Legal Concepts of Insurance Contracts Flashcards
Adhesion
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 adhears to the terms of the contract on a ¨ẗake it or leave it¨ basis.
Agent
An agent represents themselves and the insurer at the time of the application.
Aletory
An aletory contract represents the potential for an unequal exchange of value or consideration between both parties. Conditioned upon the occurrence of an event
Apparent Authority
The appearance of the insurer providing the agent authority to perform unspecified tasks based on the agent - insurer relationship
Broker
A broker represents themselves and the insured (i.e the client) at the time of the application
Competent Party
One who is capable of understanding the contract being agreed to.
All partied must be of legal age, mentally capable of understanding the terms and not under the influence of drugs / alcohol
Concealment
The failure of an applicant to disclose a known material fact when applying for insurance
Conditional
A conditional party describes the insurer´s promise to pay benefits depends on the occurrence of an event covered by the contract
Consideration
Part of the contract setting forth the amount of initial and renewal premiums and frequency of future payments
Applicants
Provide the insurer with a completed application and initial premium as consideration for insurance
Estoppel
The legal impediment to one party denying the consequences of its own actions or deeds result in another party acting in a specified manner or if certain conclusions are drawn.
Express Authority
The explicit authority granted to the agent by the insurer, as written in the agency contract
Fiduciary
The responsibility of an insurance producer has to account for all premiums collected and provide sounds financial advice to clients.
A fiduciary is in a position of trust with regards to the funds of their clients and the insurer.
Fraud
Fraud includes the dilliberate knowledge of or intentional deceit to make false statements to be compensated by an insurance company.
Implied authority
An authority not explicitly granted to the agent in the contract of an agency, but which common sense dictates the agent has. It enables the agent to carry out routine responsibilites.
Indemnity Contracts
Attempt to return the insured to their original financial position
Insurable Interest
The financial, economic, and emotional impact associated with a emotional impact associated with a person experiencing a specific loss.
A person has a insurable interest in a loss if they have more to gain by not suffering a loss.
Insurance Policy
A written contract in which one party promises to indemnify another against loss that arises from an unknown event.
Legal Purpose
An insurance contract must be legal in nature and not in opposition to public policy.
Material misrepresentation
A false statement made by an applicant that would influence an insurer in determining whether or not to accept the risk
Parol Evidence Rule
Involves parties put their agreement in writting, all previous verbal statements come together in that writting, and a written contract cannot be changed or modified by parol (oral) evidence.
Policy Rider or Endorsement
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.
Reasonable Expectations
The insured is entitled to coverage under a policy that any sensible and prudent person would expect it to provide.
Representations
Statements made by the applicants that they consider to be true and accurate to the best of the applicants belief.
Subrogation
The right for an insurer to persue are third party that caused an insurance loss to the insured.
Unilateral
Unilateral contracts mean only one party. The insurer, makes nay kind of enforceable promise,
Utmost Good Faith
Involves the belief that both the policy owner an 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.
Valued Contract
Pays a stated sum regardless of the actual loss incurred.
Life insurance contracts are valued contracts
Voidable Contract
An agreement that, for a reason satisfactory to the court, may be set aside by one of the parties in the contract.
Waiver
The voluntary resignation of the legal, given right
Warranty
A statement made by the applicant that is guranteed to be the in every respect. It becomes part of the contract and, if fraud to be untrue, can be grounds for revoking the contract
Exam Tip 2
In an insurance contract, consideration (completed application in premium payments) is given by the applicant in exchange for the insurer¨s promise to pay benefits.
Exam Tip 3
An insurance contract consists of 2 parties, the applicant and the insurer
Stranger-Organized Life Insurance (STOLI)
Life insurance arrangments where investors persuade individuals (typically seniors) to take out a new life insurance policy, naming the investors as beneficiaries. It is sometimes called Investor Originated life insurance.
These arrangements are used to ciramvent state insurable interest statutes
The Law of Agency
The law will view the agent and the company as one and the same when the agent acts within the scope of its authority. Additionally, an insurer may be liable to an insured for unauthorized acts of its agents when the agency contract is unclear about the authority granted.
Tort Law
Provides fuel compensation for proved harm
Law of Agency
The authority granted to an insurance porducer
Policy Forms
The insurance carriers has become responsible for assembling the policy forms for the insured person(s)
