Vocabulary

Question 1

Aleatory

Answer 1

Unequal exchange

Premiums paid by the applicant is small in relation to the amount the insurance company will pay for the loss

Question 2

Alien company

Answer 2

Company organized outside of the United States

Question 3

Indemnity

Answer 3

Security against or Compensation for damage, loss, or injury

Question 4

Estoppel

Answer 4

The legal process of preventing one party from reclaiming a rate that was already waived

Question 5

Unilateral contract

Answer 5

One sided contract, only the insurance company is legally bound to do anything (pay claims)

If insurer doesn’t pay premiums then the insurance company has the right to cancel the contract

Question 6

Consideration

Element of the Contract

Answer 6

Consideration on insurance company- promise to pay in event of loss
Consideration of Insurer- is the payment of premium

Question 7

A legal contract must have?

Answer 7

Offer and acceptance
Considerations
Legal purposes
Competent parties (meaning they have legal age, mentally capable of terms & not influenced by drugs/alcohol)

Question 8

Adhesion of Contract

Answer 8

known as “ take it or leave it” agreements.
There is only one author- Insurance Company. And Only prepared by them
There is no negotiations or changes with the applicant.

If ambiguity, then courts will Always side with insurer

Question 9

Conditional contract

Answer 9

Insurance contracts are conditional because certain conditions must be met by all parties when a loss occurs, otherwise the contract would not be legally enforceable.

Meaning if the policy owner is past due on his payment and the insured dies. The insurance company does not have to pay the death benefit because the condition was not met.

Question 10

Value contract

Answer 10

Value contract pays a stated amount regardless of the actual loss incurred. They are LIFE INSURANCE

Question 11

Indemnity contract

Answer 11

HEALTH INSURANCE
it only pays the amount equal to the loss.

And not allowed to make a profit

Question 12

Concealment

Answer 12

Is withholding of information by the applicant that results in an accurate underwriting decision
& can void the policy

Question 13

Insurable interest

Answer 13

Is the most important aspect for establishing a legal insurance contract.

Individual must have a valid concern for continuing the well-being of the person insured.

Insurable interest only needs to exist at the time of the application (inception of contract) for life insurance

Policyowners must face the possibility of losing money or something of value when a loss happens

Question 14

Wavier

Answer 14

Is the act of voluntarily giving Up a legal rights/claim or privilege

Question 15

Fiduciary responsibility

Answer 15

Agent is in a position of trust and confidence, handles the money of the insurer and insured

Question 16

Parol evidence rule

Answer 16

Prevents parties from changing the meaning of a written contract by trying to introduce oral or written statement made before (prior) to the formation of the contract