Chapter 9 Vocab (Text) Flashcards Preview

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Flashcards in Chapter 9 Vocab (Text) Deck (31):
1

Principle of Indemnity

states that the insurer agrees to pay no more than the actual amount of the loss; state differently, the insured should not profit from a loss

2

Actual Cash Value

replacement cost less depreciation

3

Fair Market Value

the price a willing buyer would pay a willing seller in a free market

4

Broad Evidence Rule

the determination of actual cash value should include all relevant factors an expert would use to determine the value of the property

5

Valued Policy

policy that pays the face amount of insurance if a total loss occurs

6

Valued Policy Law

law that exists in some states that requires payment of the face amount of insurance to the insured if a total loss to real property occurs from a peril specified in the law

7

Replacement Cost Insurance

there is no deduction for physical depreciation in determining the amount paid for a loss

8

Principle of Insurable Interest

the insured must be in a position to lose financially if a covered loss occurs

9

Pecuniary Interest

the insurable interest requirement in life insurance can be met

10

Subrogation

the substitution of the insurer in place of the insured for the purpose of claiming indemnity from a third party for a loss covered by insurance

11

Principle of Utmost Good Faith

a higher degree of honesty is imposed on both parties to an insurance contract than is imposed on parties to other contracts

12

Representations

statements made by the applicant for insurance

13

Innocent Misrepresentation

a misrepresentation that is unintentional; if it is relied on by the insurer, it also makes the contract voidable

14

Concealment

intentional failure of the applicant for insurance to reveal a material fact to the insurer

15

Warranty

a statement that becomes part of the insurance contract and is guaranteed by the maker to be true in all respects

16

Offer and Acceptance

The first requirement of a binding insurance contract; in most cases, the applicant makes the offer and the company accepts or rejects the offer

17

Binder

temporary contract for insurance and can be either written or oral

18

Consideration

the value that each party gives to the other

19

Legally Competent

the parties must have legal capacity to enter into a binding contract

20

Commutative Contract

the values exchanged y both parties are theoretically equal

21

Unilateral Contract

means that only one party makes a legally enforceable promise

22

Conditional Contract

the insurer's obligation to pay a claim depends on whether the insured or the beneficiary has complied with all policy conditions

23

Conditions

provisions inserted in the policy that qualify or place limitations on the insurer's promise to perform

24

Personal Contract

the contract is between the insured and the insurer

25

Contract of Adhesion

the insured must accept the entire contract, with all of its terms and condiitons

26

Principle of Reasonable Expectations

an insured is entitled to coverage under a policy that he or she reasonably expects it to provide, and that to be effective, exclusions or qualifications must be conspicuous, plain, and clear

27

Express Authority

refers to powers specifically concerned on the agent

28

Agency Agreement

agreement between the agency and the principal

29

Implied Authority

refers to the authority of the agent to perform all incidental acts necessary to fulfill the purposes of the agency agreement

30

Apparent Authority

If an agent acts with ______ to do certain things, and a third party is led to believe that the agent is acting within the scope of reasonable and appropriate authority, the principal can be bound by the agent's actions

31

Waiver

defined as the voluntary relinquishment of a known legal right