2-Legal Concepts (Life Insurance)

Representation

consider to be true and accurate to the best of the applicant's belief.

Adhesion

is best described as a policy which only the insurance company can modify.

Consideration

is given by the applicant in exchange for the insurer's promise to pay benefits. It also consist of the application and the initial premium.

Utmost Good Faith

both the policyowner and the insurer must know all material facts and relevant information.

Consideration clause

contains information such as the schedule and amount of premium payments.

Indemnity contract

is one that pays an amount equal to the loss

Apparent Authority

is the appearance or assumption of authority based on the actions, words, or deeds of the principal.

Express Authority

is the authority a principal deliberately gives to its agent. Its granted by means of the agent's contract, which is the principal's appointment of the agent to act on its behalf.

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 certain conclusions are drawn.

Implied Authority

is 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.

Waiver

is the voluntary giving up of a legal, given right. 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.

Insurable interest

must exist when the application is made for it to be valid

Insurable Interest

must only exist at the time of the application of a life or health insurance contract.

Investor-Originated Life Insurance

A life insurance arrangement which circumvents insurable interest statutes is called

The insurance company

A policy of adhesion can only be modified by whom?

F

E and F are business partners. Each takes out a $500,000 life insurance policy on the other, naming himself as primary beneficiary. E and F eventually terminate their business, and four months later E dies. Although E was married with three children at the time of death, the primary beneficiary is still F. However, an insurable interest no longer exists. Where will the proceeds from E's life insurance policy be directed to ?

Concealment

Failure by the applicant to disclose a known material fact when applying for insurance.

Offer and acceptance, consideration , legal purpose, and competent parties.

For a contract to be legally valid and binding, it must contain certain elements

Insured

If a contract of adhesion contains complicated language, to whom would the interpretation be in favor of?

Contracts of Adhesion

Insurance policies are offered on a "take it or leave it" basis, which make them:

Unilateral Contracts

Life and health insurance policies are

Parol Evidence Rule

Oral or verbal evidence, or that which is given verbally in a court of law. It states that when parties put their agreement in writing, all previous verbal statement come together in that writing and written contract cannot be changed or modified by parol (oral) evidence.

Aleatory

Q purchases a $500,000 life insurance policy and pays $900 in premiums over the first six months. Q dies suddenly and the beneficiary is paid $500,000. This exchange of unequal values reflects which of the following insurance contracts features?

Fiduciary responsibility

Taking receipt of premiums and holding them for the insurance company is an example of

The schedule and amount of premium payments

The consideration clause of an insurance contract includes:

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.

Aleatory

This means there is an element of chance and potential for unequal exchange of value or consideration for both parties.

Express, Implied, and apparent

Three types of agent authority

Unilateral

Under ____insurance policy, the insurance company makes the legally enforceable promises

When the application is made

When must insurable interest be present in order for a life insurance policy to be valid?

Insurable interest in the proposed insured

When third-party ownership is involved, applicants who also happen to be the stated primary beneficiary are required to have:

the offer, acceptance, consideration

Which of these are considered to be an element of an insurance contract?

Investor-Originated Life Insurance

Which of these arrangements allows one to bypass insurable interest laws?

Fiduciary

another legal concept which governs the activity of an agent. A ____ is a person who holds a position of financial trust and confidence.

contract of adhesion

any confusing language would be interpreted in the favor of the insured

Life and health insurance policies

are considered unilateral contracts because one party makes a promise, and the other party can only accept by performance.

Unilateral

only one party (the insurer) makes any kind of enforceable promise. Insurers promise to pay benefits upon the occurrence of a specific event, such as death or disability.

Valued contract

pays a stated sum regardless of the actual loss incurred (to come into)

Warranty

statement mad by the applicant that is guaranteed to be true in every respect.

life insurance contract

the insurer binds itself to pay a certain sum upon the death of the insured.

Insurance Company

who make the legally enforceable promises in an unilateral insurance policy?