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76 Cards in this Set

  • Front
  • Back

What is scope of general insurance companies in Canada?

-over 200 insurance companies in Canada


-sales of over $33 billion


-controlled assets in excess of almost $100 billion


-regulated by both federal and provincial governments

What is the chief concern of the federal Office of the Superintendent of Financial Institutions with general insurance companies?




What does the Property and Casualty Insurance Compensation Corporation (PACICC) do?

solvency and stability of insurance companies that are regulated under federal




pays policy claims if a member insurance company goes bankrupt to a maximum recovery of $250,000 from a single occurrence

What is a deductible?

-fixed amount of a claim the insured must pay


-encourage insureds to be more careful with their property and discourages frivolous claims

What are limitations of personal property insurance?

usually have a personal legal liability component


-NO coverage for professional activities and automobiles

What are 3 bBasic forms of property insurance coverage?

1.basic fire insurance policy


2. extended coverage endorsement


3. legal liability

What is the provincially legislated minimum coverage provided by any fire insurance policy?

fire, lightning, and specified types of explosion

What would an extended coverage endorsement (EC) attached to a fire insurance policy cover?

explosion,falling objects,impact by aircraft or land vehicle,lightning damage to electrical appliances,riot,water escape,rupture,freezing,smoke,vandalism and malicious mischief

What does legal liability section provides coverage against?

personal liability,premises liability,fire legal liability,employer's liability,voluntary medical payments,voluntary property damage

What are the three types or levels of personal property coverage widely used?


(all contain the basic fire insurance, extended coverage and legal liability components)

1. Homeowner's standard policy


Building & Contents NAMED PERILS


2. Broad form


Building ALL RISKS Contents NAMED PERILS


3. Comprehensive Form


Building & Contents ALL RISKS

DEFINE: Indemnify

provide protection from loss, while preventing profit from it

DEFINE


Burglary


Robbery


Theft

Burglary: force used on the structure of his home to gain entry or exit


Robbery: violence or the threat of violence to take his property


Theft: steals his property without necessarily forcing entry or using violence

DEFINE: Actual Cash Value

Actual Cash Value: replacement value of the property considering its condition immediately before the loss (may be more or less than the original purchase price of the property due to appreciation or depreciation)

DEFINE: Valued Basis

Valued Basis: Can insure for an agreed value, usually with proof of value. ie. antique purchased for $1K. If it appreciated to $2K or dep to $500, would receive $1K less deductible if insured on Valued Basis.

DEFINE: Replacement Cost

-property is covered without deduction for accumulated depreciation (must have been in usable or workable condition at the time of the loss)


-violates the principles of insurable interest and indemnification

Which valuation methods would allow you to profit from loss?


Which valuation methods could under insure you for loss?


Replacement Cost, Valued Basis, Actual Cash Value

Profit:Replacement Cost, Valued Basis


Under:Valued Basis, Actual Cash Value

DEFINE:Salvage

Salvage: value of the portion of the property not damaged, insured has a legal responsibility to take all reasonable steps to prevent further damage

DEFINE: Subrogation

Subrogation: insurer is entitled to attempt to recover the loss from legally responsible third party

DEFINE: rateable portion

rateable portion: portion of a loss that one insurer is required to pay in the event of two policies covering the same property loss.

What are limitations based on location for personal property coverage?

Property covered to stated amount only while on insured premises. Once removed, it is insured worldwide up to set % of coverage.


Exception:3 days coverage while in transit between old and new residence




Personal property stored in a warehouse is only insured against theft


Personal property normally kept at a location other than the insured home is not insured

What does homeowner's legal liability insurance cover?

-financial losses if someone is injured or killed while on your property


-costs incurred if you damage the property of others through negligence or carelessness


-Extends to: residence, acts of insured and family, other private residences owned by the policy owner,motorized vehicles (excluding automobiles),watercraft, swimming pools, and draft or saddle animals

How does the law of tort relate to Personal Liability?

governs harmful or injurious acts between individuals where there is no contractual relationship between the parties

What is Employer's liability?


What is a residence employee?

- liability for unintentional bodily injury to residence employees


- a person employed by your client to perform duties in connection with the maintenance or use of the insured premises ie domestic services NOT duties in connection with business

What is Premises Liability?

-liability results from damages or bodily injury arising out of ownership of the insured premises


-ie. if some one who does not live on premises is injured - a trespasser stepping on a rake

What are voluntary Medical and Property Damage Payments?

-coverage extended to person is accidentally injured on your client's premises even though your client is not legally liable


-UNINTENTIONAL direct damage your client causes to property even though your client is not legally liable, or damage caused INTENTIONALLY by an insured person aged 12 years or under (baseball through window)

What are three forms of automobile insurancecoverage?

ACCIDENT BENEFITS: pmts to insured or other insured persons if they are injured or killed in an automobile accident


COLLISION and COMPREHENSIVE: cost of repair or replacement of your insureds car, or settlement based on FMV if destroyed


BODILY INJURY LIABILITY:

What is the difference between collision and comprehensive insurance?

COLLISION: cost of repairs when involved in a collision or tips over, incl going off the road and rolling onto its roof


COMPREHENSIVE: cost of repairs when damaged in circumstances other than by a collision, (fire, theft, vandalism, or glass breakage)

What is Direct Compensation and No Fault Insurance?

Direct compensation: own insurance covers damage when another motorist is responsible


No Fault Insurance: own insurance will pay the insured person and others involved in an accident without determining the degree of fault

What are Third Party Liability and Uninsured Automobile Insurance?

Third Party Liability: protects against claims made by other people for their injuries and damage to their property caused by insured or someone operating car with consent


-combination of bodily injury liability & property damage liability insurance


Uninsured Automobile Insurance: coverage if your client or an insured person is injured or killed by an uninsured motorist or by a hit-and-run driver

What type of insurance covers cost of repairs when car tips over?

COLLISION

When would there not be a deductible on a comprehensive claim?

Loss by fire, lightning or theft of entire automobile

What is an important difference with the effective date of automobile insurance vs life insurance?

Can purchase automobile insurance over the telephone or online bc agent's acceptance renders policy immediately effective before any premiums paid or contract received

What are normal time limits for making and receiving automobile insurance policy claims?

MAKE: in writing within 7 days after the occurrence


REC: 60 days if claim not disputed or personal injury involved

What are the fundamental requirements for the formation of a valid contract?

-OFFER & ACCEPTANCE mutual assent by the parties to a promise or a set of promises


-COMPETENT PARTIES legal capacity to enter


-CONSIDERATION exchange of values


-UTMOST GOOD FAITH absence of fraud or misrepresentation


-LEGAL PURPOSE


-absence of any statute or rule that makes the contract void

Who is the offeror and the offeree in insurance contract?

Offeror: is the insured, buyer of insurance


Offeree: insurance company, party accepting offer

How is an offer made and accepted with an insurance contract?


What is the consideration of each party?

Offer: Buyer of insurance contract makes offer when submitting application


Accepted: When contract issued and premium paid


NOT made by insurance co/agent with proposal


Consideration: Buyer pays first premium, insurer gives contract

What is legal age to enter a contract

16 for an insurance contract


18 for other legally binding contracts

What type of consideration is unique in insurance world to property and liability policies?

Consideration is insured's promise to pay, in force before policy received or premiums paid

What happens if an applicant dies during period of interim coverage?


What are other terms for TIA?

the death benefit will still be paid, provided that the insurance company would have approved the application


TIA: conditional or interim receipt, binding receipt

What is a contract of good faith (bona fide)?


What is a contract of utmost good faith (uberrimae fidei)?


Which are insurance contracts?

good faith: standard implying absence of intent to take advantage of or defraud another party




utmost good faith: (insurance policies) bc relying on info in decideing to write policy, information must be true and complete or contract can be challenged



When is a fact is material?


When is a fact is minor?

material: its disclosure or failure to disclose would alter an underwriting decision or loss settlement, contract can be avoided by the offended party


minor:contract is still valid

Void/Avoid

VOID contract: apparent agreement that is not a valid contract, so the courts will not enforce it


AVOIDED contract:grounds to treat it as being a void contract

What are Representations?

statements made by the applicant to the insurer which, to the best of the applicant's knowledge, are substantially true, but not guaranteed to be exact in every detail


NOT material



Is a mistake in declaring weight a representation, material, grounds to void or avoid contract, minor, warranty or concealment?

If the life insured provided what they thought was their weight, but were wrong, this is a false representation, not a warranty or concealment.


The fact is not considered material and is not grounds to void or avoid a contract.

What are Warranties?


What are two types of warranties?

statements made by the applicant to the insurer which are absolutely true and which are assumed to be material, breach is sufficient to render the policy void




promissory: a fact is presently true, and will continue to be true


affirmative:a fact is presently true, but makes no statement about the future

What is concealment?

when the applicant fails to disclose known facts to the insurer when obligated to do so


-knew of the fact


-knew the fact was material to the contract


-knew that the insurer was unaware of the fact


-knew that the fact was not common knowledge & insurer ought to be aware


-kept silent with deliberate intent to deceive

When will a policy not be avoided because of false representation or concealment on the part of the life insured

Two years after the date of policy issue, the incontestability clause comes into effect and the insurer's rights of avoidance expire

Does false representation = concealment?

No, false representation is not concealment, bc info in a representation was given to the best of the applicants knowledge.

What are Declarations?

informational statements about the exposures to be covered and usually form the basis for decisions on the issuance and rating of the insurance

What is a Binder?

temporary contract, pending issuance of the policy.




life insurance: always written, agent does NOT have auth to bind insurer


auto/property/liability insurance: written or oral, oral binder is usually followed by a written contract, agent has authority to bind insurer

DEFINE


Warranties


Declarations


Representations


Concealment


Proposal

Warranties: st's by applicant true & material


Declarations: sts about exposures to be covered


Representations: true st's not guaranteed to be exact in every detail


Concealment: app fails to disclose facts when obligated to do so


Proposal: invitation to enter biz transaction

What are 5 basic insurance contract components?

Exclusions: what insurer will not cover


Conditions: responsibilities of the insured and insurer


Riders, Endorsements: change the original policy to meet certain conditions


Floaters: riders to extend the coverage

commutative vs. aleatory

COMMUTATIVE: each party gives up goods and services presumed to be of equal value


ALEATORY: contracting parties realize that the dollar amounts to be exchanged will not be equal

adhesion vs. bargaining

ADHESION: applicant must accept the standard policies and terms as determined by the insurance company and government regulations


BARGAINING: applicant can make counterproposals or suggest changes to provisions or wording

bilateral vs. unilateral

bilateral: exchange of a promise for a promise


unilateral: exchange of an act for a promise

Why are insurance contracts aleatory, adhesion & unilateral?

Parties to insurance contracts do not exchange equal amounts, so the contract is ALEATORY ie premium vs death benefit


An insured cannot bargain or alter terms of contract, so the contract is one of ADHESION


The insured is not required to keep paying premiums, so the contractual obligation is UNILATERAL

Describe the following characteristics, peculiar to insurance contracts:


conditional


policyholder's right of rescission


personal contract

CONDITIONAL: payment for claims is subject to the insured meeting specified conditions


right of RESCISSION: 10 day look


PERSONAL CONTRACT: contract concerning an insured individual, not the insured's property


ie. property insurance is personal bc is is attaced to person, and would not pass to a new owner of the property

Describe the following characteristics, peculiar to insurance contracts:


principle of idemnity


insurable interest


subrogation

INDEMNITY: individual should be compensated only for the amount of loss or damage suffered and should not profit from a loss or damage


INSURABLE INTEREST: expects to suffer financial loss, or fail to make a financial gain


SUBROGATION: allows the insurer to settle the claim with the insured, according to the insurance contract, and then take action against the third party to recover its costs N/A to life insur

Why is a a life insurance contract is not considered a personal contract?

The contract does not concern the insured individual


ie. a new owner of a life insurance policy does not affect the risk. The risk is attached to the life insured and not to the policy owner. Accordingly, a life insurance contract can be assigned

To which types of polices does the principle of indemnity not apply?

VALUED CONTRACT insures property for an amount that is agreed by the insurer and the insured at the time the contract is made


LIFE INSURANCE Because they require no proof of monetary loss upon the subject's death

When must you prove insurable interest?

PROPERTY INSURANCE: must be present both at the time the contract is formed and at the time of the loss


LIFE INSURANCE: only at the inception of the policy, does not matter if transferred to 3rd party without insurable interest

When would principle of indemnity apply or not apply?

When would principle of subrogation apply or not apply?

indemnity


APPLY: property insurance


NOT APPLY:valued contract, life insurance


subrogation


APPLY: property insurance, DI


NOT APPLY:life insurance


RARELY APPLY: liability insurance

What is a waiver?


What is a breach of contract?

WAIVER voluntary abandonment by one or both parties of some right or advantage under a contract


BREACH: party who fails to perform without obtaining a waiver



What does Estoppel mean and what does it "estopps" (prevents)?

ESTOPPEL prevents one of the parties to the contract from alleging or denying a fact that he has already confirmed or accepted by his own actions


ESTOPPS the insurer from denying a claim at some time in the future on the basis of this violation that was waived in the past


ie. if insured dies when premiums 32 days late and insurer has previously accepted premiums paid > 30 days after due date, claim must be paid

What is remedy of rescission and when must it be enacted?

put the plaintiff in the position in which he or she would have been if the contract had never been made


must act as soon as the wrong becomes apparent


ie. cancel policy or increase premiums

What is remedy of reformation?

available when the contract does not truly express the intention of the parties


could be because of fraud, mistake by both parties, or mistake by one party where the other party knew about it

What is Risk?

probability of harm, injury, loss, danger, or destruction occurring in the future

What is Speculative risk vs. pure risk?


Speculative: 3 outcomes - loss, no change, or gain (ie. investments, gambling)


Pure: 2 outcomes - loss or no change.


(ie. personal, property, liability, failure of others)

What is the distinction between static and dynamic risks?

DYNAMIC risks are those resulting from changes in the economy ie. inflation (little insurance protection) (can be pure or speculative)


STATIC risks are losses that would occur even if there were no changes in the economy ie. fraud (pure risk bc only outcome is loss or no change)

What is the distinction between fundamental and particular risks?

FUNDAMENTAL risks involve losses that are impersonal in origin and consequence (war, inflation, unemployment, floods)


PARTICULAR risks involve losses arising from individual events (static or dynamic) (house fire, robbery, automobile accident)

What types of risk can be protected by which insurers?


(fundamental, particular, dynamic, static)

Government: Fundamental & Dynamic


Private Insurance: Particular & Static risk

What are hazards? Name 3 types.

acts or conditions that increase the probability of a peril or the severity of a loss


PHYSICAL material or structural features of a risk, as opposed to human factors


MORALE risk increased due to indifference to loss because of the existence of insurance


MORAL character or habits of the insured that increase probability of a loss

What are perils and what type of risk are they?

PERILS: death, disability, illness, accidents, lawsuits, and dishonesty


All PURE risk


Hazards increase probability of peril

Give examples of the tools of risk reduction, Safety and Segregation.

Safety: ie protective equipment, courses in safety


Segregation: prevent single event, such as a plane crash, from causing devastating loss to a business or family by taking separate flights

Give examples of the tools of financing risk, Sharing, Pooling & Retention

Sharing: insurance policies and social welfare programs (ie EI, CPP)


Pooling:combining the exposure to risk with others (ie group liability insurance for legal society)


Retention: ie paint chips on car are more affordable to retain cost than to make insurance claim

How often should you review the risk management plan?

on a regular basis, perhaps each yea

Who is exposed to what type of risk?


Andrea, purch family car


Renaldo, bet on horses


Rebecca , invest in equities


Mohammed, purchases gems & coins

Pure risk: Andrea


Static: Andrea


Speculative: Renaldo, Rebecca, Mohammed


Dynamic: Mohammed, Rebecca