Life & Health Insurance Practice Exam 2025 – Your All-in-One Guide to Exam Success!

Implied authority refers to the power granted to an agent that is not explicitly stated in the agency agreement but is necessary for the agent to perform their duties effectively. This type of authority arises from the nature of the agent's role and the typical activities associated with that role.

For instance, while an agency contract may outline specific tasks the agent is responsible for, there are routine responsibilities that generally accompany those tasks, such as communicating with clients, processing paperwork, or making minor decisions necessary to facilitate a transaction. These activities are understood to be part of the agent’s job, even if they are not detailed in the contract.

This concept is particularly important in insurance, where agents must respond quickly to client needs and manage ongoing relationships. Implied authority helps agents navigate day-to-day operations and maintain efficient service to clients without needing explicit permission for every minor action they take.

In contrast, express authority would be clearly defined in the agency agreement, outlining specific powers granted to the agent. General authority typically refers to broader powers sometimes discussed within corporate hierarchy and is less common in the agency context. Agent authorization is not a standard term related to types of authority in agency agreements.