Legal Concept Flashcards
General law of contracts, it is enforceable by law. Life insurance, the insurer binds itself to pay a certain amount of money when the person dies. But for a contract to be legally valid it must contain what?
Offer and acceptance, consideration, legal purpose, and competent parties
Offer and acceptance means what?
It must be made with a definite, unqualified offer by one party and the acceptance of its exact terms by the other. In most cases it’s the applicant that purposes the offer.
Consideration means what?
The value given in exchange for the promises sought. It’s given by the applicant in exchange for the insurers promise to pay benefits… also contains schedule and amount of premium payments
Legal purpose is what?
The object of the contract and the reason the parties enter into agreement must be legal.
Competent parties is?
The applicant unless proven otherwise is presumed to be competent with three exceptions, Minors, the mentally retarded, those under the influence of drugs or alcy
Aleatory is what?
There is a chance and potential for unequal exchange of value or consideration for both parties. It’s conditioned upon the occurrence of an event… i.e. If a chick has disability insurance and she’s not disabled until later in life, she won’t get benefits until she’s actually disabled.. but will pay premiums at that point on
What’s adhesion?
The contract has been prepared by one party (insurance company) with no negotiation between the applicant and insurer. “Take it or leave it”, also any confusing language in a contract of adhesion would be in favor for the insured. Insurance company can also modify.
What’s unilateral?
Only one party (insurer) makes any kind of enforceable promise. As in Aflac promises to pay benefits upon something happening to the insured such as disability or death, but insured doesn’t promise to pay premiums.
Personal contract is?
It’s between insurer and insured. And the owner of the policy can give them away if they wish.
Conditional is what?
The insurers promise to pay benefits depends on the occurrence of an event covered by the contract. If it doesn’t happen nothing is paid. So if the insured doesn’t pay premiums then the insurer is relived of its obligations to pay a death benefit
Valued contract?
A valued contract pays a stated sum regardless of the actual loss incurred. So if it says 500,000 payable at death there is no attempt to value that person to get more.
Indemnity contract?
It’s a contract that pays an amount equal to the loss. Like if an insured person has a contract for fire or flooding for 50k and suffers a 5k loss due to fire, they will only get 5k.
Utmost good faith is?
Both policy owner and the insurer must know all material facts and relevant info. There can be no attempt by either side to deceive or conceal. Also insurance applicants are required to make a full and honest disclosure of the risk to the agent and insurer… related concepts are warranties, representations, and concealment. There are what the insurer might seek to avoid payment under contract
Warranty is a way for what?
A statement made by the applicant that is guaranteed to be true in every respect. It becomes part of the contract. If it’s found untrue the contract can be revoked.
Representation is a statement that what?
Is made by the applicant that they consider to be true and accurate to the best of the applicants belief. It’s used by the insurer to evaluate whether or not to issue a policy. They are not part of the contract. If someone lies its considered a material misrepresentation.
Concealment is defined as what?
Failure by the applicant to disclose a known material fact when applying for insurance… most life insurers only have 2 years to uncover false warranties, misrepresentations, or concealments.
Insurable interest is what
The person acquiring the contract must be subject to loss upon the death. An individual muse have a reasonable expectation of benefiting from the other persons continued life.
Stranger originated life insurance (STOLI)
Investors persuade individuals (typically seniors) to take out new life insurance naming the investors as beneficiary.
What is principles of agency?
An agent is someone who acts for another person or entity (known as the principal) with regard to contractural arrangements with third parties.
Principles of agency law?
Acts of the authorized agent, are the acts of the principal. A contract completed on behalf of the principal is the contract of the principal. Everything the agent does on behalf of the principal is to the principal.
Agent authority
Authority given by and insurer to a licensee to transact insurance on their behalf (aka me :) )
Three types of agent authorities are?
Express, implied, and apparent
Express authority
Authority a principal deliberately gives to its agent.
Implied authority
Is the unwritten authority that is not expressly granted, but which the agent is assumed to have I. Order to transact the business of the principal. So not every single detail of the agents authority can be spelled out, it should just be known
Apparent authority
Is the appearance or assumption of authority based on the actions, words, or deeds of the principal. It can also exists because of circumstances the principal created.
Purpose of authority is so it can bind the company to the acts of the agents.
Yup
What’s fiduciary?
It governs the activity of the agent, so if someone gives you a premium and you accept it sense it is considered a persons financial security it’s called fiduciary capacity
Brokers?
They legally represent the insureds. They solicits and accepts applications for insurance and then places the coverage with an insurer.
Professional liability insurance (E&O)
Errors and omissions, professional liability insurance.
Waiver?
Is the voluntary giving up of a legal, given right. If an insurer fails to enforce (waives) a provision of a contract, it cannot later deny a claim based on a violation of that provision .
Endorsement?
Written form attached to an insurance policy that alters the policy’s coverage, terms, or conditions. Called rider
Estoppel?
The legal impediment to one party denying the consequences of an s own actions or deeds of such actions result in another party acting in a specific manner or if certain conclusions are drawn. It is the loss of the defense.
Parol evidence rule
Is oral or verbal evidence, or that which is given verbally In A court of law. As in if your write a contract it is presumed that all the verbal talking was put into the writing of the contract
Reasonable expectations
Legal principle that reinforced the rule that ambiguities in insurance contracts should be interpreted in favor of the policyholder.
Renewability classifications
Cancellable, optional, renewable, conditionally renewable, guaranteed renewable, and non cancellable.
Reserves
Set aside by insurance company, and designated for the payment of future claims
Subrogation
Right for insurer to pursue a third party that caused an insurance loss to the insured
Business overhead expense insurance
Designed to reimburse a business for business expenses and payroll In the event the business owner becomes disabled
Disability buy out agreement, but-sell plans
Plan that’s sets forth terms for selling or buying a partners share of business in the event of disability and is no longer able to participate in the business
Key person disability insurance
Pays monthly benefit to a business to cover expenses for additional help outside services when an essential person is disabled
Who is group health insurance between?
Insurance company and employer, a master POlicy is issued to employer
How do you determine the minimum number of employees on group health insurance?
It’s a state by state basis
Shared funding arrangement
Allows the employer to self fund health care expenses up to a certain limit.
Minimum premium arrangement
The employer to self-insure the normal and expected claims up to a given amount and the insurer funds only the excess amounts
Retrospective premium arrangement
Insurer agrees to collect a provisional premium but may collect additional premium or make a premium refund at the end of the year based on the actual incurred losses
Self-funding arrangement
Large employers may elect to fully self-fund or may self-fund - plan. It contract for administrative services only (aso)
Underwriting practices
The insurer evaluates the group as a whole instead of each individual
HIPAA stands for what?
Health Insurance Portability and Accountability Act
What does hipaa do?
Provides ability to transfer and continue health insurance coverage for millions of workers and families when they change or looks their jobs.
HIPAA privacy rule?
Provides federal protection for an persons health info and gives them an array of rights
What’s HIPAA security rule?
Provides safeguards to assure the confidentiality, integrity, and availability of electronic health info
HIPAA requirements?
20 or more employees
HIPAA portability rules…
Allow individuals who change from one group med plan to another to reduce or eliminate and pre-existing conditions excluded under new plan
Pre-exsisting conditions under HIPAA are defined as what?
Health issues that existed, were treated or diagnosed within 6 months prior to employment. May be excluded for up to 12 months
Creditable coverage?
Previous coverage under another group or individual plan when there has not been a break In Coverage of 63 days
Pregnancy discrimination act of 1978
Employers treat pregnancy the same manner as disability for any other med reason…
When med bens are offered, pregnancy must be covered the same as illness
Complications arising from abortion are covered only if the life of the women is endangered
Group health insurance contacts providing coverage for employees in more then one state are usually controlled by the laws of the state
Yut
Working people Over 65 are offered the same health bens as younger employees
Yup
COBRA
Consolidated ominous budget reconciliation act of 1985
What does cobra do?
Required employers with 20 or more employees to continue group medical expense coverage for terminated workers and families for up to 18months following termination
The terminated employee or surviving dependents are responsible to pay the premium which may be up to 102% of the premium
Ight
