chapter 9

when must insurable interest exist in property insurance

at the time of the loss

principle of insurable interest

to be legally enforceable, all insurance contracts must be supported by an insurable interest

aleatory

values exchanged are not equal (claims are not more than premiums)

insurers can place limitations on the power of agents by adding a __________ to the application policy

non waiver clause

implied warranties

not found in the contract but are assumed by the parties to the contract ex: food fit for consumption

Estoppel

occurs when a representation of fact made by one person to another is reasonably relied on by that person to such an extent that it would be inequitable to allow the first person to deny the truth of the representation

misrepresentation

of a material fact, if relied on by the insurer makes the contract voidable (would not have been issued)

affirmative warranty

one that must exist only at the time the contract is first put into effect

principle of subrogation

one who has indemnified another loss is entitled to recovery from reliable third parties who are responsible

when must insurable interest exist in life insurance

only at inception of the policy

unilateral

only the insurer makes a legally enforceable promise ( indemnify you don't have to have insurance with them)

valued policy

pays the face amount of insurance if a total loss occurs

conditional

policy owner 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 insurers consent

contract of adheasion

the insured must accept the entire contract with all of its terms and conditions

principle of indemnity

the insured should not profit from a covered loss, but should be restored to same financial position prior to loss

exceptions of subrogation

-does not apply to life insurance contracts and most types of health insurance -does not give the insurer the right to collect against the insured; even if insured is negligent

an insurable interest can be supported by

-ownership of property -legal liability resulting from contracts -secured creditors -contractual rights

the insured must be in a position to lose financially if a loss occurs : purposes

-to prevent gambling -to reduce moral hazard -to measure the amount of the insured loss

what is the purpose of subrogation

-to prevent the insured from collecting twice for the same loss -to hold the negligent person responsible for the loss and financially accountable for his actions -keeps insurance premiums below what they would otherwise be

warranties

a clause in an insurance contract stating that before the insurer is liable

principle of utmost good faith

a higher degree of honesty is imposed on both parties to an insurance contract than is imposed on parties to other contracts

what constitutes insurable interest

always presumed to exist in life insurance for persons who voluntarily insure their own lives -however someone who purchases life insurance on another life must have an insurable interest in that persons life

representations

are statements made by the applicant for insurance

waiver

defined as the voluntary relinquishment of a known legal right

promissory warranty

describes a condition fact or circumstance to which the insured agrees to be held during the life of the contract

concealment

intentional failure of the applicant for insurance to reveal a material fact to the insurer

life insurance contract

is valued policy that pays a stated sum to the beneficiary upon the insureds death

a contract is voidable if the representation is ______ false and relied on by the insurer

material

material

means that if the insurer knew the true facts, the policy would not have been issued or would have been issued on different terms

replacement cost insurance

means there is no deduction for depreciation in determining the amount paid for a loss

agent

someone who has the authority to act on behalf of a principle (insurer)

express warranties

stated in contract

principle of reasonable expectations

states that an insured is entitled to coverage under a policy that he or she reasonably expects it to provide, and that to be effective, exclusions or qualifications must be conspicuous, plain, and clear (not tricked)