General Insurance Essentials Part 1: Study 4

Front 1

Utmost good faith

Back 1

Standard of honesty greater than that usually required in most ordinary contracts

Front 2

Most classes of general insurance do not require written application. Life insurance requires written applications. Provincial insurance acts specify which classes of insurance require written application

Front 3

Misrepresentation

Back 3

misleading the insurer as per material facts either by lying or not disclosing

Front 4

Material fact

Back 4

Something affecting a contract of insurance

Front 5

Statutory conditions and Quebec general conditions

Back 5

Provincial insurance act sets out certain conditions that must form part of every insurance policy. Quebec conditions are statutory in nature but it does not set out the exact words that must be used

Front 6

Cancelling temporary insurance

Back 6

Except a binder expires, it can only be terminated in accordance to statutory conditions which includes proper notice in a specified manner or by a given formality by surrendering of the document on mutual agreement.

Front 7

Policy five components

Back 7

Introduction

Insuring agreements: subject matter of insurance, perils, exclusions, circumstances for which insured may receive claim benefits

Statutory condition/Quebec general conditions: do not apply to every class of insurance

Policy conditions

Signature clause: insured's signature is not required.

Front 8

Subscription policy

Back 8

usually used to insure large risk. One insurer prepares the policy (lead company) while one or more insurers subscribe to it or participate in covering the risk.

Front 9

Manuscript policy

Back 9

designed for a particular risk and does not use pre-printed wordings but rather individual manuscripts.

Front 10

If policy issued to insured is different from the application then...

Back 10

The insured must be notified in writing. They are given time to respond. No specific time limit is given in Quebec.

Front 11

Certificate of insurance

Back 11

could be a modified form of a policy. Like in automobile, most provinces have a standard renewal certificate. It is quick and does not contain repeated information already existing in the original policy.

Front 12

Endorsement

Back 12

Any writing in the back of the policy which varies the terms of the contract. It overrules any wordings in the policy itself which is inconsistent with the endorsement.

Front 13

Name the insurance documents: there are 6

Back 13

Cover note, binder, endorsement, policy, certificate of insurance, application

Front 14

Loss payable clause

Back 14

Names of additional persons or corporations interested in the insurance like banks or mortgagee are written in the loss payable clause as the loss payees so that when a loss occurs, payment is jointly given to the insured and loss payee

Front 15

Mortgage clause

Back 15

It recognizes the existence of a mortgage. The purpose is to express an agreements between the mortgage and the insurer which is independent of the agreement between the insurer and the insured.

Front 16

Rights of Mortgagee

Back 16

1) Losses are payable to the mortgagee as their interests may appear: mortgagee has a right to share in the loss of payment as long as insured owes something on the mortgage.

2) Clauses entitles the mortgagee to receive a loss payment regardless of any act or negligence of the mortgagor or occupation of premises more hazardous than permitted by the policy.

Front 17

Obligations of Mortgagee

Back 17

1)Must inform insurer of any increased hazard or non-occupancy over 30 days. Mortgagee is not penalized when a loss occurs if they didn't know.

2) Most pay an extra premium, on reasonable demand, because of increase in hazard from the date the hazard existed.

Front 18

Rights of insurer when insured has violated a condition of the policy

Back 18

1) Pay loss and recover amount from mortgagor.

2) Buy out the mortgagee where insurer receives full assignment and transfer of mortgage and all other securities held as collateral.

If loss is less than the mortgage amount, option 1 is viable.

Front 19

Franchise and disappearing deductibles are rarely encountered

Front 20

Disappearing deductible

Back 20

The higher the loss, the less the deductible

Front 21

Franchise deductible

Back 21

If loss is more than deductible, the full loss amount is paid

Front 22

Coinsurance clause

Back 22

Designed to encourage insured to carry adequate amount of insurance on their property by requiring them to bear a portion of the loss if underinsurance exists. Formula= actual ins/req ins * loss amount = amount insurer will pay

Front 23

Can you assign your insurance over

Back 23

No: unless the insurer consents to the contract with another person. Exceptions: Under the bankruptcy act where bankrupt persons transfer their assets to trustee for the benefit of creditors. Same applies to those who have died and transfer to executors or administrators. In house sale, the former owner can sign off his or her interest in the insurance policy; the new owner has insurable interest and the insurer consents to the change by issuing an endorsement.

Front 24

Transfer of consent

Back 24

Document used to effect the change and transfer of insurance policy.

Front 25

Termination of insurance contracts by insurer and insured. Explain.

Back 25

Insurer can only cancel by giving number of days notice in writing and returning the pro rate premium. Insured can cancel anytime but the insurer will retain premium calculated at a short date or short rate basis. The contract can also be cancelled by mutual agreement

Front 26

Void policy

Back 26

Void from the beginning so insurer would return the entire premium. If nondisclosure, the insurer can returns the pro rata premium making the policy valid and existent from the start.

Front 27

Nondisclosure or concealment

Back 27

Failure to disclose material fact.

Front 28

How to read policy

Back 28

Who is covered

what is covered

Perils

Coverage amount

Exclusions

Extensions

Conditions of coverage