The insurance contract (2)

The Declarations page

Basic information. Usually on the first page. Example, name of the insured, the address, the amount the coverage...

What must be included for a contract to be legally enforceable?

CLOAC 1) competent parties 2) legal purpose 3) offer and acceptance 4) consideration

The definitions sections

Clarifies the meanings of certain terms used in the policy

An insurance policy is a___contract.

Conditional

The procedure for resolving a disagreement between an insured and an insurance company about a loss is described in which of the following parts of an insurance policy?

Conditions

An insurance company issued a homeowners policy that included ambiguous language regarding how a loss was settled. The insured sued the insurance company and won. The judge stated that due to the ambiguous language in the contract the decision must be made in favor of the insured. The judge was basing this decision on which of the following types of insurance contract?

Contract of adhesion.

Most policies contain what five parts?

DICED. 1) declarations. 2) insuring agreements 3) conditions 4) exclusions 5) definitions

The insured is looking for the amount of coverage in a property and casualty policy. This information would be found in the

Declarations

The limits of liability are found in which of the following sections of a casualty policy?

Declarations

Which one of the following components of an insurance contract contains information about the risk, the effective date of coverage, deductible, premium amounts, coinsurance percentage, and location of the insured property?

Declarations page

Fiduciary

Holding the money off someone else

Doctorine of reasonable expectations

States that a policy includes coverage is that an average person would reasonably expect it to include, regardless of what the poly actually provides.

Give an example of consideration

The consideration of the insured gives is the premium payment. The consideration of the insurer gives is the promise to pay for certain losses suffered by the insured.

Which of the following describes a personal contract?

The contract protects the individual who owns the property. Life Insurance can not be a personal contract because ownership in life insurance can be changed. personal contract can not change ownership.

The conditions

The ground rules for the policy. Describes the responsibilities in the obligations of both the insurance company and the insured.

The insuring agreements

The heart of the policy. What is to be covered. The losses for which the insured will be indemnified.

Personal contract

The insurance covers the person not the property

The exclusions

The losses for which the insured is not covered.

What indicates that an insurance contract contains the enforceable promises of only one party?

Unilateral

Jennifer and David signed a homeowners insurance application for coverage on their home. They did not divulge that last year their garage burned down after their 16-year-old son left a cigarette burning. The agent sent in the application and a policy was issued. When another fire occurred 2 months after the policy was issued, the company voided the policy because the agent would not have sent in the application if he had known of the prior loss. Which contract principle does this situation describe?

Utmost good faith

Ann and her agent meet to discuss automobile insurance. The agent completes an application for coverage, takes Ann's check for $200, and mails the application to the insurance company. Two weeks later Ann receives the policy in the mail. When did the consideration take place?

When Ann wrote the premium check.

Both parties rely on statements made to each other when writing a contract. This contract is known as a:

contract of utmost good faith.

A policy may be amended only with a(n):

endorsement

The attempt to restore an insured to his preloss condition is known as:

indemnification

The principle that restores someone to the condition he enjoyed before a loss is

indemnity

The insuring agreement section of a policy describes:

perils insured against.

Representations

true to the best of my knowledge.

Bryce owns a $50,000 lake cabin that he has insured for $40,000. He sustains a $5,000 covered loss. According to the principle of indemnity, how much will his insurer pay?

$5,000.00 The insured should be restored to approximately the same financial position as existed before the loss.

Endorsement

A document that applies a change in the policy

Contract

A legal agreement between two competent parties that promise a certain performance in exchange for a certain consideration.

What makes a person incompetent?

A person who is a minor, insane, or under the influence of alcohol or drugs.

A policy jacket is also called what?

A skeleton policy. A Nother formant type of a policy.

What makes the contract not enforceable?

Against public policy or in violation of the law

Consideration

Anything of value in exchange for the performance promised in the contract.

Which one of the following is NOT an element of a valid contract? A) Competent parties. B) Legal purpose. C) Consideration. D) Intent.

Intent

Ambiguity

Occurs when the insurer doesn't make the terms and agreements of the policy perfectly clear.

Offer and acceptance

Involves two parties. One who makes an offer and one who excepts it. This is also called an agreement.

Adhesion

One party has greater power over the other party in drafting the contract. GLUE. cant change whats in writing. either you want it or you dont.

Unilateral

One sided.

An insurance policy is ___ because....

One sided. Because, only the insurance company is a legally bound to perform its part of the agreement.

Principle of indemnity

Protection against future loss. No more and no less. Example: The insured bought an automobile four years ago for $15,000. Today is worth $6000. According to the principle of indemnity, the insured should receive no more than $6000 if the car is demolished.

Contract of utmost good faith

Relies on the truthfulness and integrity of the applicant when issuing a policy

Conditional Contract

Rules

Aleatory

Something is contingent on an uncertain event (a loss) that provides for unequal transfer of value between two parties. Unequal exchange.