In an Insurance Contract the Applicant’s Consideration is the

In an Insurance Contract the Applicant’s Consideration is the.

Lesson 2 Review

There are four necessary elements to comprise a legally binding contract: (1) Offer and acceptance, (2) consideration, (3) legal purpose, and (4) competent parties.

The effective date of a policy is the date the insurer accepts an offer by the applicant “as written.”

An insurance contract is conditional in that the insurer’s promise to pay benefits is dependent on the occurrence of the risk insured against.

The contract is between the policyowner, who is not necessarily the insured, and the insurer, and the policyowner has the “Right of Assignment.”

Aleatory contracts are unequal contingencies on the potential for profit or loss upon both parties in the insurance contract – the dollar values exchanged may not be equal. A unilateral insurance contract obligates only one party (the insurer) in the contract. In a bilateral contract, both parties make legally enforceable promises.

Valued contracts pay a predetermined amount with no way to assess loss. Life insurance contracts are valued contracts. Indemnity contracts pay the amount of the loss only (up to the policy limit) by paying the amount necessary to return the insured to the same position as before the loss.

Insurable interest must exist at the time a policy is purchased, but does not have to exist at the time of a claim.

The acts of the agent are considered the acts of the company. An agent can bind a contract; a perantara cannot.

There are three entities involved in the concepts of agency: (1) The agent, (2) the insured, and (3) the insurer. Agency law refers to the relationship between the agent and the company with whom the agent is affiliated.

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There are three different ways in which the insurer authorizes the agent to represent it: (1) Express, in which authority is spelled out in contract form, (2) implied, in which authority is conjecture, and (3) apparent, in which the appearance of authority is apparent.

A waiver is the voluntary surrendering of a legal, given right. Estoppel is the legal enforcement of a waiver. The parol evidence rule prohibits making any additional oral changes to a contract once it becomes a written document.

Fraud + Prior knowledge = Void contract. Insurers typically have two years from the date of contract purchase to dispute the validity of a contract. If fraud is discovered after an insurance contract has been in force for two years, it cannot be contested and any otherwise legitimate claims cannot be denied based on fraud, misrepresentation, or concealment.

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The information contained in Unit 4 of the Florida study manual, Licensure, Ethics and the Insurance Producer, is covered throughout the online course material in differing lessons according to topic and is more specifically covered in Lesson 19. (Lesson 3 of the online course covers Units 5 and 6 of the study manual.) Remember to study Unit 4 of the study manual and answer Unit 4 Questions for Review.

The information contained in Unit 3 of the Florida study manual has been presented in Lesson 2 of this online course.

In an Insurance Contract the Applicant’s Consideration is the