Policies are contracts
governed by contract law: 1. proposal (offer) 2. approval (acceptance) 3, Monies exchanged (consideration) 4. lawful reason for contract (legal purpose) 5. All parties to contact must be capable & adept (competent parties)
Misrepresentation (false info)
For company to void a contract the info in question must be material to the decision to extend coverage.
Concealment
The insurer must prove the applicant willfully & intentionally concealed info of a material nature.
impersonation or false pretense
Having a someone present to be you, also a form of fraud.
Parol (or Oral) Evidence Rule
limits effects of oral statement b/f contract execution, anything written is held - everything stated should be listed there.
Consideration
Completed application, premium payment made by applicant & accepted by insurer is known as such.
Right of assignment
Policyowner can give the policy to another w/written notice to the insurer (contract transfer)
Aleatory
unequal contingencies for loss/profit for both parties
$ values exchanged aren't equal, element of chance for both parties.
Commutative
Dollar values ARE equal
Adhesion
Contract of adhesion is prepared by the INSURER rather than by negotiation btwn the contracting parties.
Agent prohibited form negotiating
Unilateral
Only the insurance company that pledges anything. Only the policyowner can terminate the policy @ any time, prohibits the insurer from doing so (unless premiums aren't paid)
Bilateral Contract
Both parties (insured and insurer) make legally enforceable promises.
Valued contracts
pays a predetermined amount.
Called a contract of Utmost good faith
Indemnity contracts (reimbursement contracts)
***Look into this further, doesn't make sense to me****
Pay loss amount only amount necessary to rtn insured to same position they were b/f the loss, up to policy limit.
Insurable Interest
must have a valid $ interest to person or thing insured at time of purchase.
Consent of the insured person is required! (w/o considered a bet/wager)
Estoppel
**Look into further, unclear**
Precludes a person from asserting something contrary to what is implied by a previous action or statement of that person, or by a previous pertinent judicial determination.
Constructive Policy Delivery (or Attornment)
Approved policy delivered to policy hold by any means (agent, mail, etch)
Agent Delivery ("free-look" period begins)
(steps that must complete)
1 Deliver policy (physically, mail, email or "e-signature") 2. Collect initial premium 3. Explain policy rating, provisions & riders 4 Get statement of good health from policy holder 5 Get signed delivery receipt.
Collecting the Initial Premium
(must by Agent)
If not received w/application, must get when policy is delivered. Policy only b/c effective on the initial premium payment.
Explaining Provisions, Riders & Rating
Explain what it covers, provisions attached, riders or benefits that wasn't originally there.
Riders: additional benefits or benefits company took/limited
Rating: explain as it affects the premium
Verification of Insured's Medical Condition
(agency duty)
- no changes since application (obtain a statement of good health from policyholder)
**If significant changes the agent must rtn policy to company, they will examine again & adjust.
Delivery Receipt
(agent must)
Get a signed delivery receipt from policy holder
Deliver it to the insurance company
Policy Summary or Declarations Page
(Agent must)
Usually the 1st page (list the terms, conditions info, benefits info, coverage limits, cost & premiums.) Required to be delivered
Conditional Receipt
Company has "window of time" they can issue or refuse to approve policy. If during that time a claim is filed, company will pay a benefit if it would have been issued. If initial premium paid for policy that doesn't require medical exam, applicant is covered immediately. (doesn't make sense)