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20 Cards in this Set
- Front
- Back
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Characteristics of an
Insurable Risk |
loss must be definite and definable, accidental, great enough to create economic hardship, must not be catastrophic in nature. Law of large numbers should apply. Insurance must be offered at a reasonable cost, & insurance companies should be able to calculate the chance of loss.
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When is one deemed to have an Insurable Interest in a property?
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When one has a lawful, substantial, economic interest in the preservation of that property.
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What are the parties to an insurance contract?
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First Party- The insured
Second Party- The insurance company Third Party- in liability insurance, this is the party that has been damaged by the first party |
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What are the four Elements of a contract
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There must be intent on both parties to enter into a legal relationship and the insurance contract must possess the following elements:
Capacity to Contract Legal Purposes/Object Offer and Acceptance Consideration |
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Capacity to Contract
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In order for the contract to be binding, all parties must have the necessary capacity to enter into the contract. (Minors, mental incompetents and those who sign a contract while under the influence of drugs or alcohol are deemed insufficient for capacity) Must be at least 15 for life insurance
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Legal Purposes/ Object
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An insurance contract must not be written to cover an illegal activity or immoral purposes
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Offer and Acceptance
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applicant completes an application for coverage and the insurance company accepts it and returns a policy or a binder. If it is altered, the altered policy becomes a counter-offer
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Consideration
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Something that has value in the eyes of the law in which a promisee receives something in return for a promise. The insured gives the appl and premium to the agent and/or company in return for their promise to pay in the future
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Characteristics of an Insurance Contract
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Aleatory
Contract of Adhesion Executory Conditional Utmost Good Faith Personal Aspect Principle of Indemnity Valued Contract Reimbursement Contract Unilateral |
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Aleatory. What does it mean when an insurance contract is aleatory?
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It is contingent on a an uncertain event (a loss). Insureds who pay premium but have no losses will not receive claim payments under the policy. However, they have peace of mind knowing they are covered if a loss occurs.
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Contract of Adhesion
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There is unequal bargaining strength between parties and in ambiguous language will bring a court decision in favor of the insured. One party has greater power over the other party in drafting contract has greater power over the other party in drafting the contract
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Executory
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Both sides must perform certain acts to make the contract legally enforceable
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Conditional
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Promises action in the event of a future occurrence. Insured's obligations are based on conditions specified in the contract.
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Utmost Good Faith
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Both parties bargain in good faith
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Personal Aspect
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The insurance contract is bound to the insurable interest of the insured person. The policy doesn't automatically pass to the new purchaser
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Valued Contract
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pays stated amount in the event of a claim
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Reimbursement
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Pays on the amount of the loss
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Unilateral
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The insured has agreed to pay a premium in exchange for the insurers promise to act in the future. Unilateral means "1-sided", the insurance company is legally bound to perform its part of the agreement.
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Legal Interpretations Affecting the Insurance Contract
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Breach of Warranty
Misrepresentation Concealment Fraud Warranty Reasonable |
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Estoppel
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If someone intentionally or unintentionally creates the impression that a certain fact exists, and an innocent party relies on that impression and is damaged as a result, the guilty party may be legally prohibited (estopped) from asserting that the fact doesn't exist
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