chapter two Flashcards
There are two parties to an insurance contract
the insured and the insurer.
he following four essential elements must be contained in every contract for it to be legally valid and binding
Offer and acceptance
Consideration
Legal purpose
Competent parties
When an offer is answered by a counter-offer, the first offer is
void
an agreement that, for a reason satisfactory to the court, may be set aside by one of the parties to the contract.
voidable contract
contract is made null and void
recession
Insurance contracts are aleatory.
This means there is an element of chance and potential for unequal exchange of value or consideration for both parties.
An insurance contract is either a valued contract or an indemnity contract.
A valued contract
pays a stated sum regardless of the actual loss incurred.
An indemnity contract
is one that pays an amount equal to the loss.
written contract in which one party promises to indemnify another against loss that arises from an unknown event.
a policy contract
Insurance applicants
are required to make a full, fair, and honest disclosure of the risk to the agent and insurer.
Insurable interest
can be defined as the kind of financial interest a person must have in order to possess legally enforceable insurance coverage.
A policy rider or endorsement
is a legal attachment amending a policy.
the applicant gives consideration
in exchange for the insurer’s promise to pay benefits.
means there is a potential for unequal exchange of value or consideration for both parties.
Aleatory
the contract has been prepared by one party (the insurance company) with no negotiation between the applicant and the insurer.
adhesion
This means that only one party (the insurer) makes any kind of enforceable promise.
Insurance contracts are unilateral
warranty
is a statement made by the applicant that is guaranteed to be true in every respect.
representation
statement made by the applicant that they consider to be true and accurate to the best of the applicant’s belief.
concealment
defined as the failure or neglect by the applicant to disclose a known material fact when applying for insurance.
authority a principal deliberately gives to its agent.
express authority
is the unwritten authority that is not expressly granted, but which the agent is assumed to have in order to transact the business of the principal.
implied authroity
is the appearance or assumption of authority based on the actions, words, or deeds of the principal.
apparent authority
provide full compensation for proved harm
tort law
has the authority to seek insurance applicants for a company but does not have any authority to bind coverage on behalf of a company to a customer.
soliciter
transactions are life insurance arrangements where investors persuade individuals (typically seniors) to take out new life insurance.
STOLI stranger-originated life insurance
