ch50

West's Business Law with Online Research Guide, 9th Edition

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INSURANCE: TERMINOLOGY Insurance Policy: A contract in which, for a stipulated consideration, one party (the insurer , or underwriter ) agrees to compensate the other (the insured ), or the other’s heirs or assigns, for a particular, stated loss. Risk Pooling: Insurance is premised on spreading the risk of loss among a large number of people, reducing the premium that any one person must pay to afford the coverage offered. Premium: The price paid by the insured to the insurer for a policy of insurance for a specified period of time. Insurable Interest: An interest either in a person’s life or well-being or in property that is sufficiently substantial that insuring against injury to or the death of the person or against damage to the property protects against the loss of reasonably expected benefits. An insurable interest in someone’s life or health must exist at the time the policy takes effect . An insurable interest in property must exist at the time the loss occurs . Ch. 50: Insurance - No. 1 West’s Business Law (9th ed.)
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FORMING THE INSURANCE CONTRACT Application: The insurance application is generally made a part of the contract if and when a policy issues; therefore, the applicant is bound by any false statements or misinformation in the application, which may void the policy if discovered. Effective Date: As a general rule, coverage does not begin until a policy is issued by the insurer, unless the insurer’s agent issues a binder – a temporary policy in effect from the application date until the date the policy issues or is denied. It is important to distinguish between an insurer’s authorized agent , who has the authority to bind the insurer, and a third-party broker , who does not. If the broker fails to procure a policy for the applicant, the applicant has a claim against the broker, not the insurer. An applicant who seeks coverage from an agent of the insurer is typically covered against losses that occur while the application is pending. Ch. 50: Insurance - No. 2 West’s Business Law (9th ed.)
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If the parties agree that the insurance will be issued at some later date, any loss sustained in the interim is not covered. Ch. 50: Insurance - No. 3 West’s Business Law (9th ed.)
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THE INSURANCE POLICY - PT. I The heart of an insurance policy is the coverage afforded, as limited by the various exclusions and exceptions in the policy. Incontestability Clause:
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ch50 - INSURANCE: TERMINOLOGY Insurance Policy: A contract...

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