Contract Law

what is consideration on the part of the insurer?

A promise to pay in the event of a loss

what does the term unilateral contract mean?

A unilateral contract is a one-sided contract. This means only one party makes an enforceable promise

What is a warranty in an insurance contract?

An absolutely true statement upon which the validity of the policy depends

what are the methods of managing risk?

Avoidance, transfer, sharing, retention, and reduction

what is consideration in an insurance contract?

Consideration is something of value that each party gives to the other. Consideration on the part of the insurer is binding.

what are three types of hazards?

Physical, Moral, Morale

What does indemnify mean in insurance?

To restore an insured to the same financial status as before a loss

what is a risk?

Uncertainty regarding loss

According to the Law of Agency, a principal is represented by whom?

agent or producer

What are the four elements of an insurance contract?

agreement (offer and acceptance), consideration, competent parties, and legal purpose

What type of authority is based on the agent's actions, or words?

apparent

what does the term reasonable expectations mean in insurance?

certain expectations for coverage that a reasonable person would have based sources other than just policy language

What document is required for an insurance company to transact insurance?

certificate of authority

Insurers are classified according to their domicile. What are the three types of insurers?

domestic, foreign, and alien

what are three types of agent authority?

express, implied and apparent

what type of insurer is formed under the laws of another state?

foreign

conditions that increase the chance of a loss are known as what?

hazards

what provision states that if a policy allows for greater benefits than the financial loss incurred, the insured may be compensated only for the amount lost?

indemnity

What do individuals use to transfer their risk of loss to a larger group?

insurance

In the agent/insurer relationship, who is considered the principal?

insurer

what are the five characteristics of an ideally insurable risk?

loss must be: 1. due to chance 2. definite and measurable 3. statistically predictable 4. not catastrophic and 5. coverage cannot be mandatory

a tornado that destroys a property would be an example of what?

peril

what is the term for the causes of loss insured against in an insurance policy?

peril

a situation in which a person can experience only a loss and no gain presents what type of risk?

pure risk

Wagering on a sporting event is known as what type of risk?

speculative

Insurance contracts are aleatory in nature. What does that mean?

unequal values are exchanged between the parties to a contract

When would a misrepresentation on an insurance application be considered fraud?

when it is intentional and material

in insurance contracts, when is the offer usually made?

when the insurance application is submitted

in insurance contracts, when does acceptance usually occur

when the insurer approves a prepaid application