Legal Concepts Of Insurance Flashcards
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
Adhesion
Someone who represents themselves and the insurer at the time of the application
Agent
Presents the potential for an unequal exchange of value or consideration between both parties. Conditioned upon the occurrence of an event
Aleatory
Appearance of the insurer providing the agent authority to perform unspecified tasks based on the agent-insurer relationship
Apparent Authority
Represents themselves and the insured at the time of application
Broker
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.
Competent Party
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.
Concealment
Describes the insurers promise to pay benefits depending on the occurrence of an event covered by the contract
Conditional
Part of the insurance contract setting forth the amount of initial and renewal premiums and frequency of future payments
Consideration
Provides the insurer with a completed application and initial premium as consideration for insurance
Applicant
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
Estoppel
Explicit authority granted to an agent by the insurer, as written in an agency contract
Express Authority
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
Fiduciary
Deliberate knowledge of or intentional deceit to make false statements to be compensated by an insurance company
Fraud
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.
Implied Authority
Contract that attempts to return the insured to their original financial position
Indemnity contract
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
Insurable interest
Written contract in which one party promises to indemnify another against loss that arises from an unknown event
Insurance Policy
Insurance contract must be legal in nature and not in opposition to public policy
Legal Purposes
False statement made by an applicant that would influence an insurer in determine whether or not to accept the risk
Material Misrepresentation
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
Parol Evidence Rule
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
Policy rider or endorsement
Insured is entitled to coverage under a policy that any sensible and prudent person would expect it to provide
Reasonable Expectations
Statements made by the applicant that they would consider to be true and accurate to the best of the applicants beliefs
Representations
Right for an insurer to pursue a third party that caused an insurance loss to the insured
Subrogation
Only one party, the insurer, makes any kind of enforcement promise
Unilateral
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
Utmost Good Faith
Pays the stated sum regardless of the actual loss incurred. Ex: life contracts
Valued Contract
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
Voidable Contract
Voluntary giving up of a legal, given right
Waiver
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
Warranty
