Legal Concepts - Ch. 3

Question 1

Adhesion Contract

Answer 1

“take it or leave it” contract with no room for negotiation

Question 2

Aleatory Contract

Answer 2

Contract involving an uneven exchange between parties contingent on specific events happening.

Question 3

Apparent Authority

Answer 3

The perception that the insurer has given the agent the authority to perform tasks
not specifically outlined in their agreement, based on their working relationship.

Question 4

Concealment

Answer 4

The act of failing to reveal a material fact that is known to the applicant during the insurance application process.

Question 5

Consideration

Answer 5

The provision of the contract for insurance that outlines the initial and renewal premiums, as well as the frequency of payments.

Question 6

Estoppel

Answer 6

Prevents one party from denying the consequences of their own actions if those
actions lead another party to act in a certain way

Question 7

Indemnity Contract

Answer 7

Contracts that aim to restore the insured to the financial position they held before a loss
occurred.

Question 8

Parol Evidence Rule

Answer 8

Once an agreement is put into writing, all prior verbal agreements are considered merged into that writing, and oral statements cannot alter the written contract.

Question 9

Policy Rider or Policy Endorsement

Answer 9

An amendment to an insurance contract

Question 10

Subrogation

Answer 10

The insurer’s right to seek compensation from a third party responsible for
causing a loss

Question 11

Unilateral Contract

Answer 11

Only one party, the insurer, makes a binding promise

Question 12

Valued Contract

Answer 12

A contract that pays a predetermined amount regardless of the actual financial loss

Question 13

Voidable Contract

Answer 13

An agreement that one party may legally void or cancel under certain conditions, as deemed acceptable by a court

Question 14

Waive

Answer 14

Voluntarily relinquish a legal right

Question 15

Warranty

Answer 15

A statement by the applicant that must be entirely accurate. If proven false, it can result in the contract being invalidated.

Question 16

4 Essential Elements of an Insurance Contract

Answer 16

1. Offer & Acceptance
2. Consideration (Exchnge of value)
3. Legal Purpose
4. Competent Parties

Question 17

2 Primary Parties involved in an Insurance Contract

Answer 17

The applicant & the Insurer

Question 18

Tort Law

Answer 18

Governs civil wrongs and aims to compensate victims of negligence or intentional acts