XCEL Chapter 3 Flashcards

Insurance Contract Elements

• Insurable interest is a vital component of legal purpose within a contract.
• Consideration in an insurance contract is when each party gives something of value to one another.

Unilateral Contracts

• An insurance policy is classified as a unilateral contract because only the insurer is obligated to fulfill the contract terms.

Authority in Insurance

• Licensed producers derive authority through the Law of Agency, which defines their relationship with the insurer.
• Implied authority allows agents to undertake actions that are not explicitly stated but necessary to fulfill their roles.

Legal Purpose in Contracts

• Legal purpose requires lawful reasons for entering into a contract.

Elements of an Insurance Policy

• Key components include definitions, other insurance, and conditions, while claim forms are not considered a formal element.

Insurable Interest in Life Insurance

• Insurable interest must exist at the time of application, ensuring a legitimate stake in the life or health of the insured.

Relationships and Insurable Interest

• Insurable interest cannot occur between a business owner and a business client, unlike familial relationships or partnerships.

Nature of Contracts

• Aleatory contracts highlight the concept of unequal value exchange between parties, emphasizing the unpredictable nature of outcomes.

Policy Proceeds Distribution

• In a case where partners in a dissolved business have life insurance policies on each other, the surviving partner will receive the policy proceeds.

Role of Insurance Carriers

• Insurance carriers are responsible for assembling policy forms necessary for the insureds.

Contract of Adhesion

• A contract of adhesion mandates that the insured must accept or reject the terms entirely, leading to potential imbalances in agreements.

Conditional Insurance Contracts

• These contracts stipulate that specific conditions or actions must be fulfilled by the insured for effectiveness.

Authority Classifications

• The written authority granted by the principal to the agent is termed express authority, distinguishing it from implied and apparent authority.

Test your knowledge of key concepts from XCEL Chapter 3! This quiz focuses on the components of insurance contracts including insurable interest, legal purpose, and consideration. It's perfect for students preparing for their insurance exams.