General Insurance Principles - Insurance Contracts Flashcards

1
Q

What are the elements of a legal contract?

A
  1. ) Offer
  2. ) Acceptance
  3. ) Consideration
  4. ) Legal Purpose
  5. ) Compentent Parties
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2
Q

To be considered legally competent for the entrance into a contract, a person must be . . .

A
  1. ) Mentally sound;
  2. ) Of legal age; and
  3. ) Not under the influence of drugs or alcohol.
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3
Q

What are the legal characteristics of insurance contracts?

A
  1. ) Contracts of Adhesion
  2. ) Aleatory
  3. ) Personal
  4. ) Unilateral
  5. ) Conditional
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4
Q

Contract of Adhesion

A

A contract of adhesion is drafted by one party. The other party must adhere to its provisions.

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5
Q

Aleatory Contract

A

In an aleatory contract, one party may receive a benefit that is entirely out of proportion to the consideration he or she is giving. Receiving the disproportionately large benefit, however, depends on whether a chance event occurs.

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6
Q

Unilateral Contract

A

In a unilateral contract, only one party makes an enforceable promise. Insurance contracts are unilateral; only the insurer makes an enforceable promise.

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7
Q

Conditional Contract

A

A conditional contract means that its continuation depends upon certain conditions taking place. In an insurance contract, the condition is that the owner continues to pay premiums as agreed.

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8
Q

Utmost Good Faith

A

Legal concept relaying the expectation that all parties in a contract are entitle to receive all material facts before entering into the contract.

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9
Q

Reasonable Expectations

A

Legal concept that relays how promises made by the insurer will be respected when the time comes.

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10
Q

Indemnity Contract

A

An insurance contract that limits the payment for a loss to the actual value of the loss.

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11
Q

Valued Contract

A

A life or health insurance policy that pays a stipulated sum as set in the contract, regardless of the actual value of the loss.

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12
Q

Representation

A

A statement that is true to the best knowledge of the person making that statement. Information provided by an applicant on an insurance application are considered representations.

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13
Q

Warranty

A

A statement guaranteed by the maker to be true in all ways.

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14
Q

Concealment

A

The deliberate withholding of material facts when applying for insurance.

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15
Q

Fraud

A

Deliberate act to deceive with the intent to gain something of value.

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16
Q

Waiver

A

When a party to a contract gives up a right that this party knows he or she holds.

17
Q

Estoppel

A

When a party to a contract gives up a right without intending to do so.