Insurance Concepts Chapter 3 Flashcards

Key Legal Concepts in Insurance

• Consideration in Insurance Contracts: Refers to the statements made in the application and the payment of the premium by the applicant.
• Insured's Consideration: The act of paying a premium serves as the insured's consideration in the contract.
• Concealment Defined: The intentional withholding of material facts that can impact the validity of an insurance policy.
• Utmost Good Faith Principle: Ensures that the insured provides accurate information and pays premiums while the insurer agrees to act fairly and uphold their promises.
• Implied Authority: The authority not explicitly granted in an agent's contract, which an agent assumes to fulfill their responsibilities effectively.
• Errors and Omissions: Professional liability that allows producers to be sued for mistakes made while arranging insurance policies.
• Unilateral Contract Principle: An insurance policy is classified as unilateral because only the insurer is legally obligated to fulfill the contract's terms.
• Insurable Interest Requirement: Must exist at the time of application for a valid life insurance contract.
• Consideration Clause: A statement in the insurance policy that acknowledges issuance based on application representations and first-term premium payment.
• Legal Purpose Component: Insurable interest is part of this essential element required for an insurance contract's legitimacy.
• Apparent Authority Indicated by Actions: The deeds and actions of a producer indicate what authority they appear to possess.
• Law of Agency Proof: The authority granted to a licensed producer is established through the legal framework of the Law of Agency.
• Consideration Element: Demonstrates that each party in an insurance contract offers something of value; essential for contract validity.
• Conditional Insurance Contract: A type of contract that stipulates certain conditions or actions must be fulfilled by the insured for the policy to be valid.