Define These Insurance Policy Flashcards

It is a legally enforceable agreement between two or more parties.

In an individual contract, the parties are the insurance co. that issued the policy and the individual who owns it. In a group contract, the parties are the insurer that issued the policy and the group policyholder, which is the person who decides what type of group coverage there will be.

A formal contract is one that is enforceable because the parties to the contract met certain formalities concerning the form of the agreement. They must be in writing and that the written document contains some form of seal. An Informal contract is also enforceable but can either be in writing or an oral agreement and the parties must meet requirements as to the substance of the agreement rather than the form of the agreement. Life and Health Ins. Contracts are informal.

A unilateral is a contract when one party makes legally enforceable promises when the parties enter into the contract. Ex: An Insurance policy. A bilateral is if both parties makes legally enforceable promises when they enter into a contract. Ex: You contract with someone to mow your lawn and pay them. Two people for a deal and agree.

Commutative is similar to bilateral - this is where two people enter an agreement and the parties specify in advance the values that will be exchanged. In an aleatory contract, one party provides something of value to another party in exchange for a conditional promise. Ex: An Insurance Co. promises to pay death benefits in the event the insured dies.

A bargaining contract is one which both parties, as equals, set the terms and conditions of the contract. Life and Health Ins. policies are contracts of adhesions because one party prepares the contract and the other party simply accepts or rejects the contact as a whole, without bargaining.

1. Parties must have agreed to the terms of the contract. 2. Must have contractual capacity 3. Must have legally adequate consideration. 4. Contract must be for a lawful purpose.

Valid satisfies all legal requirements and is enforceable by law. Void is one that does not satisfy one or more of the legal requirements and is never enforceable by law. Voidable is one in which a party has the right to avoid the obligation without incurring legal liability.

Each person must have legal capacity to make a contract - the insurance co. must have the legal capacity to issue a policy just as the applicant must have the legal capacity to purchase the policy. Minors and individuals lacking mental capacity are limited. The age of majority differs from age 16 in some countries to 21 in others. In the U.S. and Canada, the age is 18.

Having Consideration means that each must give or promise something that be of value to the other party. Ex: The Ins. co. gives a policy and the other party pays an initial premium. Renewal premiums are a condition to continue coverage and are not a consideration for the policy.

An assurance that a life or health ins. policy contract is being made to protect a party against financial loss, rather than just speculating on a life or profiting from ill health. It is to protect against financial loss and not for profit.

Real property is land and whatever is growing on or affixed to that land. All property other than real property is considered to be personal property - like furniture, clothing, and cars. These are considered as tangible goods. An insurance policy is intangible personal property.