The Principal-Agent relationship which is governed by law, is one between the:

The Principal-Agent relationship which is governed by law, is one between the:

• A. Agent and the insured.
• B. Agent and the insurer.
• C. Contract between the agent and insured.
• D. Has no legal binding by law.

Answer: (B)

In insurance law, a principal-agent relationship is formed when the insurer hires an agent to act on its behalf. The insurer is the principal, and the agent is the representative empowered to solicit, bind, and service policies. This relationship is created by an agency agreement and governed by law, with the agent owing duties to the insurer and the insurer liable for the agent’s actions within the scope of that authority. The insured interacts with the agent as an intermediary, but the legal relationship of agency exists between the insurer and the agent, not between the agent and the insured. The actual contract of insurance is between the insurer and the insured.

In insurance law, a principal-agent relationship is formed when the insurer hires an agent to act on its behalf. The insurer is the principal, and the agent is the representative empowered to solicit, bind, and service policies. This relationship is created by an agency agreement and governed by law, with the agent owing duties to the insurer and the insurer liable for the agent’s actions within the scope of that authority. The insured interacts with the agent as an intermediary, but the legal relationship of agency exists between the insurer and the agent, not between the agent and the insured. The actual contract of insurance is between the insurer and the insured.