Life insurance contracts Flashcards
What gives you peace of mind in life insurance
The contract
Why are so many life insurance claims paid?
Because of the liberal interpretation of life insurance
What is the legally binding agreement in a life insurance contract
For the insurer to compensate the beneficiary
When is the last time you speak to your life insurer
Inception
Aleatory relationship
Based on the probability that something may or may not happen
What parts of a contract must be in place for it to be legally binding? (5)
- Agreement
- Consideration
- ICLR
- Formality
- Capacity
When is agreement formed?
When the offer (proposal form) is accepted by the insurer
Consideration in a life insurance contract
Exchange money premium for promise of cover
Can court rule if consideration is adequate or not
No, consideration need not be adequate
Discuss ICLR in a lif insurance contract
Since it is a commercial contract ICLR is assumed and is assumed to be legally bound unless the intention is rebutted.
What are the requirements for consideration
Must be legal, cant be from the past and need not be adquet
What form must a life insurance contract take?
Written
Who does not have capacity to enter a life insurance contract
- Person under 18 unless they need life insurance (married)
- Convicts in prison or on parole
- Drunk people
- People of unsound mind
What is used to underweight clients?
Proposal form
How long can it take to get a quote back and why?
Up to 2 months because of how much checking they need to do
What must be in a life insurance contract?
- Who is insured
- What risks are covered
- What is insured (life =, illness..)
- Period or term
- Consideration (premium)
Fraudulent misrepresentation
Intentional or lazy
Innocent misrepresentation
Left that blank by a mistake
“I didn’t know I had to do that” is what type of misrepresentation?
Fraudulent
Caveat emptor in life insurance
Doesn’t exist because you are not around to defend your self
Do material facts include statements of opinion
no
When does a misrepresentation result in a non-pay out?
When it is material
When does your duty to disclose end?
Inception
What are remedies for breach of a contract?
Rescind, Reformation, sue for damages
Rescinding a contract
The contract is void from the start, only in very severe cases
Reformation of a contract
If there was a mistake apply the contract retrospectively
What could an insured sue for in a breach of contract?
Pain and suffering for the delay in indemnity
What could an insurer sue for in a breach of contract?
Cost or damages that come from investigating fraud
Entire contract clause
The agreement is the policy plus the application form
Why does the entire contract clause exist
Protect insured and gives them peace of mind
Ownership clause
The owner of the policy can sell it, cash in it and transfer the policy
Beneficiary clause
Allows the holder to name somebody else as the primary or secondary beneficiary
What is a secondary beneficiary and why might you have this
Second beneficiary is usually your kids in case you and your partner die
Irrevocable beneficiary
Cant change beneficiary without their permission
Revokable beneficiary
a BENEFICIARY YOU CAN CHANGE
incontestable clause
The insurer cant revoke the policy after a certain amount of time unless the policy lapses or there was a fraudulent misrepresentation
Misrepresentation of age clause
Incontestable clause of age does not apply because it is the main underwriting criteria in life insurance and it is usually known.
Gracing period
If you stop paying premiums and the policy lapses, you repay premiums and with proof of health you can have the contract reinstated
Suicide clause
Payout as long as it has been over 1 year from inception and policy was not taken out in contemplation of suicide
What do life insurers do in terminal illness cases
If you have over one year on policy they will payout, if it is less then they race you to the end
Disability waiver of premiums
If you suffer a specified disability that puts you out of work and you cant pay premiums you will still have cover
Accidental death benefits
Double payments if you die accidentally
Why would accidental death benefits be a good provision for a young person
Good for young people as they are more likely to die this way and would have children with a longer dependency period.
