Chapter 50 business law

Term insurance

-A type of policy under which premiums are paid for a specified term -Payment on the policy is due only if the death occurs within the term period -Premiums are lower than whole life or limited-payment life

Limited-payment life

-A type of policy under which premiums are paid for state number of years -After that time, the policy is paid up and fully effective during the insured's lifetime

Universal life

-Combines aspects of both term insurance and whole life insurance -For every payment the issuing life insurance company makes two deductions. First is to charge for term insurance protection. Second is for company expenses and profits.

Collision and comprehensive insurance

-Covers damage to the insured's car in any type of collision -Can be stolen or keyed

Liability car insurance

-Covers liability for bodily injury and property damage -Will pay max $100,000 for bodily injury to one person, max $500,00 for bodily injury to more than one person and a max $50,000 for property damage

General liability insurance

-Encompass as many risks as the insurer agrees to cover -It can project a business from liability for injuries arising fro on-premises events held after work hours -It can protect bars and liquor stores

Duties of the insured

-Good faith requires the party who is applying for insurance to reveal everything necessary for the insurer to evaluate the risk of issuing the policy -The applicant must disclose all facts that an insurer would consider in determining whether to charge a higher premium or to refuse to issue a policy altogether -Three basic duties under the contract --To pay the premiums as stated in the contract --To notify the insurer within a reasonable time if an event occurs that gives rise to a claim --To cooperate with the insurer during any investigation or litigation

Bad faith tort action against insurers

-If an insurer in bad faith denies coverage of a claim the insured may sue. --If successful, the insured can recover an amount exceeding the policy's coverage limits and may also recover punitive damages.

Endowment insurance

-Involves fixed premium payments that are made for a definite term -At the end of the term, a fixed amount is paid to the insured or if the insured dies during the specified term to a beneficiary -Premiums are high because a payment must be made at the end of the term even if the insured is still living

Duties of the Insurer

-Once the insurer has accepted that risk and some events occur that give rise to a claim, the insurer has a duty to investigate to determine the facts. -When a policy provides insurance against third party claims, the insurer is obligated to make reasonable efforts to settle any claims. -If the settlement cannot be reached, the insurer has a duty to defend any suit against the insured. -The insurer also owes a duty to pay any legitimate claims up to the face amount of the policy

property coverage

-Property coverage- includes the house, garage, and other private buildings on the policyholder's lot. -Includes personal possessions and property of the policyholder at home, at work, or while traveling -Policy covers additional living expenses like having to live away from home after the fire -Persils insured under property coverage often include, fire, lightning, wind, hail, vandalism, and theft

Whole life

-Provides protection with an accumulated cash surrender value that can be used as collateral for a load -The insured pays premium during his or her entire lifetime and the beneficiary receives a fixed payment on the death of the insured

incontestability clause

-Such clause provides that after the policy has been in force for a specified length of time, the insurer cannot contest statement made in the application -Once a policy becomes incontestable, the insurer cannot later avoid a claim on the basis of, for instance fraud on the part of the insured, unless the clause provides an exception for that circumstance. -The clause does not prevent an insurer from asserting other defenses to a claim, such as the nonpayment of premiums, failure to file proof of death, or lack of an insurable interest.

alternatives to cancellation

-The insurer may be required to extend the insurance for period of time -The insurer may issue a policy with less coverage to reflect the amount of the payment made -The insurer may pay to the insured the policy's cash surrender value- the amount the insurer has agreed to pay on the policy' cancellation before the insured's death

Liability coverage

-Under homeowners policy is for personal liability in the event that someone is injured on the insured's property because of an unsafe condition on the property -Also applies when the insured damages someone else's property or injures someone else -Coverage for the medical payments of others who are injured on the policyholder's property and for the property of others that is damaged by a member of the policyholder's family.

property insurance

-an insurable interest exists when the insured derives a monetary benefit from the preservation and continued existence of the property. -Insurable interest must exist at the time the loss occurs but need not exist when the policy is purchased.

Insurable interest

-is a person can insure anything if they have this -Without this there is no enforceable contract and a transaction to purchase insurance coverage would have to be treated as a wager

Insurable contract

-is governed by the general principles of contract law -For the contract to be binding consideration must be given -Parties forming the contract must have the required contractual capacity to do so

life insurance

-person must have a reasonable expectation of benefit from the continued life of another to have an insurable interest in that person's life. -Insurable interest must exist at the time the policy is obtained

Multiple insurance coverage

-policies with several companies covering the same interest -If the amount of coverage exceeds the loss, the insured can collect from each insurer only the company's proportionate share of the liability relative to the total amount of insurance.

Lost fire insurance policies

-provide that if the parties cannot agree on the amount of loss covered under the policy or on the value of the property lost, an appraisal can be demanded -An appraisal is an estimate of the property's value determined by a suitably qualified individual who has no interest in the property -Typically two appraisers are used, one appointed by each party -A third party can be called on to resolve differences

Coinsurance clause

-provides that if the owner insures the property up to a specified percentage -Usually 80% of its value will recover any loss up to the face amount of the policy. -It applied to only in instances of partial loss

Lack of insurable interest

An absolute defense exist if the insurer can show that the insured lacked insurable interest

policy

An un insurance contract

Workers compensation

Covers payments to employees who are injured in accidents arising out of and in the course of employment

Fraud or misrepresentation

If the insurance company can show that the policy was procured through fraud or misrepresentation

Product liability

Manufacturers and retailers may be subject to liability for injuries resulting from the products they sell, and product liability insurance can be written to match specific products risks

Professional malpractice

Professionals often become the target for negligence suits It protects themselves against such claims

premium

The consideration paid to the insurer

insurance

a contract in which the insurance company promises to pay or otherwise compensate another for a particular loss. -The injury or death of the insured or another -Damage to the insured's property -Resulting from lawsuits

Risk

can be described as a prediction concerning potential loss based on known and unknown factors

Uninsured motorist coverage

insures the driver and passengers against injury caused by any driver without insurance

Risk Management

involves an individual transferring certain risks to the insurance company through a contract

Umbrella policy

is a separate coverage that they can purchase if they are not satisfied with the max

Key person insurance

is insurance obtained by an organization on the life of a person who is important to that organization -Typically a small company will insure the lives of its important employees -Insurable interest in the life of a key executive whose death would result in financial loss to the company -If a firm insures a key person's life and the person leaves the firm and subsequently die the firm can collect on the insurance policy

Friendly fire

one burning in a place where it was intended to burn.

Medical payment coverage

pays hospital and other medical bills and sometimes funeral expenses

The standard fire insurance policy

protects the homeowner against fire and lightning, as well as damage from smoke and water caused by the fire or the fire department

Omnibus clause

protects the vehicle owner who has taken out the insurance and anyone who drives the vehicle with the owner's permission

Accidental death benefit

provides for a payment of twice the policy's face amount if the policyholder dies in an accident

The effective date

the date on which the insurance coverage begins

antilapse provision

the insured has a grace period of thirty or thirty-one days within which to pay an overdue premium

Hostile fires

those that breakout or begin in places where no fire was intended to burn

Insurance contracts

usually are obtained through an agent that works for the insurance company or through a broker who is ordinarily an independent contractor