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
