Chapter 9 Vocab (Text) Flashcards Preview

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

Principle of Indemnity

A

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
Q

Actual Cash Value

A

replacement cost less depreciation

3
Q

Fair Market Value

A

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

4
Q

Broad Evidence Rule

A

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

5
Q

Valued Policy

A

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

6
Q

Valued Policy Law

A

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
Q

Replacement Cost Insurance

A

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

8
Q

Principle of Insurable Interest

A

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

9
Q

Pecuniary Interest

A

the insurable interest requirement in life insurance can be met

10
Q

Subrogation

A

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
Q

Principle of Utmost Good Faith

A

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

12
Q

Representations

A

statements made by the applicant for insurance

13
Q

Innocent Misrepresentation

A

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

14
Q

Concealment

A

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

15
Q

Warranty

A

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

16
Q

Offer and Acceptance

A

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
Q

Binder

A

temporary contract for insurance and can be either written or oral

18
Q

Consideration

A

the value that each party gives to the other

19
Q

Legally Competent

A

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

20
Q

Commutative Contract

A

the values exchanged y both parties are theoretically equal

21
Q

Unilateral Contract

A

means that only one party makes a legally enforceable promise

22
Q

Conditional Contract

A

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

23
Q

Conditions

A

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

24
Q

Personal Contract

A

the contract is between the insured and the insurer

25
Q

Contract of Adhesion

A

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

26
Q

Principle of Reasonable Expectations

A

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
Q

Express Authority

A

refers to powers specifically concerned on the agent

28
Q

Agency Agreement

A

agreement between the agency and the principal

29
Q

Implied Authority

A

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

30
Q

Apparent Authority

A

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
Q

Waiver

A

defined as the voluntary relinquishment of a known legal right