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Questions and Answers
What does the consideration clause of an insurance contract include?
What does the consideration clause of an insurance contract include?
Life and health insurance policies are not considered unilateral contracts.
Life and health insurance policies are not considered unilateral contracts.
False
Who makes the legally enforceable promises in a unilateral insurance policy?
Who makes the legally enforceable promises in a unilateral insurance policy?
Insurance company
What are insurance policies referred to when they are offered on a 'take it or leave it' basis?
What are insurance policies referred to when they are offered on a 'take it or leave it' basis?
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A policy of adhesion can only be modified by whom?
A policy of adhesion can only be modified by whom?
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A life insurance policy is considered a wagering contract without insurable interest.
A life insurance policy is considered a wagering contract without insurable interest.
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What is the term for a life insurance arrangement that circumvents insurable interest statutes?
What is the term for a life insurance arrangement that circumvents insurable interest statutes?
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Which of the following is a statement that is assured to be true in every respect?
Which of the following is a statement that is assured to be true in every respect?
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Stranger Originated Life Insurance (STOLI) has been found to violate which contractual element?
Stranger Originated Life Insurance (STOLI) has been found to violate which contractual element?
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Which elements are required for a contract?
Which elements are required for a contract?
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What kind of contract is it when only one party makes a legally enforceable promise?
What kind of contract is it when only one party makes a legally enforceable promise?
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When must insurable interest exist for a life insurance contract to be valid?
When must insurable interest exist for a life insurance contract to be valid?
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If a contract of adhesion contains complicated language, to whom would the interpretation be in favor of?
If a contract of adhesion contains complicated language, to whom would the interpretation be in favor of?
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What must applicants who are also the stated primary beneficiaries have when third-party ownership is involved?
What must applicants who are also the stated primary beneficiaries have when third-party ownership is involved?
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Which of these is NOT considered an element of an insurance contract?
Which of these is NOT considered an element of an insurance contract?
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What is the definition of consideration in an insurance context?
What is the definition of consideration in an insurance context?
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When does a formal contract become binding?
When does a formal contract become binding?
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Insurance contracts are aleatory.
Insurance contracts are aleatory.
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Study Notes
Legal Concepts in Insurance Contracts
- The Consideration clause outlines the schedule and amount of premium payments in an insurance contract.
- Life and health insurance policies operate as unilateral contracts, where only the insurer makes enforceable promises.
- In a unilateral policy, the insurance company is responsible for making legally enforceable promises.
- Insurance policies are classified as Contracts of Adhesion because they are presented on a "take it or leave it" basis.
- Modifications to a policy of adhesion can only be made by the insurance company.
- A life insurance policy without insurable interest is classified as a wagering contract.
- Investor-Originated Life Insurance (IOLI) circumvents insurable interest statutes by having investors persuade individuals to take out life insurance for sale purposes.
- A warranty in insurance refers to statements guaranteed to be true in every respect, and these become part of the contract.
- STOLI (Stranger-Originated Life Insurance) arrangements violate the principle of legal purpose within contracts.
- An insurance contract requires an offer, acceptance, and consideration from both parties.
- Insurable interest must be established at the inception of the contract for it to be valid.
- In cases of confusion in a contract of adhesion, interpretation favors the insured.
- Competent parties (with exclusions for minors, the mentally impaired, or those under substance influence) are required for enforceability of a contract.
- Insurance contracts are considered aleatory, meaning the exchange of value is unequal and involves an element of chance.
- Utmost good faith requires both insurer and applicant to disclose all material facts honestly.
- A distinction exists between void (non-legal agreements) and voidable contracts (which can be set aside by one party).
- Waiver is the voluntary relinquishing of a legal right; failure to enforce conditions means the insurer cannot later deny a claim based on those conditions.
- Concealment is the failure to disclose significant facts during an insurance application.
- Insurable interest ensures that the applicant has a legitimate stake in the insured party to satisfy legal purposes of the contract.
- Express authority refers to the explicitly granted powers to an agent, while implied authority relates to powers assumed necessary for conducting business.
- Apparent authority is based on the principal's actions leading others to believe the agent has authority.
- The parol evidence rule prevents altering a written contract's meaning with prior oral statements.
- A representation is an applicant's statement believed to be true to the best of their knowledge, influencing the insurer's decision to issue a policy.
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Test your knowledge of essential legal concepts related to insurance contracts with these flashcards. Each card provides a key term and its definition, helping you understand the nuances of life and health insurance policies.
