Chapter 3

Question 1

_______________________ refers to the process in the contract in which the offer and all negotiations has been completed, both parties are satisfied.

Answer 1

Acceptance

Question 2

An Offer + Acceptance = _____________________

Answer 2

Agreement

Question 3

An agreement consists of two parts, what are they?

Answer 3

An offer and acceptance.

Question 4

What is an oral or written agreement to provide temporary insurance until a regular policy can be issued?

Answer 4

A binder

Question 5

Who issues a binder — the insurer or the agent?

Answer 5

Only an agent can issue a binder.

Question 6

What are the four elements of a contract?

Answer 6

1. Declarations
2. Insuring Agreements
3. Conditions
4. Exclusions

Question 7

What is covered in the Declarations Section?

Answer 7

The name of the insurer
The name of the insured
Description of the property covered
The time period the policy will be in force
The amount of the premium
The amount of the deductible
The amount of the limit of liability

Question 8

What is covered under the Insuring Agreements section?

Answer 8

Lists the perils covered
Determines the type of coverage (Basic, broad or special)
Describes the type of cover that will be provided by listing the covered perils

Insuring agreement includes the insurance company’s promise to repair the damage, replace the property, or in some other way pay for the covered loss (up to the limits of the policy).

Question 9

What is covered in the conditions section of the policy.

Answer 9

Biggest section of the policy — sets forth the rules, duties, and obligations between the insured and the insurer.

The Insured must do the following:
Give the insurer immediate notice of a loss, within 60 days — provide a proof of loss form, show the damaged property to anyone designated by the insurer, protect the property from further damage, notify the police of a crime, only able to file lawsuit agains insured within 2 years of loss.

Question 10

What is contained within the Exclusions section?

Answer 10

Any loss, peril or item of property that is not covered by the policy.

Question 11

What is a representation?

Answer 11

A statement made to the best of the applicant’s knowledge and belief.

Question 12

What is a warranty?

Answer 12

Statements made on the application form that the applicant guarantees to be absolutely true and literally true. Also guarantee regard the future condition of the premises.

Question 13

What is concealment?

Answer 13

Intentionally hiding the truth or intentionally telling only a partial truth regarding a material fact.

Question 14

True/False

Statement in the application and proof of loss form are presumed to be representations.

Answer 14

True

Question 15

What is Misrepresentation?

Answer 15

Misrepresentation is an intentional lie, insured makes an intentionally false statement regarding a material fact.

Question 16

Is intentionally hiding the truth concealment or misrepresentation?

Answer 16

Concealment

Question 17

What does a Contract of Adhesion refer to?

Answer 17

Contract in which the consumer has zero input, not ability to negotiate. Most insurance policies are contacts of adhesion meaning that the insured accepts the terms. This is why in court cases the court rules agains the insurer.

Question 18

What is a binder?

Answer 18

A binder is an oral or written agreement to provide temporary insurance until a regular policy can be issued. Binders provide immediate, but temporary coverage.

Question 19

Who is authorized to issue a binder?

Answer 19

Only an agent authorized by the insurance company may issue binders obligating the firm.