Legal Concepts of the Insurance Contract 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.
Example: You pay $50 towards your premium and then die. The insurer has to pay $100,000.

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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

Applicants

A

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

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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.

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.

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.

19
Q

Legal Purpose

A

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

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.

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.

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.

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.

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.

25
Q

Subrogation

A

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

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.