Chapter 9 Vocab (Text) Flashcards
Principle of Indemnity
states that the insurer agrees to pay no more than the actual amount of the loss; state differently, the insured should not profit from a loss
Actual Cash Value
replacement cost less depreciation
Fair Market Value
the price a willing buyer would pay a willing seller in a free market
Broad Evidence Rule
the determination of actual cash value should include all relevant factors an expert would use to determine the value of the property
Valued Policy
policy that pays the face amount of insurance if a total loss occurs
Valued Policy Law
law that exists in some states that requires payment of the face amount of insurance to the insured if a total loss to real property occurs from a peril specified in the law
Replacement Cost Insurance
there is no deduction for physical depreciation in determining the amount paid for a loss
Principle of Insurable Interest
the insured must be in a position to lose financially if a covered loss occurs
Pecuniary Interest
the insurable interest requirement in life insurance can be met
Subrogation
the substitution of the insurer in place of the insured for the purpose of claiming indemnity from a third party for a loss covered by insurance
Principle of Utmost Good Faith
a higher degree of honesty is imposed on both parties to an insurance contract than is imposed on parties to other contracts
Representations
statements made by the applicant for insurance
Innocent Misrepresentation
a misrepresentation that is unintentional; if it is relied on by the insurer, it also makes the contract voidable
Concealment
intentional failure of the applicant for insurance to reveal a material fact to the insurer
Warranty
a statement that becomes part of the insurance contract and is guaranteed by the maker to be true in all respects
Offer and Acceptance
The first requirement of a binding insurance contract; in most cases, the applicant makes the offer and the company accepts or rejects the offer
Binder
temporary contract for insurance and can be either written or oral
Consideration
the value that each party gives to the other
Legally Competent
the parties must have legal capacity to enter into a binding contract
Commutative Contract
the values exchanged y both parties are theoretically equal
Unilateral Contract
means that only one party makes a legally enforceable promise
Conditional Contract
the insurer’s obligation to pay a claim depends on whether the insured or the beneficiary has complied with all policy conditions
Conditions
provisions inserted in the policy that qualify or place limitations on the insurer’s promise to perform
Personal Contract
the contract is between the insured and the insurer
Contract of Adhesion
the insured must accept the entire contract, with all of its terms and condiitons
Principle of Reasonable Expectations
an insured is entitled to coverage under a policy that he or she reasonably expects it to provide, and that to be effective, exclusions or qualifications must be conspicuous, plain, and clear
Express Authority
refers to powers specifically concerned on the agent
Agency Agreement
agreement between the agency and the principal
Implied Authority
refers to the authority of the agent to perform all incidental acts necessary to fulfill the purposes of the agency agreement
Apparent Authority
If an agent acts with ______ to do certain things, and a third party is led to believe that the agent is acting within the scope of reasonable and appropriate authority, the principal can be bound by the agent’s actions
Waiver
defined as the voluntary relinquishment of a known legal right
