Parol evidence rule

MR. WATSON: Which supersedes the other: A written contract or a spoken contract? Parol evidence rule means written comes before the spoken. So you can’t amend, or change, a written contract with parole evidence, which is spoken evidence, like a handshake deal.  If we have a deal in writing and then change something about it and only do a handshake - if we end up fighting in court about it, the judge is going to base the decision on the written agreement and the handshake won’t matter.

 

Suicide ****

MR. WATSON: Suicide. If I commit suicide within the first two years, what will the company pay?

STUDENTS: Nothing.

MR. WATSON: Nothing is the wrong answer.

STUDENTS: Zero.

MR. WATSON: Oye. This is important. Say it.

WOMAN: Void the policy, & give you back your premiums that you paid in.

MR. WATSON: Even a blind hog finds an acorn every once in a while, huh? If you commit suicide within first two years what will the company do?

ALL: Void the policy & return your premiums.

MR. WATSON: But, if you had the policy longer than years?

ALL: They pay the death benefit.

 

Incontestable Clause (Fraud) ***

MR. WATSON: The insurance company will challenge your statements within the first two years of the contract. They will challenge your statements if you die within the first two years. After two years they can't challenge your statements. Policies are incontestable after two years.

MR. WATSON: Let me give you an example. Here’s Josh. Josh has diseases they don't have names for.

MR. WATSON: Two years ago I sold him a life insurance policy. He lied to almost every question asked on the application. I said, "How is your health?"

MR. WATSON: He said, “Good.” I said, “Any health problems?” He said, “No, I'm Good.”

MR. WATSON: He's lying. He signs the application. Two years goes by and he dies. Will the company pay? Yes. We can't challenge the statements after two years. Policies are incontestable after two years. More later on this.

MAN: Is there ever a policy that you can do something and they pay nothing?

MR. WATSON: Yeah. If something was excluded or if you lied (fraud) and you die within two years, we will challenge your statements. Fraud. Right? We will say, “Heavens no, we’re not paying. This guy lied. It was material fact, so we would return the premiums.

MR. WATSON: Fraud means the applicant intentionally lied on the application about a material fact.  It’s a material misrepresentation with intent to deceive.  So the applicant lied on the application about a material fact, and they lied on purpose.

MR. WATSON: Be very careful about the definition of fraud, because you need to know it for the exam. It’s not an agent stealing someone’s premium or anything like that. It’s a material misrepresentation with intent to deceive.  So if the insurance company discovers fraud (lying about material facts on the insurance application) within the first two years of the policy, they will void the policy and refund all premiums.

MAN: Never a situation that they keep the premiums.

MR. WATSON: No, because it's a void contract, and they return the premiums. Very good. This is how you learn. We talk. It's not me lecturing. We talk. We are on the same playing field.

MAN: For example, you apply for life insurance, and you told us you were 35. You died within two years, and then we find out that you are 50. So we pay but we adjust the benefits.

MR. WATSON: That's my boy. Because we can't deny the claim because of your age or your sex, or where you live, or whether you are married or not married. Drug addiction or health, things like that, we can deny the claim.

 

Void vs Voidable

MR. WATSON: What's the difference between "void " and "voidable"?

STUDENT: Void is more concrete and means it's no good; and voidable can be no good down the road?

MR. WATSON: That's very good. If you write "void " on a check, it is no good. Correct? "Void " does not exist. A void contract is one that is not in effect, so you really don’t have a contract at all. Voidable contracts can be made void under certain conditions in the future.  So a voidable contract is one that is currently effective - but it may be voided in the future. Voidable contracts can be made void under certain conditions.

 

Know this chapter. Call, text, or email if you have any questions. After 45 years of training folks like you I promise you this license can and will change your lives financially and provide you the ability to help other folks.

 

Once again, in case you didn't download these review notes at the beginning of the chapter, here they are again.