CONTRACT LAW

RATE

the price of insurance for each exposure unit

WHAT IS A MATERIAL MISREPRESENTATION?

A statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company

CONTRACT

An agreement that is enforced by the law

WHAT DESCRIBED A COMPETENT PARTY?

Legal age, mentally competent to understand the contract, not under the influence of drugs or alcohol.

WHAT DOES NOT NEED TO BE IDENTIFIED IN AN INSURANCE POLICY

The insurer's financial rating

ALL OF THE FOLLOWING ARE REASONS AN INSURER OR INSURED HAVE THE RIGHT TO RESCIND A POLICY

Whenever there is a violation of material warranty, intentional or unintentional concealment, or intentional or fraudulent omissions. the amount of paid claims will not rescind the policy

4 ELEMENTS OF INSURANCE CONTRACT

agreement (offer and acceptance), consideration, competent parties, legal purpose. counteroffer is NOT required.

NEGLIGENCE

an unintentional TORT is the result of acting without proper care. this is generally referred to as negligence

REPRESENTATIONS IN INSURANCE CONTRACTS QUALIFY AS

implied warranties

UNILATERAL CONTRACT ELEMENT

in insurance policies, the insured is not legally bound to any particular action in the insurance contract, but the insurer is legally obligated to pay losses covered by the policy

ADHESION

insurance policies are not drawn up by negotiation and an insured has little to say about its provisions the insureds only option is to accept or reject

ALEATORY

insured pays a small amount of premium for a large amount of risk on the part of the insurance company.

INSURER VS INSURED'S CONSIDERATION

insurer: promise to pay for losses insured:payment of premium and statements on the application

CONSIDERATION

something of value that each party gives to another. the consideration on the part of the insured is the payment of premium and the representation made in the application

In forming an insurance contract, when does acceptance usually occur?

when an insurer's underwriter approves coverage and issues the policy

CONCEALMENT

withholding of information that will result in an imprecise underwriting decision