Chapter 2 Contract Law

Premium

payment by insured to keep policy in force

conditional contract

requires that certain conditions are met by the policyowner and the insurer in order for the contract to be executed

Cancellation

revoking or terminating contract

consideration

something of value exchanged for something else of value

Rescission

termination of contract

Contract Law

the body of law that governs contract enforcement

personal contract

the contract is between the insured and the insurer

6 specifications for insurance policies

1. parties to contract 2. person or property being insured 3. Statement of insurable interest that exists if the insured is not the owner, 4. Risks insured against. 5. Time period when policy will be in force. 6. Stated premium to be paid

Riders

Added to policy to modify provisions that already exist.

contract of adhesion

Any contract in which one party must either accept the agreement as written by the other party or reject it.

which of the following best defines and insurance policy? A. A written request to an insurance company for insurance coverage B. A contract between an insured and an insurer that guarantees payment for loss caused by a specific event C. An endorsement or a modifying provision D. An agreement between an insurer and the department of insurance

B. A contract between and insured and insurer that guarantees payment for loss caused by specific events.

The act of revoking or terminating an insurance policy is called A. Lapse B. Cancellation C. Forfeiture D. Non Renewal

B. Cancellation. Cancellation is the act of revoking or terminating ones insurance policy

which of the following best describes the policy non renewal A. Revocation of one's insurance policy by insurer B. Discontinuance of an insurance policy by the insured on policy anniversary date C. Return the policy after 10 day free look D. Voiding policy due to misrepresentation on application.

B. Discontinuance of an insurance policy by insurer on anniversary date. Non renewal is the discontinuance of an insurance policy beyond its original term, usually on the policy anniversary or premium due date.

During the grace period, the policy owner can. A. Renew policy without proof of insurability B. pay a late premium without penalty C. Return the policy to the insurer for a full refund D. Add riders to the existing policy

B. Pay late premium without penalty.

A contract between an insured and the insurer which agrees to pay the insured for loss caused by specific event is: A. Guaranteed benefit B. A policy C. A Rider D. A premium

B. Policy. A contract between an insured and insurer which agrees to pay the insured for a loss caused by specific events is a policy

The price of insurance for each exposure unit is known as A. Premium B. Rate C. Consideration D. Insurable interest

B. Rate. Rate is the price of insurance for each exposure unit. The rate helps determine the premium by multiplying it by the number of units of insurance purchased.

Policy

Contract between policy holder and insurance company

which of the following does NOT need to be identified in an insurance policy. A. Stated periodic premium B. Statement of insurable interest C. First name of insured D. Insurers financial rating

D. An insurers financial rating does not need to be specified in an insurance policy

Contracts

Legal written agreement enforceable by law

Unilateral contract

Only one of the parties are legally bound to do anything

Grace period

Period of time after deadline or due date of premium in which late payment may be made without penalty

Torte

Private, civil, non-contractual wrong for which a legal action may be sought. It can be either intentional or non-intentional. qq

Aleatory contract

The exchange of value is unequal.

legal purpose

The purpose of the contract must be legal and not against public policy.

application

Written request for coverage

warranty

a statement that becomes part of the insurance contract and is guaranteed by the maker to be true in all respects. violation of a material warranty by either party entitles the other to rescind the policy

Unintentional torte

acting without proper care. aka: neglegence

What are the 4 elements of a contract

agreement or offer, competent parties, legal purpose and consideration

materiality

based on the idea that all parties on contract are entitled to all information necessary to make an informed decision. . facts. Disadvantages are always material information.

renewal

continuance of a policy beyond its original term

concealment

intentional withholding of material information

Intentional Torte

meant to do it: intent, willful act, harm, causation

agreement

offer and acceptance