Insurance Contracts Flashcards
What is insurance?
A contractual agreement where one party agrees to accept a transferred risk in exchange for compensation and in an attempt to pool several risks together.
What are the elements of a valid contract?
Legal purpose, competent parties, offer and acceptance, & consideration.
What is legal purpose?
The fact that a contract cant force someone to break the law.
What qualifies as a competent party?
The party must be of legal age (18) and sound mind (sober etc.)
What is the offer and acceptance of an insurance contract?
Consumer makes an offer via application and premium. Insurer decides whether to accept it.
What is consideration in an insurance contract?
The insurer receives a premium in exchange for agreeing to accept the consumers risk
What is a unilateral contract?
A contract in which one party makes a legally enforceable promise and can be ordered to fulfill its duties by a court. (Most insurance contracts)
What is a bilateral contract
Both parties make legally enforceable promises and can be ordered to fulfill their duties by a court.
What is a aleatory contract?
A contract that involves matters of chance. (Allows consideration to be unequal between two parties)
Insurance contracts are personal and conditional which means what?
(Personal)Insurance contracts are between the insurer and the insured and no one else
(Conditional) Rules need to be obeyed and several things need to happen before the insurer must act.
What is a contract of adhesion?
A contract that is written by one party. Any unclear language should be interpreted to favor the non-writing party
What’s the difference between a warranty and a representation?
A warranty is a promise or statement that must be true at all times in order to maintain a contract. A representation is not as strict as a warranty. A representation is a statement that is true at a particular time but doesn’t need to be maintained.
What’s the difference between misrepresentation and concealment?
Misrepresentation is providing false information. Concealment is failing to disclose information.
What are the 3 ways to end a contract?
Rescission, cancellation, and non-renewal.
What is rescission?
Rescission is when a contract is treated like it never existed. (Premiums are refunded)
