Insurance Contract

Question 1

4 required elements

Answer 1

1. agreement (offer and acceptance)
2. consideration (exchange of something of value)
3. competent parties ( of legal age and mentally competent
4. Legal purpose (must have insurable interest and consent)

Question 2

Contract characteristics of insurance contract

Answer 2

1. personal (between an insurer and an individual)
2. aleatory (exchange of unequal values)
3. adhesion (contracts are accepted by the applicants as is)
4. conditional (certain conditions must be met by both parties for the contract to be executed)

Question 3

Legal terms of an insurance contract

Answer 3

1. representation (a statement believed to be true to the best of one’s knowledge)
2. misrepresentation (an untrue statement on the insurance application)
3. material misrepresentation (a statement that, if discovered, can alter the underwriting decision)

Question 4

warranty of an insurance contract (an absolutely true statement)

Answer 4

1. concealment ( intentional withholding of material information)
2. fraud (intentional act with the purpose of deceiving another party)

Question 5

acts of the agents within the scope of the authority are deemed to be the acts of the insurer.

Answer 5

law of agency

Question 6

agents have 3 types of authority

Answer 6

1. express (written in the contract)
2. implied (assumed necessary to conduct business)
3. apparent (based on agent’s words and actions)

Question 7

ideally, insurable risk

Answer 7

1. due to chance
2. definite and measurable
3. statistically predictable
4. randomly selected from a large pool