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Insurance > Legal Concepts > Flashcards

Legal Concepts Flashcards

1
Q

Adhesion

A

A contract of adhesion describes a contract that has been prepared by one party (the insurance company) with no negotiation between the applicant and insurer. The applicant adheres to the terms of the contract on a “take it or leave it” basis when accepted.

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2
Q

Agent

A

An agent represents themselves and the insurer at the time of application.

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3
Q

Aleatory

A

An aleatory contract presents the potential for an unequal exchange of value or consideration between both parties. Aleatory contracts are conditioned upon the occurrence of an event.

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4
Q

Apparent Authority

A

Apparent Authority is the appearance of the insurer providing the agent authority to perform unspecified tasks based on the agent-insurer relationship.

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5
Q

Broker

A

A Broker represents themselves and the insured (i.e., the client or customer) at the time of application.

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6
Q

Competent Party

A

A competent party is one who is capable of understanding the contract being agreed to. All parties must be of legal competence, meaning they must be of legal age, mentally capable of understanding the terms and not influenced by drugs or alcohol.

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7
Q

Concealment

A

Concealment is the failure of the applicant to disclose a known material fact when applying for insurance.

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8
Q

Conditional

A

A conditional policy describes the insurer’s promise to pay benefits depends on the occurrence of an event covered by the contract.

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9
Q

Consideration

A

Consideration is the part of an insurance contract setting forth the amount of initial and renewal premiums and frequency of future payments.

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10
Q

_________ provide the insurer with a completed application and initial premium as consideration for insurance.

A

Applicants

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11
Q

Estoppel

A

Estoppel is the legal impediment to one party denying the consequences of its own actions or deeds if such actions or deeds result in another party acting in a specific manner or if certain conclusions are drawn.

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12
Q

Express Authority

A

Express authority is the explicit authority granted to the agent by the insurer, as written in the agency contract.

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13
Q

Fiduciary

A

The responsibility an insurance producer has to account for all premiums collected and provide sound financial advice to clients. A fiduciary is in a position of trust with regards to the funds of their clients and the insurer.

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14
Q

Fraud

A

Fraud includes the deliberate knowledge of or intentional deceit to make false statements to be compensated by an insurance company.

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15
Q

Implied Authority

A

Implied authority is an authority not explicitly granted to the agent in the contract of agency, but which common sense dictates the agent has. It enables the agent to carry out routine responsibilities.

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16
Q

Indemnity contract

A

Contracts of indemnity attempt to return the insured to their original financial position.

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17
Q

Insurable Interest

A

Insurable interest is the financial, economic, and emotional impact associated with a person experiencing a specified loss. A person has an insurable interest in a loss if they have more to gain by not suffering the loss.

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18
Q

Insurance Policy

A

An insurance policy is a written contract in which one party promises to indemnify another against loss that arises from an unknown event.

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19
Q

Legal Purpose

A

Legal purpose means an insurance contract must be legal in nature and not in opposition to public policy.

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20
Q

Material misrepresentation

A

A material misrepresentation is a false statement made by an applicant that would influence an insurer in determining whether or not to accept the risk.

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21
Q

Parol Evidence Rule

A

Parol evidence rule involves parties put their agreement in writing, all previous verbal statements come together in that writing, and a written contract cannot be changed or modified by parol (oral) evidence.

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22
Q

Policy rider or endorsement

A

A policy rider or endorsement is an amendment added to an insurance contract that overrides terms in the original policy; endorsements may add or remove coverages, change deductibles, or revise any other policy feature.

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23
Q

Reasonable expectations

A

Reasonable expectations means the insured is entitled to coverage under a policy that any sensible and prudent person would expect it to provide.

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24
Q

Representations

A

Representations are statements made by the applicant that they consider to be true and accurate to the best of the applicant’s belief.

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25
Q

Subrogation

A

Subrogation is the right for an insurer to pursue a third party that caused an insurance loss to the insured.

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26
Q

Unilateral

A

Unilateral contracts mean only one party, the insurer, makes any kind of enforceable promise.

27
Q

Utmost Good Faith

A

Utmost good faith involves the belief that both the policyowner and the insurer must know all material facts and relevant information, and as such, they will provide each other with all material facts and relevant information.

28
Q

Valued contract

A

A valued contract pays a stated sum regardless of the actual loss incurred. Life insurance contracts are valued contracts.

29
Q

Voidable Contract

A

A voidable contract is an agreement that, for a reason satisfactory to the court, may be set aside by one of the parties in the contract.

30
Q

Waiver

A

A waiver is the voluntary giving up of a legal, given right.

31
Q

Warranty

A

A warranty is a statement made by the applicant that is guaranteed to be true in every respect. It becomes part of the contract and, if found to be untrue, can be grounds for revoking the contract.

32
Q

If an applicant applies without an initial premium, he or she is making an __________.

A

invitation

33
Q

the __________ clause also contains information such as the schedule and amount of premium payments.

A

Consideration

34
Q

the reason the parties enter into the agreement must be legal

A

legal purpose

35
Q

In an insurance contract, ____________ (completed application in premium payments) is given by the applicant in exchange for the insurer’s promise to pay benefits.

A

consideration

36
Q

An insurance contract consists of two parties, the applicant, and the insurer (company). The ____________ and ___________ (if different from the insurer) are not parties of an insurance contract, and as such, do not have legal capacity.

A

beneficiary and insured

37
Q

An ____________ is characterized by an unequal payment or consideration.

A

Aleatory Contract

38
Q

A ________________ can also be described as one which the insurance company can modify.

A

policy of adhesion

39
Q

According to this doctrine, a court of law will generally state that an insurance contract may be interpreted by a “reasonable” consumer to mean what the producer or insurer has indicated it means or what he or she has interpreted or expected it to mean. The purpose is to correct any advantage gained by the party who prepared the contract.

A

doctrine of reasonable expectations

40
Q

This means that only one party (the insurer) makes any kind of enforceable promise.

A

Unilateral Contract

41
Q

A ________ contract pays a stated sum regardless of the actual loss incurred.

A

valued

42
Q

An ________ contract is one that pays an amount equal to the loss.

A

indemnity

43
Q

_____________ can be defined as the kind of financial interest a person must have in order to possess legally enforceable insurance coverage.

A

Insurable interest

44
Q

_________________ (STOLI) transactions are life insurance arrangements where investors persuade individuals (typically seniors) to take out new life insurance, naming the investors as beneficiaries.

A

Stranger-Originated Life Insurance

45
Q

A _____________ or endorsement is a legal attachment amending a policy. Additional benefits or a reduction in benefits are often incorporated in policies by the attachment of either a benefit or an exclusion rider.

A

policy rider

46
Q

a statement made by the applicant that is guaranteed to be true in every respect

A

warranty

47
Q

A _________ is a statement made by the applicant that they consider to be true and accurate to the best of the applicant’s belief.

A

representation

48
Q

A false statement made by an applicant that would influence an insurer in determining whether or not to accept the risk is considered a ______________________________.

A

material misrepresentation

49
Q

________________ is defined as the failure or neglect by the applicant to disclose a known material fact when applying for insurance.

A

Concealment

50
Q

_____________ means the contract is made null and void.

A

Rescission

51
Q

A void ________ is simply an agreement without legal effect.

A

contract

52
Q

A ____________ is an agreement that, for a reason satisfactory to the court, may be set aside by one of the parties to the contract. It is binding unless the party with the right to reject it wishes to do so.

A

voidable contract

53
Q

The voluntary act of terminating an insurance contract is called ___________.

A

cancellation

54
Q

_____ evidence is oral or verbal evidence or that which is given verbally in a court of law.

A

Parol

55
Q

______ is the voluntary surrendering (giving up) of a known right.

A

Waiver

56
Q

________ prohibits an insurer from denying a claim due to specific actions (or inactions) by the insurer or its representatives.

A

Estoppel

57
Q

____________ is what is given by an insurer to a licensee to transact insurance on their behalf.

A

Authority

58
Q

________ authority is the unwritten authority that is not expressly granted, but which the agent is assumed to have in order to transact the business of the principal.

A

Implied

59
Q

__________ authority is the authority a principal deliberately gives to its agent.

A

Express

60
Q

_________ authority is the appearance or assumption of authority based on the actions, words, or deeds of the principal. It can also exist because of the circumstances the principal created.

A

Apparent

61
Q

A _________ has the authority to seek insurance applicants for a company but does not have any authority to bind coverage on behalf of a company to a customer.

A

solicitor

62
Q

A _________ is a person who holds a position of financial trust and confidence.

A

fiduciary

63
Q

__________ is the right for an insurer to pursue a third party that caused an insurance loss to the insured. ___________ is used to recover the amount of the claim paid to the insured for the loss.

A

Subrogation

64
Q

The concept of ____ law is to provide full compensation for proved harm.

A

Tort

Insurance (5 decks)

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