Exam 2 Flashcards
What are the 5 legal aspects of the insurance contract?
Contract of indemnity, personal contract, contract of adhesion, aleatory contract, good faith
contract of indemnity
at the heart of understanding insurance, explains why insurance is not gambling, needs to be put back in the same financial position that occurred prior to the loss, a life insurance policy is not this, obligates one party to pay the damages or losses sustained by another party as a result of certain future occurrences
personal contract
insurance policy is assigned to a person to cover their property, expires with sale of the asset - non-transferrable, insurance wants to underwrite a specific person or entity
contract of adhesion
“take it or leave it,” accept or decline contract, no negotiations, a contract prepared by the insurance company that is accepted or rejected by the insured, courts typically side with insured person when it comes to a misunderstanding
aleatory contract
outcome is effected by chance and the number of dollars given up by the contractual parties are not equal
good faith
loss was true, utmost level of trust or no insured people, assume truthful on application and not concealing anything
insurance contract
the transfer of risk from the individual to the insurance company is accomplished through a contractual arrangement under which the insurance company, in consideration of the premium paid by the insured and his/her promise to abide by the provisions of the contract, promises to indemnify the insured or pay an agreed amount, in the event of the signified
an insured policy is what
an insured contract
how is the insurance contract extended
by the individual reaching out to the company, the product is then accepted or declined at face value
5 key elements of a contract
offer and acceptance, consideration, legal objective, competent parties, legal form
offer and acceptance
definite offer is extended by insurance company, the prospect then accepts or denies at face value, must be spelled out and exact and other party must accept it in exact terms, offer made by consumer and acceptance is when the policy is issued
legal objective
insurable ownership (interest) in the item
competent parties
the basic principle is that some parties are not capable of understanding the contract they would enter into so therefore are not bound by these agreements- under 18 years old can easily void a contract like with car insurance
legal form
has to be a legal document
express
give authority from company to agent, spells out the relationship
implied
incidental authority needed to express exact authority, there inherently will be implied authority, doesn’t exactly spell it out
apparent
believe that one can do the job, however does not have coverage to do so, think coverage is provided
Father of Life Insurance
Solomon Huebner
human life value
the capitalized monetary worth of the earning capacity resulting from the economic focuses that are incorporated within our being
three key life insurance terms
insured person, beneficiary, policy owner
insured person
the person who dies and triggers the claim to be made, the individual whose life is being insured, if they die someone or some entity gets paid
beneficiary
the person who gains a monetary amount of money in the case the insured person dies, the entity who gets paid, usually a person but can also be a charity organization or business
policy owner
the person who pays the premiums and decides the terms and beneficiary of the policy, the person who owns the policy, usually the insured person but not always, has all rights to the policy
term life insurance
set up for a specific period of time, no cash value, pure protection, cost typically lower than cash value life insurance, no savings element, cost determined by age or when you choose to renew it
whole life insurance
protection for whole life, premiums set amount for life, cash value, typically higher cost than term
buy term and invest the rest
people do not normally end up investing the rest and instead they spend and have no investments to show from this
types of whole life insurance
universal life, variable life, other cash value life hybrids
one unique use of life insurance by Chad
key person insurance- used to cover employees you could not live without
what is at the heart of insurance
the transfer of risk
how is the transfer of risk from the individual to the insurance company accomplished
through a contractual arrangement under which the insurance company, in consideration of the premium paid by the insured and his/her promise to abide by the provisions of the contract, promises to indemnify the insured or pay an agreed amount, in the event of the specified loss
policy
contract between you and the insurance company
three types of agency authority
express, implied, apparent
consideration of an insurance company
the promise to pay in the event of a covered loss
consideration
items of value from one party to another, promise- premium
insurance is primarily regulated at what level
the state level
the financial loss of life
direct expenses and loss of future income earning potential
life insurance is not
a contract of indemnity
why do people not purchase life insurance
expense of people passing away
how is life insurance different from property and liability insurance
a property policy is a contract of indemnity, life insurance is not because you don’t know how long someone is going to live
universal life
similar to whole life, but start earning cash value right off the bat, higher interest rate, interest-sensitive product, cash value is not invested in the market
variable universal life
based on market results
group term insurance is as good as
your employment
