14

What is representations?

Answer 14

are statements believed to be true to the best of one’s knowledge, but they are not guaranteed to be true; are the answers the insured gives to the questions on the insurance application.

Question 15

What are warranties?

Answer 15

is an absolutely true statement.

Question 16

What concealment?

Answer 16

term for the intentional withholding of information of a material fact that is crucial in making a decision.

Question 17

What is a Binder?

Answer 17

A temporary agreement issued by an agent or insurer providing temporary coverage until a policy is issued.

Question 18

how can a Binder be given?

Answer 18

Usually in writing but can also be verbal