chapter 2 contract law

Ace your homework & exams now with Quizwiz!

Personal

An insurance policy is between the insurer and the individual The insured cannot be changed without the written consent of the insurer The insurer must be notified in writing when ownership is transferred (assignment)

Competent Parties

A contract must be entered into by competent parties to be enforceable. Parties must be of legal age, mentally competent and not under the influence of alcohol or drugs.

Conditional

Certain conditions must be met in order for the contract to be executed An insurance contract is an if/then proposition. If the policyowner pays the premiums and the insured dies during the policy coverage period, then the insurer will pay the death benefit to the beneficiary.

Adhesion

Insurance Company (one party) writes the contract with no negotiation Applicant can "take-it-or-leave-it" Any ambiguity is resolved in favor of the insured

Agreement: Offer and Acceptance

Offer - the applicant's initial premium plus application. Acceptance - when the application is approved and the company issues the policy

Unilateral

Only one of the parties is legally bound to do anything The insurer is legally bound to pay claims as long as the policy is in force; the insured is not legally bound to do anything

Legal Purpose

Reason for contract must be legal and not absent public policy (contract for murder not legal). Insurable Interest (must exist at time of application)

Rescission

Revocation (void) of the contract (policy) The injured party can rescind the contract for false material representation, concealment, or violation of a material warranty (or any other material provision of the policy)

Consideration

Something of value that each party gives to the other The Company promises to pay the death benefit The Applicant pays the premium plus the statements (representations) made on the application

Materiality

The concept that all parties to a contract are entitled to all the information necessary to make an informed decision Failure to disclose information may entitle the "injured" party to rescind the contract

Concealment

The intention withholding of material information that is critical in making a decision If the applicant withholds information that may affect the underwriting process, the concealment could result in the contract being voided Reasonable expectation - both parties should expect that the other is acting in god faith without attempting to conceal or deceive the other

Aleatory

Values exchanged are not equal Example: $600 annual premium for $100,000 of insurance.

Every insurance contract is required to include these 6 specific elements

1. The parties to the contract 2. The person or property being insured 3. A statement of the insurable interest that exists (if the insured is not the policyowner) 4. The risk insured against 5. The time period the policy will be in force 6. The stated amount of the premium, the premium mode, and the method used for calculating the premium

Tort

A private, civil, non-contractual wrong for which a remedy may be sought through legal action Intentional tort - a deliberate act that causes harm to another person regardless whether it is intended to injure the person Unintentional tort - result of acting without proper care; generally referred to as negligence. (Insurance generally will only respond to unintentional torts since they are not deliberate)

Warranty

A statement guaranteed to be true and becomes part of the contract Expressed- statements in the policy that become part of the contract Implied- unwritten or unspoken guarantees presumed to be made based on the circumstances of the transaction.

Contract

An agreement between two or more parties legally enforceable by law. Insurance policies are contracts and they share many of the elements and characteristic of contracts

Material Misrepresentation

An untrue statement that, if discovered, would alter the underwriting decision and void the contract

Fraud

If material misrepresentation is discovered to be intentional, it is considered to be fraud

Representations

Statements believed to be true to the best of one's knowledge - answers on the application.

Not Required

The insurer's financial rating is not required to be specified in an insurance policy

Misrepresentation

Untrue statements (lies) on the application

Insurance Policy

Written instrument in which a contract of insurance is set forth


Related study sets

Radiation Protection Chapters 1-5 Test

View Set

BIO103 MOD 2 STUDY GUIDE (CH2&3)

View Set

International Business Chapter 1

View Set

Oedipus play part 1 & 2 Pre-test

View Set

Unit 3: Basics of Life Insurance

View Set