Chapter 3 Flashcards
the insurance company agrees to pay the face amount, in exchange for the premium
life insurance
the insurance company agrees to pay a percentage of the insureds medical bills or benefit in exchange for the premium
health insurance
the four elements of an insurance contract
consideration, legal purpose, offer and acceptance, and competent parties
something of value that each interested party gives to each other. the insured provides this with payment of premium
Consideration
the insurance contract has insurable interest and the insured has provided written consent
legal purpose
the applicant has to submit the application and initial premium to be insured
offer and acceptance
must be legal age, mentally capable of understanding the terms and not drinking or doing drugs
Competent parties
an insurance contract that has been prepared by the insurance company with no negotiation. the only author is the insurance company. Always favors the insured over the insurer
Contract of adhesion
There is an unequal exchange. the premiums paid by the applicant is small compared to what the insurance will pay out in event of a loss
aleatory contract
the insurance company is legally bond. the insured does not promise to make premium payments, but if they are not paid, the insurer can cancel the contract.
unilateral contract
contract between the insurance company and the insured person, not transferable to another person without the insurers consent.
personal contract
certain conditions must be met by all parties in the contract
conditional contract
restore the insured to the same financial condition that existed prior to the loss. you cannot benefit from this.
principle of indemnity
statements made by applicant to be true becomes part of the contract. if found to be untrue, the contract can be revoked.
warranties
statements made by the applicant believed to be true but are not part of the contract. only needs to be true only to the extent that they are material and related to the risk.
representations
withholding of info or facts by the applicant
concealment
requires that the person have a valid concern for the continuation of the life or well-being of the persons insured. only needs to exist at the time of the application
insurable interest
the insured is entitled to coverage under a policy that a sensible and product person would expect to provide.
reasonable expectations
when a life insurance policy is purchased in agreement that a 3rd party agent/broker or investor will purchase the person policy and receive the proceeds as a profit if the person dies.
STOLI
Stranger-originated life insurance
where one person is authorized to represent another person or company is established through this. the insurance company will always be the principal.
law of agency
a person who acts for another person or entity and has the power to bind the principal to contracts
authorized agent
the explicit authority granted to the agent by the insurer as written on the agency contract
express authority
the unwritten authority of a producer to perform incidental acts necessary to fulfill the purpose of the agency agreement
implied authority
deals with the relationship between the insurer, the agent, and the customer.
apparent authority
handling of money of the insured and insurer. someone in the position of trust and confidence.
fiduciary responsibility
the intentional misrepresentation or concealment of material fact made by one party in order to cheat another party out of something that has economic value. an insurer may void an insurance policy if a misrepresentation on the application is proven to be material
fraud
is voluntarily giving up the known right
waiver
the legal process of preventing one party from reclaiming a right that was waived
estoppel
rule that prevents parties in a contract from changing the meaning of a written contract by oral or written evidence made prior to the formation of the contract, but not part of the contract.
parol evidence rule
the right for an insurer to pursue a third party that caused an insurance loss to the insured
subrogation
an agreement that does not have legal effect, therefore is not a contract. not enforceable by either party.
void contract
is a valid, binding contract which can be avoided at the request of a party with the right to reject.
voidable contract
the voluntary act of terminating an insurance contract.
cancellation
a written form attached to an insurance policy that alters the policy’s coverage, terms, or conditions.
endorsement
an agent that can represent more then one insurance company under separate contractual agreements.
brokers
where producers can be sued for mistakes of putting a policy into effect.
professional liability insurance
