Contract Law

Question 1

Contracts

Answer 1

Written agreements that are legally enforceable by law

Question 2

Law of contracts

Answer 2

A great deal of the law that has shaped the formal structure of insurance and influence its content is derived from the general law of contracts

Question 3

Tort

Answer 3

A tort is a private, civil, non-contractual wrong for which a remedy through legal action may be sought

Question 4

Intentional tort

Answer 4

Any deliberate act that causes harm to another person regardless of whether the offending party intended to injure the aggrieved party

Question 5

Unintentional tort

Answer 5

The results of acting without proper care this is generally referred to as negligence

Question 6

Four elements of a contract

Answer 6

Agreement :offer and acceptance
Competent parties,
legal purposes,
consideration.

Question 7

Agreement: offer and acceptance

Answer 7

There must be a definite offer by one party and the other party must accept this offer and it’s exact times. In insurance the applicant usually makes the offer when submitting the application.

Question 8

Consideration

Answer 8

The binding force in any contract is the consideration. Consideration is something of value that each party gives to the other. The consideration on the part of the insured is the payment of premium and there is representations made in the application. The consideration on the part of the insurer is the promise to pay an event of a loss.

Question 9

Competent parties

Answer 9

The parties to a contract must be capable of entering into a contract in the eyes of the law. Generally this requires that both parties be of legal age, mental competent to understand the contract, and not under the influence of drugs or alcohol.

Question 10

Legal purpose

Answer 10

The purpose of the contract must be legal and not against public policy. To ensure legal purpose of a life insurance policy, for example, it must have both: insurable interest and constant. A contract without a legal purpose is considered void, and cannot be enforced by any party.

Question 11

Acceptance

Answer 11

Acceptance takes place when an insurance underwriter approves the application issues a policy.

Question 12

Contract of adhesion

Answer 12

Prepared by one of the parties (insurer) and excepted or rejected by the other party (insured). Insurance policies are not drawn up through negotiations, and an insured has little to say about its provisions. In other words, insurance contracts are offered on the take it or leave it basis by insurer.

Question 13

Conditional contract

Answer 13

Requires that certain conditions must be met by the policy owner and the company in order for the contract to be executed, and before each party fulfills its obligations. For example, the insured must pay the premium and provide proof of loss in order for the insurer to cover a claim.

Question 14

Aleatory

Answer 14

Which means there is an exchange on equal amounts or values. The premium paid by the insured is small in relation to the amount that will be paid by the insurer in the event of loss

Question 15

Unilateral

Answer 15

Only one of the parties to the contract is legally bound to do anything. The insured makes no legal binding promises. However, an insurer is legally bound to pay losses covered by a policy in force.

Question 16

Personal

Answer 16

it is between the insurance company and an individual. Because the company has a right to decide with whom it will and will not do business, the insured cannot be changed to someone else without the written consent of the insurer, nor can the owner transferred the contract to another person without the insurers approval.Life insurance is an exception to this rule a policy owner can you transfer ownership to another person however that insurer must still be notified in writing.

Question 17

Insurance policy

Answer 17

The insurance policy is the written instrument in which a contract and insurance is set forth.

Question 18

Representations

Answer 18

Statements believe to be true to the best of one’s knowledge, but they are not guaranteed to be true. For insurance purposes, presentations are the answers the insured gives to the questions on the insurance application.

Question 19

Misrepresentations

Answer 19

Untrue statements on the applications are considered misrepresentations and could void the contract.

Question 20

Material misrepresentation

Answer 20

A material misrepresentation is a statement that, if discovered, would alter the underwriting decision of the insurance company. Furthermore, if material misrepresentations are intentional they are considered fraud.

Question 21

Warranty

Answer 21

Is a statement considered to Be guaranteed to be true and becomes part of the contract.

Question 22

Materiality

Answer 22

The concept of materiality is based on the idea that all parties into a contract are entitled to all information necessary to make an informed decision about the quality or nature of the contract.

Question 23

Concealment

Answer 23

The legal term for the intentional withholding of information of a material fact that is crucial in making a decision.

Question 24

Information that does not need to be communicated in a contract

Answer 24

Known information,
Information that should be known
Information that the other party waves
Information that is excluded by a warranty and not material to the risk
Information that is expected that from insurance and that material to the risk
Information based on personal judgment

Question 25

Rescission

Answer 25

The revocation of a contract

Question 26

Application

Answer 26

A written request for coverage to the insurance company

Question 27

Policy

Answer 27

A contract between the policy owner and an insurance company which agrees to pay for the loss caused by specified covered events.

Question 28

Riders

Answer 28

Are added to a policy to modify provisions that already exist.

Question 29

Endorsements

Answer 29

Are printed addendums to a contract that are used to change the policies original terms, conditions, or coverages.

Question 30

Cancellation

Answer 30

The act of revoking or terminating ones insurance policy

Question 31

Lapsed policy

Answer 31

A policy that is terminated because of nonpayment of premiums

Question 32

Renewal

Answer 32

The continuance of an insurance policy beyond its original term

Question 33

Non-renewal

Answer 33

Is the discontinuance of an insurance policy beyond its original time.

Question 34

Grace period

Answer 34

Is the period of time after the deadline I do date of a premium in which a late premium payment may be made without penalty, or without the policy lapsing.

Question 35

Rate

Answer 35

The price of insurance for each exposure unit

Question 36

Premium

Answer 36

Is the payment required by the insured to keep the policy in force. The premium is determined by multiplying the rate by the number of insurance purchased

Question 37

Earned premium

Answer 37

The portion of a premium that belongs to the insurance company for providing coverage for a specific period of time

Question 38

Unearned premium

Answer 38

Is the portion of the premium insurance company has collected but has yet to earn because it has not yet provided coverage for the insured.