XCEL Chapter 2: Legal Concepts of Insurance
13 Questions
100 Views

Choose a study mode

Play Quiz
Study Flashcards
Spaced Repetition
Chat to lesson

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What is life insurance?

  • Insurance that pays a predetermined amount upon the insured's passing (correct)
  • A contract that guarantees profits
  • Insurance that covers medical bills
  • A contract that requires negotiation
  • What does health insurance cover?

    percentage of medical bills

    The four elements of a valid insurance contract are: consideration, legal purpose, offer and acceptance, and __________.

    competent parties

    What is a contract of adhesion?

    <p>A contract prepared by one party without negotiation.</p> Signup and view all the answers

    An aleatory contract implies equal exchange between parties.

    <p>False</p> Signup and view all the answers

    What is a unilateral contract?

    <p>One-sided agreement where only the insurer is bound.</p> Signup and view all the answers

    What characterizes a personal contract in insurance?

    <p>Non-transferable without consent</p> Signup and view all the answers

    Insurance contracts are considered unconditional.

    <p>False</p> Signup and view all the answers

    What distinguishes valued contracts from indemnity contracts in insurance?

    <p>Valued contracts pay a stated amount, indemnity contracts reimburse actual costs</p> Signup and view all the answers

    What does utmost good faith require in insurance?

    <p>Honest disclosure and no misrepresentation</p> Signup and view all the answers

    What are warranties in an insurance context?

    <p>Guaranteed true statements by the applicant</p> Signup and view all the answers

    What are representations in an insurance context?

    <p>Believed true statements that are not part of the contract</p> Signup and view all the answers

    What is concealment in insurance?

    <p>Withholding of relevant information by the applicant</p> Signup and view all the answers

    Study Notes

    Life Insurance

    • Agreement for the insurer to pay a predetermined amount, known as the face amount or benefit.
    • Premium paid by the insured serves as consideration for this agreement.

    Health Insurance

    • Insurer pays a portion of the insured's medical expenses in exchange for premiums.
    • The benefit is typically a percentage of the total medical bills incurred.

    Elements of a Valid Contract

    • Consideration: Insured pays premium as consideration; insurer promises to pay benefits.
    • Legal Purpose: Must comply with laws and public policy.
    • Offer and Acceptance: Contract initiates when the applicant submits an application and initial premium.
    • Competent Parties: All parties must be of legal age and mentally capable, free from undue influence.

    Contract of Adhesion

    • Prepared solely by the insurer, leaving no room for negotiation.
    • Insured must accept or reject the entire contract, favoring the insured in case of ambiguities.

    Aleatory Contract

    • Involves unequal exchange; premiums paid are minimal compared to potential benefits.
    • Example: A $50 premium can result in a $50,000 benefit, highlighting the contract's gamble.

    Unilateral Contract

    • Legally binding only on the insurer to pay claims.
    • Insured has no concrete obligation to make future premium payments but risks cancellation for non-payment.

    Personal Contract

    • Insurance contracts are typically personal and non-transferable without the insurer's consent.
    • Life insurance allows policy transfers, as the owner’s identity does not affect risk assumptions.

    Conditional Contract

    • Benefits are contingent on certain conditions being met, necessitating events covered by the contract.

    Valued vs. Indemnity Contracts

    • Life insurance is valued; it pays a specific amount upon loss.
    • Health insurance is an indemnity; it reimburses actual medical expenses, adhering to the Principle of Indemnity to prevent profit from the loss.

    Utmost Good Faith

    • Requires transparency from both parties to avoid misrepresentation or fraud.
    • Full and honest disclosure of risks is essential, along with accurate policy explanations by agents.

    Warranties

    • Statements guaranteed to be true by the applicant, forming part of the contract.
    • Misrepresentation of warranties can lead to contract revocation.

    Representations

    • Statements believed to be true by the applicant; they are not part of the contract.
    • Need to be true only as they materially relate to the risk involved.

    Concealment

    • Withholding crucial information from the insurer can impact the contract validity (e.g., not disclosing smoking habits or medical conditions).

    Studying That Suits You

    Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

    Quiz Team

    Description

    This quiz focuses on key legal concepts related to insurance contracts as covered in Chapter 2 of the XCEL study materials. It includes essential terms such as life insurance and health insurance, helping learners understand the principles and elements involved in these contracts.

    More Like This

    Life Insurance Contracts Assignment Quiz
    11 questions
    Life & Health Insurance Flashcards
    40 questions
    Life/Health Chapter 4 Flashcards
    30 questions
    Life Insurance Contracts Quiz
    31 questions
    Use Quizgecko on...
    Browser
    Browser