Chapt 2 key words (legal concepts of insurance)

Broker

A broker represents themselves and the insured (I.e., the client or customer) at the time of application.

Competent party

A competent party is one who is capable of understanding the contact being agreed too. All party must be legal competence, meaning they must be of legal age, mentally capable of understanding the terms and not influenced by drugs or alcohol.

Conditional

A conditional policy describes the insurer's promise to pay benefits depends on occurrence of an event covered by the contract.

warrenty

A statement made by the applicant that is guaranteed to be true in every respect. It becomes part of the contract and, if found to be untrue, it can be grounds for revoking the contract.

Voidable Contract

A voidable contract is an agreement that, for a reason satisfactory to the court, may be set aside by one of the parties in the contract.

Wavier

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

Agent

An agent represents themselves and the insurer at the time of application.

Insurance policy

An insurance policy is a written contract in which one party promises to indemnify another against loss that arises from an unknown event.

Apparent Authority

Apparent authority is the appearance of the insurer providing the agent authority to perform unspecified tasks based in the agent-insurer relationship.

Concealment

Concealment is the failure of the applicant to disclose a unknown material fact when applying for insurance.

Consideration

Consideration is the part of an insurance contract setting forth the amount of initial and renewal premiums and frequency of future payments.

Indemnity contract

Contracts of indemnity attempt to return the insured to their original financial position.

Estoppel

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 if certain conclusions are drawn.

Express authority

Express authority is the explicit authority granted to the agent by the insurer, as written in the agency contract.

Fraud

Fraud includes the deliberate knowledge of or intentional deceit to make false statements to be compensated by an insurance company.

Implied Authority

Implied authority is an authority not explicitly granted to the agent in the contract of agency, but which common sense dictates the agent has. It enables the agent to carry out routine responsibility.

Insurable Interest

Insurable interest is the financial, economic, and emotional impact associated with a person experiencing a specific loss. A person has an insurable interest in a loss if they have more to gain by not suffering the loss.

Parol Evidence Rule

Parol evidence rule involves parties to put their agreement in writing, all previous verbally statements come together in that writing, and a written contract cannot be changed or modified by parol (oral) evidence.

Applicants

Provides the insurer with a completed application and initial premium as consideration for insurance.

Reasonable Expectations

Reasonable expectations means the insured is entitled to coverage under a policy that any sensible and prudent person would expect it to provide.

representations

Statements made by the applicant that they consider to be true and accurate to the best of the applicant's belief.

Valued contract

contract the pays a stated sum regardless of the actual loss incurred. Life insurance are valued contracts.

Utmost Good Faith

involves the belief that both the policyowner and the insurer must know all material facts and relevant information, and as such, they will provide each other with all material facts and relevant information.

Subrogation

the right for an insurer to pursue a third party that caused an insurance loss to the insured.

unilateral

unilateral contracts mean only one party, the insurer, makes any kind of enforceable promise.

Policy rider or endorsement

A policy rider or endorsement is an amendment added to an insurance contract that overrides terms in the original policy; endorsements may add or remove coverages, change deductibles, or revise any other policy feature.

Material Misrepresentation

A material misrepresentation is a false statement made by an applicant that would influence an insurer in determining whether or not to accept the risk.

Adhesion

A contract of adhesion describes a contract that has been prepared by one party (the insurance company) with no negotiation between the applicant and insurer. The applicant adheres to the terms of contract on a "take it or leave it" basis when accepted.

Aleatory

An aleatory contract presents the potential for an unequal exchange of value or consideration between both parties. Aleatory contracts are conditioned upon occurrence of an event.

Legal purposes

Legal purpose means an insurance contract must be legal in nature and not opposition to public policy.

Fiduciary

The responsibility an insurance producer has to account for all premiums collected and provide sound financial advice to clients. A fiduciary is in a position of trust with regards to the funds of their clients and the insurer.