Chapter 3- Insurance

CHARACTERISTICS OF INSURANCE CONTRACTS

1. Aleatory 2. Unilateral 3. Conditional 4. Personal 5. Contract of Adhesion

misrepresentation

A false or misleading statement or assertion.

annuity contract

A legally enforceable written agreement between an insurance company and a contract owner under which the insurer grants a named person the right to receive a series of periodic payments in exchange for a premium or series of premiums.

concealment

A way to lie on an application by telling a partial truth, which specifies that the policy may be voided if there is material concealment, misrepresentation or fraud on the part of the insured.

Aleatory vs. Commutative

Aleatory: values exchanged are not equal & any performance based on uncertain event COMMUTATIVE: An agreement under which both parties specify in advance the values that they will exchange

Contract of adhesion vs Bargaining Contracts

Contracts of adhesion: since the insured must accept the entire contract as it is written, any ambiguities are construed against the insurer BARGAINING CONTRACTS: Both parties, as equals, set the terms and conditions of the contract

PROPERTY

Defined as a bundle of rights a person has regarding something real property or personal

1. Legal systems, based on the legal system of England, in which laws are contained in an unwritten body of general principles and rules developed and followed by the courts. a. Common law systems b. Civil law systems c. Islamic legal system d. Customary laws

a. Common law systems

7. The mutual assent requirement for an insurance contract typically is met through a. Offer and acceptance. b. Consideration c. Voidable contracts d. Offer and counter offer

a. Offer and acceptance.

6. A completed application and payment of an insurance policy's first premium, which an applicant must provide in order to form an insurance contract, are called a. Aleatory b. Consideration c. Personal d. Offer and Acceptance

b. Consideration

2. If only one of the parties to a contract makes legally enforceable promises when the contract is formed, the contract is considered a. Conditional b. Unilateral c. Aleatory d. Bilateral

b. Unilateral

3. Because insurance contracts are contracts where the values exchanged by the parties may not be equal, they are said to be a. Unilateral b. Personal c. Aleatory d. Contracts of Adhesion

c. Aleatory

8. The presence of which of the following satisfies the requirement of lawful purpose in Individual life and health Insurance policies a. Offer and Acceptance b. Representations c. Insurable interest d. Consideration

c. Insurable interest

5. The parties to an insurance contract are the insurance company that issues the policy and the a. Applicant b. Insured c. Owner d. Beneficiary

c. Owner

10.Land and whatever is growing on or affixed to the land is known as a. Property b. Personal property c. Real property d. Ownership of property

c. Real property

4. Courts typically interpret ambiguity in an insurance contract against the insurer because of which contract characteristic? a. Formal b. Aleatory c. Personal d. Contract of Adhesion

d. Contract of Adhesion

9. The sum of all the legal rights that exist in property is best categorized under which of the following a. Property b. Personal property c. Real property d. Ownership of property

d. Ownership of property

real property

land or anything affixed to land

Conditional:

policyowner must comply with all policy provisions to collect for a covered loss

Personal:

property insurance policy cannot be validly assigned to another party without the insurer's consent

personal property

tangible: clothing , cars, etc. intangible: contractual rights

personal risk

the risk of economic loss associated with death, poor health, injury, and outliving one's economic resources

Unilateral or Bilateral

unilateral: only the insurer makes a legally enforceable promise BILATERAL: both parties make legally enforceable promises