Washington State Insurance Practice Exam

Which term describes the authority a principal intends to grant to an agent by means of the agent's contract?

1. Apparent Authority

2. Implied Authority

3. Express Authority

4. Actual Authority

The correct answer is: Apparent Authority

The term that describes the authority a principal intends to grant to an agent by means of the agent's contract is "Express Authority." Express Authority is the clear and direct instructions given by the principal to the agent regarding the scope of their authority. It is explicitly stated and agreed upon in the agent's contract. In contrast: - Apparent Authority refers to authority that a principal has not actually granted but that a reasonable third party would assume the agent possesses. - Implied Authority is understood as the authority that the agent may assume is necessary to carry out their express authority effectively. - Actual Authority is the real authority that the principal has granted to the agent, which includes both express and implied authority.