Policy Provisions and Contract Law

What is a warranty in an insurance contract?

A absolutely true statement upon which the validity of the policy depends.

The declarations page of the homeowners policy provides all of the following information except

A statement that earthquakes damage is not covered. (The declarations section provides information as to who is insured, ehere they are located, when the policy provides coverage, how much coverage and the amount of deductible applied to a loss. The statement that earthquake damage is not covered is found in the policy form.)

Proof of loss

A sworn statement from an insureed notifying the insurer about a loss

Binder

A temporary insurance contract that goes in effect prior to the policy issue.

In property and casualty policies, what is required for an assignment to be valid?

A written consent of the insurer

A provision that adds more coverage for specific loss at no additional premium.

Additional coverage in a insurance policy

Four elements of an insurance contract?

Agreement (offer and acceptance), consideration, competent parties, and legal purpose.

What are the elents in order for a contracr to be legally binding?

Agreement, consideration, competent parties, and legal purpose.

Who is insured in property and casualty insurance?

Anyone covered under the policy, even if not specifically named.

A policy condition that stipulates how the amount of damaged or lost property will be determined if the insured and the principal do not agree on the value of a property loss is known as what?

Appraisal

Which process is used to settle a casualty claim when the insured and the insurer cannot agree?

Arbitration

When a disagreement occurs as to how to settle a loss in a "fender bender" between two cars, what procedure is followed?

Arbitration through the court

What describes the traansfer of a legal right or interest in an insurance policy?

Assignmemt

Which of the following describes the transfer of a legal right or intrest in an insurance policy?

Assignmet

In return for premium, an insurance company must...

Be fair in underwriting and pay covered losses.

The proof of loss statemet must be in what?

Be in writing

Information about changes to the policy or return of premium can be found in what section of a policy?

Conditions

What part of an insurance policy sets forth the rules of conduct, duties, and obligations of the parties to the contract?

Conditions

When an insured makes truthful statements on the application for insurance and pays the required, it is known as which of the following?

Consideration

What is consideration in an insurance contract?

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

A promise to pay in the event of a loss

Consideration on the part of the insurer

What part of a policy shows the amount of insurance, premium, and policy terms?

Declaration

An insured has four separate but identical policies written by different insurers to cover her $100,000 building. Each policy is writen for $100,000, and each has the pro rata liability other insurance clause. In the event of total loss to the building, what would each insurer pay?

Each policy will pay $25,000 of the loss.

Which of the following would modify the original insurance contract by either adding or removing coverage?

Endorsement

The section of an insurance policy that details what perils are not insured against and what persons are not insured is known as the...

Exclusions

In commerical property policies, who has control of the policy, and who can cancel it?

First named insured

Which of the following would be named on the declarations page of a property or liability policy?

First named insured

The policy conditions define what?

How parties to the contract must act following a loss.

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

If it is intentinal and material

What insurance principle does pro rata liability protect?

Indemnity

Who is responsible for filling out a notice of claim form?

Insured (Notice claim form is a form or statement from an insured to an insurer, informing the insuruer that events leading to a possible claim have occurred.)

Persons covered under an insurance policy, weather named or not, are known as what?

Insureds

What part of an insurance policy contains the insurer's promise to pay a claim?

Insuring agreement

For a contract to be enforeable by law, the purpase of the contract must be what?

Legal and not against public policy

Endorsement

Modifies the policy's original terms, coditions, or coverages. Endorsements can add or delete coverage, or merely correct iteams such as the insured's name, address, etc.

What are the four elements of all legal contracts?

Offer and acceptance, considerationm competent parties, and legal purpoese.

Where is the policy period stated in an insurance policy?

On the declaration page

Additional Insured

Persons who are not named on the declaration page of the policy but who are protected by the policy

The other insurance provision that limits the liability of the insurer to a portion of the loss no greater than the amount the insurer bears to all the insurance covering the property is called what?

Pro Rata Liability

What are an insured's duties after loss?

Protect the damage property from further damage, prepare an inventory of damage property, cooperate with the insurer in setting a loss, notify police in case of theft; and submit proof of loss

Other Insurance

Provision that defines how a policy will respond if there is more than one insurance policy written on the same risk.

The Federal Fair Reporting Act is what?

Regulates consumer reports

The Federal Fair Credit Reporting Act

Regulates reports

What type of information would be found in a policy's insuring agreement?

Renewal dates

Which method of loss valuation is contrary to the principle of indeminty?

Replacement cost

Declarations

Selection that personalize an insurance policy

Whcih of the following would qualify as a competent party in an insurance contract?

The applicant has a prior felony convition

Which of the following is NOT the consideration in a policy?

The application given to a prospective insured. (Consideration s something of value that is transfered between the two parties to form a legal contract.)

Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract?

Warranty

What does the exclusions section of a policy specify?

What perils are not onsured against, or what persons are not covered in a policy.

When does pro rata liability apply?

When an insured has more than one policy covering a loss

What does the declaration section inclued?

Who is insured, what is insured, where the property is located, when the policy begins and end, how much insurance and how much premium. The exclusions tell what is not covered.

Representations

Are statements made by an applicant that they believe to be true.

The part of the insurance contract that describes the covered peril and the nature of coverage of the contracual agreement between the insurer and the insured is called what?

Insurufng agreement

When is an appraisal needed and how can it be requested?

Is an insured and an insurer disagree about the value of a property loss, either party can make a writtin demand for an appraisal.

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.

Unilateral Contract

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

Provisions

A board term used to refer to the sections or clauses of an insurance policy that communicate the policy's benifits, conditions, etc. The essential parts of the policy are declarations, insuring clause, conditions and exclusions.