South Carolina Life Insurance Practice Exam

What are the three types of agent authority?

1. Implied, Express, and Competent

2. Implied, Express, and Apparent

3. Express, Absolute, and Implied

4. Authorized, Implied, and Apparent

The correct answer is: Implied, Express, and Apparent

The three types of agent authority are Implied, Express, and Apparent. Express authority is the specific authority given to an agent through explicit language or written agreements, where the principal clearly states the powers granted to the agent. This is the authority that is directly communicated to the agent, outlining the responsibilities and limits of their role. Implied authority refers to powers that are not explicitly stated but are necessary for the agent to carry out their duties effectively. This type of authority arises from the nature of the agent's position or the circumstances of the engagement, allowing them to perform actions that, while not directly mentioned, are understood to be necessary to fulfill their express duties. Apparent authority occurs when a third party reasonably believes that the agent has the authority to act on behalf of the principal based on the principal's representations. This form of authority helps in protecting the interests of third parties who rely on the outward appearances of authority conferred by the principal. In summary, the identification of these three types of authority is crucial for understanding the dynamics of agency in life insurance and other fields, ensuring that the rights and responsibilities of both agents and principals are upheld.