Fundamental Legal Principles (Unit 4 Exam)

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

• replacement cost less depreciation
• Replacement cost ($1000) - Depreciation ($500)= $500

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

• the determination of actual cash value should include all relevant factors an expert would use to determine the value of the property
• - relevant factors include replacement cost less depreciation, fair market value, present value of expected income from the property, comparison sales of similar property, opinions of appasiers, and numberous other factors

• -valued policy
• -valued policy laws
• -replacement cost insurance
• -life insurance

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

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

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

this is not a contract of indemnity but is a valued policy that pays a stated sum to the beneficiary upon the insured's death

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

• -to prevent gambling
• -to reduce moral hazard
• -to measure the amount of the insured's loss in property insurance

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

even when there is no relationship by blood or marriage, one person may be financially harmed by the death of another

• -prevents the insured from collecting twice for the same loss
• -used to hold the negligent person responsible for the loss
• -helps to hold down insurance rates

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

• -representations
• -concealment
• -warranty

statements made by the applacants for insurance

if the insurer knew the true facts, the policy would not have been issued, or it would have been issued on different terms

if this is relied by the insurer, this makes the contract voidable. This is unintentional

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

the applicant for insurance makes the offer, and the company accepts ot rejects the offer

a temporary contract for insurance and can be wither writen or oral

if the applicant is found insurable according to the insurer's normal underwriting standards, the life insurance becomes effective as of the date of the application

the value that each party gives to the other

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

an insurance contract that encourages or promotes something illegal or immoral is contrary to the public interest and cannot be enforced

• -aleatory contract
• -unilateral contract
• -conditional contract
• -personal contract
• -contract of adhesion

a contract where the values exchanged may not be equal but depend on an uncertain event

the values exchanged by both parties are theoretically equal

only one party makes a legally enforceable promise

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

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

the contract is between the insured and the insurer

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

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 conspicious, plain, and clear

• -express authority
• -implied authority
• -apparent authority

powers specifically conferred on the agent

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

if an agent acts with this 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

the voluntary relinquishment of a known legal right

occurs when a representation of fact made by one person to another person is reasonably relied on by that person to such an extent that it would be inquitable to allow that first person to deny the truth of the representations

• -the ownership of property
• -potential legal liability
• -secured creditors
• -contractual rights

at the time of lose

at the inception of the policy

the insured generally must be fully restored before the insurer can retain any sims collected form the negligent third party

do anything that might impair the insurer's subrogation rights. However, the insurer can waive it's subrogation rights in the contract either before or after the loss

life insurance contracts and to most individual health insurance contracts

• -there must be an offer and acceptance
• -consideration must be exchanged
• -the parties to the contract must be legally competent
• -the contract must be for a legal purpose

• -there is no presumptions of an agency relationship
• -an agent must have the authority to represent the principal
• -a principal is responsible for the actions of agents acting within the scope of their authority
• -limitations can be placed on the powers of agents

an insurer may be required to pay a claim that it ordinarily would not have to pay