Chapter 2 Review (Life): Legal Concepts

Question 1

Express agent authority

Answer 1

is the explicit authority granted to the agent by the insurer as written in the agency contract. (ex: solicit applications and collect premiums)

Question 2

Implied agent authority

Answer 2

The unwritten authority of a producer to perform incidental acts necessary to fulfill the purpose of the agency agreement (otherwise unwritten in the contract). (ex: implied that you can set up appointments because of express authority.)

Question 3

This deals with the relationship between the insurer, agent, and customer. It is the appearance of authority based on the agent-insurer relationship. _____ _____ is a situation in which the insurer gives the customer reasonable believe that an agent has the power and authority to bind the principal. (Ex: you have all the insurance application forms and business cards, so it’s apparent to the customer you can help them apply for insurance.)

Answer 3

Apparent agent authority

Question 4

Commingling

Answer 4

Mixing premiums collected from applicants with the agent’s own personal funds. This is illegal and is a breach of fiduciary responsibility.

Question 5

What four essential elements must be present for an insurance contract to be legally binding?

Answer 5

1. Offer and Acceptance
2. Consideration
3. Legal Purpose
4. Competent Parties

Question 6

A contract where one party either accepts or rejects the terms of a contract written by another party is called a contract of

Answer 6

Adhesion

Question 7

Insurance policies are considered aleatory contracts because

Answer 7

performance is conditioned upon a future occurence.

Question 8

At what point does an informal agreement become a binding contract?

Answer 8

When consideration is provided by one of the parties to the contract.