Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
32 Cards in this Set
- Front
- Back
cancellation |
voluntary act of terminating an insurance contract |
|
legally valid and binding |
offer and acceptance, consideration, legal purpose, and competent partie |
|
Offer and Acceptance |
definite, unqualified proposal (offer) by one party and the acceptance of its exact terms by the other. |
|
Consideration |
consideration is given by the applicant in exchange for the insurer's promise to pay benefits.
schedule and amount of premium payments |
|
Legal Purpose |
the reason the parties enter into the agreement must be legal |
|
Competent Parties |
► Minors ► The mentally infirm ► Those under the influence of alcohol or narcotics |
|
Aleatory |
unequal exchange of value or consideration for both parties Both insurance and gambling contracts are typically considered aleatory contracts. |
|
Adhesion |
Insurance contracts are contracts of adhesion. This means that the contract has been prepared by one party (the insurance company) with no negotiation between the applicant and insurer. In effect, the applicant "adheres" to the terms of the contract on a "take it or leave it" basis when accepted. Any confusing language in a contract of adhesion would be interpreted in favor of the insured. |
|
Unilateral |
This means that only one party (the insurer) makes any kind of enforceable promise. |
|
Personal Contract |
For this reason, people who buy life insurance policies are called policyowners rather than policyholders. Policyowners actually own their policies and can give them away if they wish. This transfer of ownership is known as assignment. To assign a policy, a policyowner simply notifies the insurer in writing. The company will then accept the validity of the transfer without question. The new owner is granted all of the rights of policy ownership. |
|
Conditional |
This means that the insurer's promise to pay benefits depend on the occurrence of an event covered by the contract. If the event does not materialize, no benefits are paid. |
|
Valued or Indemnity |
A valued contract pays a stated sum regardless of the actual loss incurred. An indemnity contract, however, is one that pays an amount equal to the loss. |
|
Utmost Good Faith |
nsurance applicants are required to make a full, fair and honest disclosure of the risk to the agent and insurer |
|
Warranty |
guaranteed to be true in every respect |
|
Representation |
A statement made by the applicant that they consider to be true and accurate to the best of the applicant's belief. |
|
Concealment |
failure by the applicant to disclose a known material fact when applying for insurance. If |
|
Insurable Interest |
This means that the person acquiring the contract (the applicant) must be subject to loss upon the death, illness, or disability of the person being insured. To have "an insurable interest" in the life of another person, an individual must have a reasonable expectation of benefiting from the other person's continued life. A policy obtained by a person not having an insurable interest |
|
Stranger-Originated Life Insurance (STOLl) |
investors named as beneficiary.These arrangements are used to circumvent state insurable interest statutes. |
|
Principles of Agency Law (4) |
The acts of the agent (within the scope of his authority) are the acts of the principal ► A contract completed by an agent on behalf of the principal is a contract of the principal ► Payments made to an agent on behalf of the principal are payments to the principal ► Knowledge of the agent regarding business of the principal is presumed to be knowledge of the principal |
|
Agent Authority |
Authority is what’s given by an insurer to a licensee to transact insurance on their behalf. |
|
Express authority. |
is the authority a principal deliberately gives to its agent. |
|
mplied authority. |
the unwritten authority that is not expressly granted, but which the agent is assumed to have in order to transact the business of the principal. |
|
Apparent authority. |
Apparent authority is the appearance or assumption of authority based on the actions, words, or deeds of the principal. It can also exist because of circumstances the principal created. |
|
Agent as a Fiduciary |
A fiduciary is a person who holds a position of financial trust and confidence |
|
Brokers versus Agents |
Unlike agents, brokers legally represent the insureds. A broker (or independent agent) may represent a number of insurance companies under separate contractual agreements. A broker solicits and accepts applications for insurance and then places the coverage with an insurer. |
|
Professional Liability Insurance (E&O) |
errors and omissions (E&O) professional liability insurance. |
|
Waiver |
If an insurer fails to enforce (waives) a provision of a contract, it cannot later deny a claim based on a violation of that provision. |
|
Estoppel |
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. In other words, it is the loss of defense. |
|
Parol Evidence Rule |
The parol evidence rule states that when 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. |
|
Void |
A void contract is simply an agreement without legal effect. |
|
Voidable |
voidable contract is an agreement which, for a reason satisfactory to the court, may be set aside by one of the parties to the contract. |
|
Fraud |
With life insurance contracts, an insurer has only a limited period of time (usually two years from date of issue) to challenge the validity of a contract. After that period, the insurer cannot contest the policy or deny benefits based on material misrepresentations, concealment, or fraud. |