Insurance Broker Certification Practice Exam

Which type of authority is specifically granted to an agent through their contract?

1. Implied authority

2. Express authority

3. Apparent authority

4. General authority

The correct answer is: Express authority

The type of authority that is specifically granted to an agent through their contract is express authority. This authority is directly outlined and stated within the written agreement between the agent and the principal. It clearly defines what the agent is allowed to do on behalf of the principal, including the scope of actions, responsibilities, and limitations. Express authority is important because it creates a clear understanding of the agent's power, ensuring that both parties have a mutual comprehension of the agent's role in conducting business. This type of authority is established through explicit instructions in the contract, making it recognizable and enforceable. In contrast, implied authority includes powers that are not explicitly stated but are necessary to fulfill the duties outlined in the express authority. Apparent authority refers to the perception of power an agent has to third parties based on the principal's representations. General authority typically relates to certain standard powers granted to an agent in a regular business setting, but it does not encompass the specifics laid out in a contract as express authority does.