FL 2-15: CH 2 - Legal Concepts
Conditional Contract
Certain conditions must be met by all parties to the contract when a loss occurs in order for the contract to be legally enforceable.
Which arrangement allows one to bypass insurable interest laws?
Investor-Originated Life Insurance
Unilateral Contract
One sided agreement, where only the insurer is legally bound. In an insurance contract only the insurance company is legally bound to do anything.
Aleatory Contract
The exchange of value is unequal.
At what point does an informal agreement become a binding contract?
When consideration is provided
A contract where one party either accepts or rejects the terms of a contract written by another party is called a contract of
adhesion
Insurance contracts are known as ____ because certain future conditions or acts must occur before any claims can be paid.
conditional
What are the 4 elements of a contract?
consideration legal purpose offer & acceptance competent parties
Contract of Adhesion
only one author - the insurance company. if there is an ambiguity in the contract, the courts always favor the insured over the insurer.
Insurance policies are considered aleatory contracts because...
performance is conditioned upon a future occurrence.
What is the consideration given by an insurer in the consideration clause of a life policy?
promise to pay a death benefit to a named beneficiary
Principal of Indemnity
restore the insured to the same financial condition as that which existed prior to the loss.
Insurable Interest
something of value that, if lost, would cause you financial harm. Only exists at time of application
A policy of adhesion can only be modified by who?
the insurance company
The Consideration clause of an insurance contract includes
the schedule and amount of premium payments
What is consideration?
The value given in return for a promise or performance in a contractual agreement. the insured provides consideration with premium payment. the insurer provides consideration by promising to pay.
Which of the following consists of an offer, acceptance, and consideration?
contract
Insurance policy are offered on a "take it or leave it" basis, which makes them:
contracts of adhesion
What are the types of agent authority?
express, apparent, implied
indemnity contract:
health insurance will only reimburse the actual cost of loss.
A life insurance policy would be considered a wagering contract without...
insurable interest
Who makes the legally enforceable promises in a unilateral insurance policy?
insurance company
If a contract of adhesion contains complicated language, to whom would the interpretation be in favor of?
insured
Stranger Originated Life Insurance (STOLI) has been found to be in violation of which of the following contractual elements?
legal purpose (insurable interest)
Valued Contract
life insurance contract it will pay a stated amount
health insurance
the insurance company agrees to pay a percentage of the insured's medical bills (or benefit) in exchange for consideration (premiums).
life insurance
the insurance company agrees to pay a predetermined amount - the face amount (or benefit), in exchange for the insured's consideration (premium)
In insurance contract, the insurer is the only party who makes a legally enforceable promise. What kind of contract is this?
unilateral
Life and health insurance policies are (What type of contracts?)
unilateral. One party makes a promise, the other can only accept by performance
Which of these is said to be true in every respect?
warranty
At what point does an informal agreement become a binding contract?
when consideration is provided
When must insurable interest be present in order for a life insurance policy to be valid?
when the application is made