Legal Concepts Of Insurance

Question 1

Describes a contract that has been prepared by one party (insurance company) with no negotiation between the applicant and insurer. “Take it or leave it” basis

Answer 1

Adhesion

Question 2

Someone who represents themselves and the insurer at the time of the application

Answer 2

Agent

Question 3

Presents the potential for an unequal exchange of value or consideration between both parties. Conditioned upon the occurrence of an event

Answer 3

Aleatory

Question 4

Appearance of the insurer providing the agent authority to perform unspecified tasks based on the agent-insurer relationship

Answer 4

Apparent Authority

Question 5

Represents themselves and the insured at the time of application

Answer 5

Broker

Question 6

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.

Answer 6

Competent Party

Question 7

Failure or neglect of the applicant to disclose a known material fact when applying for insurance. If the purpose is to defraud the insurer, the insurer may have grounds to void the contract.

Answer 7

Concealment

Question 8

Describes the insurers promise to pay benefits depending on the occurrence of an event covered by the contract

Answer 8

Conditional

Question 9

Part of the insurance contract setting forth the amount of initial and renewal premiums and frequency of future payments

Answer 9

Consideration

Question 10

Provides the insurer with a completed application and initial premium as consideration for insurance

Answer 10

Applicant

Question 11

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

Answer 11

Estoppel

Question 12

Explicit authority granted to an agent by the insurer, as written in an agency contract

Answer 12

Express Authority

Question 13

Responsibility an insurance producer has to account for all premiums collected and provide sound financial advice to clients. Position of trust and confidence with regards to the funds of their clients and the insurer

Answer 13

Fiduciary

Question 14

Deliberate knowledge of or intentional deceit to make false statements to be compensated by an insurance company

Answer 14

Fraud

Question 15

Authority not explicitly granted to the agent in the contract of agency, but which common sense dictates the agent has. Enables the agent to carry out routine responsibilities.

Answer 15

Implied Authority

Question 16

Contract that attempts to return the insured to their original financial position

Answer 16

Indemnity contract

Question 17

The financial, economic, and emotional impact associated with a person experiencing a specified loss. The person has more to gain by not suffering the loss

Answer 17

Insurable interest

Question 18

Written contract in which one party promises to indemnify another against loss that arises from an unknown event

Answer 18

Insurance Policy

Question 19

Insurance contract must be legal in nature and not in opposition to public policy

Answer 19

Legal Purposes

Question 20

False statement made by an applicant that would influence an insurer in determine whether or not to accept the risk

Answer 20

Material Misrepresentation

Question 21

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 parole (oral) evidence

Answer 21

Parol Evidence Rule

Question 22

Amendment added to an insurance contract that overrides terms in the original policy. May add or remove coverage, change deductions, or revise any other policy features

Answer 22

Policy rider or endorsement

Question 23

Insured is entitled to coverage under a policy that any sensible and prudent person would expect it to provide

Answer 23

Reasonable Expectations

Question 24

Statements made by the applicant that they would consider to be true and accurate to the best of the applicants beliefs

Answer 24

Representations

Question 25

Right for an insurer to pursue a third party that caused an insurance loss to the insured

Answer 25

Subrogation

Question 26

Only one party, the insurer, makes any kind of enforcement promise

Answer 26

Unilateral

Question 27

Belief that both the policy owner 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

Answer 27

Utmost Good Faith

Question 28

Pays the stated sum regardless of the actual loss incurred. Ex: life contracts

Answer 28

Valued Contract

Question 29

Agreement that, for a reason satisfactory to the court, may be set aside by one of the parties in the contract. Legally binding unless the party with the right to reject it wishes to do so

Answer 29

Voidable Contract

Question 30

Voluntary giving up of a legal, given right

Answer 30

Waiver

Question 31

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

Answer 31

Warranty