Requirements of an Insurance Contract
Offer and acceptance : aaron aplies 10000 life . tomorrow noon , he is killed. so he will paid 10000
Consideration :the value that each party gives to the other
Competent parties : legal capacity to enter into a binding contract
legal purpose:no contract purpose against illegal public
principle utmost good faith
A higher degree of honesty is imposed on both parties to an insurance contract than is imposed on parties to other contracts
1. Representations : statements made by the applicant for insurance.A contract is voidable if the representation is material, false, and relied on by the insurer.
2.A concealment : intentional failure of the applicant for insurance to reveal a material fact to the insurer
3. A warranty : statement of the insurance contract and is guaranteed by the maker . for example , bank guaranty guard for 24 hours a day . business warrant automatic sprinkler system working.
Actual Cash Value
principle subrogation
Replacement cost less depreciation : Current cost restoring damaged property with new material quality. Deduction for physical wear, tear, age and economic obsolence
Substitution insurer in place of the insured for the purpose of claiming indemnity from a third party for a loss covered by insurance.
Fair market value: Price willing buyer would pay a willing seller in free maket.
For example, car insurance 20000 and actual loss 5000. So court ruled on fair market 5000 or rather than 20000 can be claim.
For example. megan could to collect from directly from negligence motorist. so she do not have to collect from insurer.
1. to prevent insured collecting same loss.
2. to hold negligence responsible
Broad evidence rule: To property insurance, actual cash value is used .
In liability insurance, insurer pays up policy limit amount damage.
principle of indemnity
Fundamental Legal Principles
The insurer agrees to pay no more than the actual amount of the loss,
1. The insured should not profit from the loss.
2. To reduce moral hazard
principle insurable interest
insured must stand to lose financially if loss occur .
1. prevent gambling: you could insured property and hope loss to occur
2. reduce moral hazard : dishonest person could purchase property insurance and cause loss to receive proceed.
3.measure amount of loss :
Exception Principle Indemnity
When must insurable interest exist?
Property insurance: at the time of the loss
Life insurance: only at inception of the policy
1. Ownership of property:
2. Potential legal liability:
3. secured creditor:
4. Contractual rights: business firm contract to purchase good condition when they arrive safe in US because loss profit if car not arrive
Law and the Insurance Agent
Legal Characteristics of Insurance Contracts
1. Value Policy: Pay the face amount insurance if total loss occur.
For example, 10000 insured for clock, you can claim 10000 too when fire
2. Value Policy Law: Payment face amount insurance to insured from peril specified law.
For example, home 20000 may 15000 actual loss. if loss occur, 20000 willl be paid
3. Replacement Cost Insurance : No deduction for depreciation in determine amount paid loss . for example, BMW useful about 20 years. The current cost 70000. Under cash value, you would receive 50000(70000-20000). but you would receive 70000.
4. Life Insurance Contract: Value policy pay some to benificiary upon insured death
for example, determine value human life.
1. There is no presumption of an agency relationship : agent someone who authority to act half principal.
2. agent must be authorized to represent the principal: power specially conferred on agent
3. principal is responsible for the acts of agent: knowledge an agent
4. Limitations can be placed on the powers of agents
1. Aleatory: agreement under party provide values to anothe party exchanged condition
2. Unilateral: only the insurer makes a legally enforceable promise
3. Conditional: policy owner must comply with all policy provisions to collect for a covered loss
4. Personal: contract between insured and insurer
5. contract of adhesion: contract prepared by one party that must be accepct or rejected by whole party.