C81 General Insurance Essentials Vol. 1

Front 1

Actual Cash Value

Back 1

The current cost of replacing an article with a similar one in the same condition.

Front 2

Agent

Back 2

Act as intermediary and assist in bringing the insurer and insured together in a contractual relationship by arranging the insurance contract.

Front 3

Application

Back 3

Request for insurance. Can be oral or written.

Front 4

Binder

Back 4

An oral or written confirmation that insurance coverage is in effect. A binder usually includes the name and address of the insured, details of the risk, and amount of coverage,

among other things.

Front 5

Bodily Injury

Back 5

Refers to any claims resulting from injury to or death of persons other than the insured as defined in the policy.

Front 6

Broker

Back 6

An individual or firm that acts as an intermediary and assists in arranging contracts of insurance between insurers and clients.

Front 7

Collateral Benefits

Back 7

Any sources of entitlement outside of the automobile policy.

Front 8

Consideration

Back 8

Consideration is what one party gives or promises to give in exchange for the act or promise of the other party to the contract.

Front 9

Contract

Back 9

An agreement enforceable at law, which sets out in detail the arrangements between insured and insurer concerning premiums, the contingency insured against, and the manner and method of settling losses.

Front 10

Cover Note

Back 10

A notice and confirmation to the insurer that he or she has been bound to a contract of insurance. It is a document issued by an agent or broker confirming to the insured that insurance is in effect; similar to a binder. Binders and cover notes tend to be interchangeable.

Front 11

Deductible

Back 11

The amount of a loss that the insured must pay himself.

Front 12

Express Contract

Back 12

A contract in which the terms of the arrangement have been specifically stated and agreed to by both parties either orally or in writing.

Front 13

General Conditions

Back 13

Statutory in nature in that provincial legislation sets out the subject matter that must be covered by these conditions although it does not specify the exact words that must be used.

Front 14

Gross Negligence

Back 14

Reckless, wanton, and willful misconduct where the standard of due care of a reasonable and prudent person has been ignored by such a shockingly wide margin that it reflects an indifference to the natural and probable consequences and almost amount to an intentional act.

Front 15

Hazard

Back 15

A condition that may cause a peril to occur or make the loss more severe.

Front 16

Highway Victims Indemnity Fund

Back 16

Highway victims indemnity funds ensure that innocent victims are compensated

· Set up in all Canada – AB, BC, Man, ON, Sask have govn’t operated funds, NB, Nfld, NS, PEI are compensated by Facility Association when they are not covered by section D of their auto policy

· Quebec the Fonds d’indemnisation is administered by the Societe de l’assurance due Quebec

· The fund steps in as though it were an insurer providing the min liability limits in the province

· More recently some funds have investigated and negotiated a reasonable settlement if the claim was straightforward

· In Quebec, a court judgment is still required

· Persons who suffer injury or PD must apply to the Fund

· If the uninsured owner denies liability, the Fund may require that the victim sue and a judgment rendered b4 making payment

· Payments from the Fund are based on the extent of the uninsured driver’s legal liability – if the claimant is AF the Fund does not pay

· In ON, the enactment of the Compulsory Auto Insurance Act substantially reduced the role of the Motor Vehicle Accident Compensation Fund by providing broader coverage

PD claims all provinces except Sask and Man have applied a modest deductible

Front 17

Implied Contract

Back 17

An implied contract is one in which the parties have acted in such a way that it is understood that a principal-agent relationship exists, even though there may have been no expressed statement by either.

Front 18

Indemnity

Back 18

A principle of insurance by which insureds, up to the limit of the policy, are fully compensated for the actual cash value of what they have lost, so that they neither gain nor lose as a result of the loss.

Front 19

Independent Adjuster

Back 19

A qualified independent businessperson may be appointed by the insurer to assist in the loss settlement and in each case, is a representative of the insurer.

Front 20

Insurance

Back 20

Insurance means the undertaking by one person to indemnify another person against loss or liability for loss in respect of a certain risk or peril to which the object of the insurance may be exposed, or to pay a sum of money or other thing of value upon the happening of a certain event.

Front 21

Insurance Policy

Back 21

The written evidence of the contract of insurance.

Front 22

Insured

Back 22

A person or organization covered by an insurance policy, including the "named insured" and any other parties for whom protection is provided under the policy terms

Front 23

Insurer

Back 23

The party to the insurance contract who promises to pay losses or benefits; also, any corporation engaged primarily in the business of furnishing insurance to the public.

Front 24

Manuscript Policies

Back 24

A policy that is specifically designed for a particular risk. It does not use standard pre-printed wordings but rather is an individual manuscript. It still must incorporate all the elements of a normal policy.

Front 25

Material Fact

Back 25

Something affecting a contract of insurance important enough to change the agreement between the company and the policyholder.

Front 26

Minimum Limits

Back 26

The smallest amount of Third Party Liability insurance that may be purchased in any Canadian jurisdiction.

Front 27

Misrepresentation

Back 27

Misleading the insurer as to material facts affecting a policy or the settlement of a loss either by directly lying or by not disclosing certain information.

Front 28

Negligence

Back 28

Also referred to as ordinary negligence, has been defined as either the failure to do what a reasonable and prudent person would do in a given situation or doing what such a person would not do in a given situation. It is the peril insured in liability insurance.

Front 29

Onus of Proof

Back 29

Means burden of proof. The provincial Highway Traffic Acts state who must prove negligence in specific automobile accident situations. This is known as onus of proof.

Front 30

Operating Account

Back 30

A broker's general business account.

Front 31

Outstanding Loss Reserves

Back 31

Consist of funds set aside to pay for losses that have been incurred but not yet paid.

Front 32

Peril

Back 32

An event that may cause a loss to occur.

Front 33

Premium

Back 33

The amount of money an insurance company charges to provide coverage for a specific item or policy.

Front 34

Priorities of Payment

Back 34

Specify how much of the minimum policy limit will apply to bodily injury claims and how much will apply to property damage claims in situations where there is not enough insurance to cover all the combined claims.

Front 35

Pro Rata Cancellation

Back 35

Cancellation of a policy when the return premium paid is the full proportionate part due for the unexpired term.

Front 36

Profit Commission

Back 36

Extra commission paid annually to brokers/agents for business that produced a certain level of profitability for an insurer. Terms are stipulated in the agency/brokerage agreement.

Front 37

Property Damage

Back 37

Refers to damage to the property of others, not the insured's own property

Front 38

Public Adjuster

Back 38

An independent businessperson who may be engaged by the insured to help in the settlement of a claim. A public adjuster might be hired on large claims

Front 39

Pure Risk

Back 39

Pure Risk entails a chance of loss but no chance of profit.

Front 40

Rate

Back 40

The price of a unit of insurance (usually $100 or $1,000) for a period of one year. It is expressed either in dollars and cents or as a percentage.

Front 41

Risk

Back 41

Risk is the chance of loss, for example: loss of property or loss of life.

Front 42

Short Rate or Short Date Cancellation

Back 42

Short rate or short date cancellation is applicable when the policyholder cancels before a policy reaches its natural expiration.

Front 43

Speculative Risk

Back 43

Speculative risk exists where there is either a chance of loss or a chance of profit.

Front 44

Staff Adjuster

Back 44

Deals with losses when the insured and insurer deal directly with each other in arranging the loss settlement.

Front 45

Statutory Conditions

Back 45

Conditions required by law as promulgated by provincial legislatures. These conditions form part of every insurance policy covering certain classes of risks.

Front 46

Subscription Policy

Back 46

A subscription policy is used usually to insure large risks.

Front 47

Tortfeasor

Back 47

A wrongdoer or, in other words, the party responsible for the accident.

Front 48

Trust Account

Back 48

Contains all deposited premiums collected from insureds and from which net premiums are paid to insurers.

Front 49

Unearned Premium

Reserves

Back 49

Consist of that portion of the premium that has not yet been earned on each policy

Front 50

Utmost Good Faith

Back 50

Implies a standard of honesty greater than that usually required in most ordinary contracts

Front 51

Written Agreement

Back 51

A written agreement is more desirable in that it avoids any misunderstanding as to the responsibilities and obligations of each party to the agreement.