Introduction to Insurance Contracts Flashcards
Legal contracts require these 5 elements:
CLOAC: Consideration, Legal Purpose, Offer, Acceptance, Competent Parties
What is a contract of adhesion?
A contract written by one party (the insurer), which can only be accepted or denied (by the insured)
What is an aleatory contract?
A contract where the value received from each party is unequal. In this case, the insured is paying a premium for no services until an accident occurs, where the insurer pays exponentially more than they received in earned premium.
What is a unilateral policy?
A one-sided contract, because the insurer is the only party required to perform. The premium pays to keep the contract in good standing.
Define “Representation”
Statements that the applicant believes to be true
Define “Misrepresentation”
In simple terms: a non-material lie
Define “Material Misrepresentation”
False information (a lie) that was used as a determining factor for accepting a risk that would have otherwise been denied
What is a warranty?
A statement guaranteed to be true
What is concealment?
An intentional failure to disclose known facts for the purpose of receiving coverage or a lowered premium
What are material facts?
A truth that should have been voluntarily revealed or directly addressed, which would impact whether coverage was accepted or denied
What is fraud?
An intentional act to deceive another party for gain, such as when an insured files a false claim for compensation
What is a waiver?
The intentional and voluntary giving up of a known right
How does an estoppel work?
Once a right has been waived, the estoppel prevents that same right from being reinserted and used against the insured. For example: a customer has always paid their premium late without issue. A new manager notices the late pay and cancels her policy. An estoppel claim would say that because they had allowed it before, they cannot punish her for it now
