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127 Cards in this Set

  • Front
  • Back
Risk
chance of financial loss to which an object of insurance is exposed
Speculative Risk
the chance of a financial loss or gain
Pure Risk
the chance of financial loss but no chance of financial gain.
Insurance
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
Contract
an agreement between two or more persons which creates an obligation to do or not to do a particular thing
Consideration
an exchange or something of value between parties
Insurable Interest
one has an insurable interest in the subject matter of the insurance when they will suffer financially by a loss
Utmost Good Faith
the law requires insurance contracts to maintain a higher standard of honesty than is needed of other contracts. This applies to the insured, insurer & broker.
Indemnity
application of this principle ensures people receive the actual amount of their loss, no more and no less
Insurance Binder
a temporary agreement in which the insurer agrees to provide certain coverages pending the issuance of the policy
Agency Agreement
a written agreement or contract between the insurer and the brokerage which acknowledges their relationship.
Void Contract
one which is unable in law to support the purpose of which it was intended. Such contracts are deemed never to existed
Voidable Contract
a contract that may be voided at the option of the wronged party only and not the wrongdoer
Peril
the cause of loss
Direct Loss
occurs when the peril insured actually attacks the object of insurance
Indirect Loss
losses which arise as a consequence of a direct loss
Actual Cash Value
new or replacement cost of the property at the time of the loss, less depreciation
Replacement Cost
the cost to repair or replace the lost or damaged property with new property of like kind and quality, without deduction for depreciation
Valued Policy
both the insured and insurer agree at the time the policy is issued as the the cash value of the property. In the event of a loss, the agreed amount would be paid
Blanket Coverage
policy which provides a single limit of insurance for all property falling within a specific class
Scheduled Coverage
Covered property is itemized on the policy
Fiduciary
one who occupies a special position of trust or confidence in the handling or supervising of the affairs or funds of another
Unearned Premiums
premiums not yet earned by the insurer. Such premiums are deemed to be held in trust in order to refund the insureds in the event the policy is cancelled prior to expiry date
Fire
involves the presence of a visible flame or glow, actual ignition or burning is required
Friendly Fire
a fire that is contained in its proper receptacle
Hostile Fire
a fire that passes outside of the limits assigned to it.
Proximate Result
damage which arises from a natural or continuous sequence of the peril causing the loss
Material Change
is any change within the control and knowledge of the insured and which arises after the policy has been issued and serves to increase the chance of loss
Pro Rata
the basis of return premium calculation when the insurer cancels a policy. The amount of the return premium is arrived at by dividing the amount of premium paid by the number of days in the policy period. The number so obtained is the multiplied by the number of days remaining in the policy period
Short Rate
the basis of return premium calculation when the insured cancels the policy. The amount of the return premium is equivalent to that provided on a pro-rata basis, less any administrative charge or cancellation penalty
Notice of Loss
immediate report of loss to insurer by the insured or his representative in writing
Proof of Loss
a formal verification, under oath, of the details and amounts being claimed under the policy
Fraud
is a deliberate attempt to deceive, with a view to securing some profit
Deductible
represents the amount the insured is required to absorb for each loss for which insurance coverage is provided before receiving any payment from the insurer
Subrogation
when the insurer has paid a claim for loss caused by a third party, the Insurance Act allows the insurer to place itself "in the insureds shoes" in respect of their right to recover the amount of the loss from the responsible party
Proprietary Insurers
insurance companies which exists to make a profit or return on their investment
Non-proprietary Insurers
insurance companies which are organized for reasons other than profit. They are owned and controlled by their policyholders and their mandate is to secure insurance at as low a cost as possible
Personal Property
contents of the insured's dwelling and other personal property owned, worn or used by the insured while on the premises, which is usual to the ownership or maintenance of a dwelling
Additional Living Expenses
coverage that provides for additional cost of living elsewhere when the dwelling is damaged by an insured peril and the damage is sufficient to make the dwelling unfit for occupancy, or requires that the insured move out while repairs are being made. Also provides for loss of fair rental value if part of the dwelling was rented or being held for rental at the time of the loss
Vandalism
the wilful or ignorant destruction of property
Malicious Act
wrongful act done without legal justification or excuse
Vacant
regardless of the presence of furnishings, all occupants have moved out with no intention of returning and no new occupant has taken up residence; or in the case of a newly contracted house, no occupant has yet taken up residence
Theft
includes all means of taking property without the owner's consent
Mobile Home
a home that is factory built on its own chassis and which can be easily moved
Condominium
a system of separate ownership of individual units in a multiple unit building
Endorsement
an extra sheet or slip of paper attached to the policy indicating in writing that the insured and the insurer have agreed to a change in the terms of the insurance contract
Fine Arts
traditionally includes painting, pictures, etchings, tapestries and other bona fide works of art of rarity, historical value or artistic merit
Criminal Law
deals with wrongs against society
Civil Law
concerns itself with settling disputes between individuals or other legal entities in matters not involving a criminal act
Plaintiff
the party making the complaint
Defendant
the party who allegedly committed the wrong
Tort
a wrong done to another in breach of a duty laid down by law
Strict Liability
Doctrine in law in which " a person is guilty until proven innocent"
Negligence
the omission to do what a reasonable man, guided by those ordinary considerations which ordinarily regulate human affairs, would do, or the doing of something which a reasonable and prudent man would not do
Special Damages
damages which can be accurately measured and which are intended to reimburse the plaintiff for out-of-pocket expenses
General Damages
damages which cannot be exactly determined but which reflect an amount the court believes necessary to compensate the aggrieved party fairly
Trespasser
is one who is on another's premises for his/her own purpose without the express or implied permission of the occupier. Their presence is of no value to the occupier and such persons are viewed as having temporarily appropriated the property for their own use
Licensee
a licensee is someone who comes onto the premises for his own purpose but with the occupier's consent
Invitee
someone who enters by invitation be it express or implied. His entry is connected with the owner's business or with an activity the owner conducts or permits to be conducted on his land and there is a mutual benefit or benefit to the owner
Visitor
classification given to a licensee or invitee under provincial Occupier's Liability Acts
Farming
ownership, maintenance or use of premises for the production of crops or the raising or care of livestock, including all necessary operations
Custom Farming
use of insured's farm machined or equipment for others away from insured's farm premises for compensation. It does not include work done for others in return for work done by them
Residence Employee
those whose duties are exclusively in connection or maintenance and use of the residence premises
Farm Employee
those paid for their work and who are hired on a part time, seasonal or full time basis to perform duties principally connected with farming activities outside the insured's dwelling. Or persons engaged in farm related work on behalf of the insured in a neighbourly exchange of assistance for which the insured is not obliged to pay any money
Pink Card
in provinces where automobile insurance is provided by private insurers, a PINK CARD is used to provide proof of financial responsibility or in provinces having compulsory government insurance plans, the PINK COPY of the certificate of registration serves as a proof financial responsibility
Facility Association
an insurance pool in which all licensed automobile insures participate and which provides insurance to those who may be refused insurance by private insurers
Driver's Abstract
a record of the driver history of the applicant and other drivers which can be obtained from provincial licensing authorities
Uninsured Automobile
one in which neither the driver nor the owner has collectible bodily injury liability insurance
Unidentified Automobile
one in which the identity of either the owner or driver cannot be ascertained and which causes bodily injury or death to an insured person arising out of actual contact of that automobile with the automobile in which the insured is an occupant
General Average
designed to provide payment for ocean marine losses voluntarily incurred for the safety of the entire venture. The insurers of the parties whose property was saved shall contribute to the losses of the parties whose property was sacrificed
Temporary Substitute Automobile
one which is temporarily being used as a substitute for the automobile described on the policy. It qualifies only if the described automobile cannot be used because of its breakdown, repair, servicing, loss destruction or sale
Occupant (auto)
any person who drives the automobile or is being carried on or upon or is in addition to others owned by the insured which are all insured by the same insurer
Step Licensing
a system which requires a higher degree of knowledge for each increasing step
Ethics
the principles of conduct governing an individual or group
Professional
one who possesses special skills or knowledge
Self Regulation
the right of an industry to govern it own affairs
List the three categories of risk.
Personal - injury to one's health or life
Property - damage to one's property
Liability - lawsuits
Four possible options to deal with risk.
1. Avoid the risk - not practical - all chance of financial loss has been eliminated. e.g. rent rather than buy
2. Control the risk - loss control measures. Reduces frequency & severity of loss
3. Retain the risk - self -insurance or share risk though deductibles
4. Transfer the risk - purchase insurance
Two examples of loss control measures:
Intrusion detection system
Fire detection alarms
Two reasons why loss control measures are not a total solution in eliminating financial loss:
1. Equipment may not work 100% of the time
2. Certain types of losses such as wind, hail & lightning cannot be effectively controlled
What type of risk will the insurers not provided an insurance policy:
Speculative Risk
List the five elements in a contract:
Agreement
Consideration
Legality of object
Legal capacity of the parties to contract
Genuine intention
Agreement - meeting of the mind as to the subject matter and terms of condition. Two items that are required:
1. an OFFER made;
2. An unequivocal and unconditional ACCEPTANCE of the terms of that offer.
Legal capacity of the parties to contract.
Persons who do not have the legal capacity of the parties to contract are called incompetents. Such persons include:
1. Minors (unless age of majority in their province, or right to contract for necessities of life such as food, clothing and lodging.
2. Mental incompetents
3. Persons under the influence of alcohol or drugs
4. Trade names
To prove genuine intent, it is necessary to show that the agreement between the parties was not affected by:
1. Fraud, trickery to cheat another
2. Duress, use of force or illegal imprisonment
3. Concealment, misrepresent the past or present fact
4. Mistake, when legal documents are sign by error or mistake
Three additional elements unique to insurance contracts:
Insurable interest
Utmost good faith
Indemnity
At what point in time is the true measure of indemnity determined?
it is measured by the value of the insured property as it existed immediately prior to the loss
How is binding authority provided to brokers?
Agency Agreement
What should occur after oral binders have been provided by brokers?
should be confirmed immediately in writing.

This practice avoids the potential for disagreement as to coverages and amounts of insured in the event of a loss occurring before the policy has been issued.
What do brokers face when they exceed their binding authorities?
May find itself facing an errors and omissions claim.

The broker will be responsible for the amount of the loss.
What are three elements found in Indemnity Agreements?
The insurer agrees to indemnify the insured against the direct loss so caused to an amount not exceeding, whichever is least of:
a. ACV of the property at the time of loss, destruction or damage;
b. the interest of the insured in the property;
c. the limit of insurance provided by this policy in respect of the property lost, destroyed or damaged
What considerations are used to determine depreciation?
Condition of the object
Resale value
Normal life expectancy
Identify four persons who might have an insurable interest in a contract of insurance.
1. Owners of property including their business partners.
2. Mortgagee.
3. Bailees to whom property is entrusted for repair, service or safekeeping.
4. Any person who may be held legally responsible to a third party for bodily injury, or property damage.
Why do governments pay a role in the insurance industry?
Insurance companies will be financially competent to discharge their obligations.
Forms of contracts are drafted fairly.
Business is being conducted to the general benefit of the public.
What duties are owed by brokers to insurers?
1. Collection of premiums.
2. Passing on of relevant information, obtained from the client.
What duties do brokers owe to the insureds?
Careful & prompt attention to instructions
Expert advice
Competitive pricing of products
Identify three ways in which brokers might exceed the binding authority given to them by an insurer.
Dwelling & contents.
Commercial building & contents.
Liability insurance.
What is the role of the Federal government?
Licensing companies & monitoring the insurers solvency & financial stability.
What is the role of the Provincial government?
Administering the Insurance Act.
Supervising the terms & conditions of insurance contracts.
Licensing insurers, agents, brokers, and adjusters.
Monitoring solvency of provincially licensed insurers.
What is PACICC?
Property and Casualty Insurance Compensation Corporation.
What does PACICC provide?
When a bankruptcy occurs and claims cannot be paid, the corp pays all valid claims. All participating insurance companies are then charged an assessment to cover the total amount of the claims. The amount of each insurer's contribution is based on total direct premiums written by it.
Basic Coverage Legislated contains the following three coverages.
1. Fire.
2. Lightning.
3. Explosion of natural, coal or manufactured gas.
Standard Exclusions Legislated. List the losses excluded under fire policies.
1. Loss or damage due to direct application of heat.
2. Lightning damage to electrical devices or appliances.
3. Other electrical currents.
4. Contamination by radioactive material.
What are three forms of misrepresentation?
1. A false description of the property to the prejudice of the insurer.
2. Misrepresentation of a material fact.
3. Fraudulent omission of a material fact.
Property of Others
Unless otherwise specifically stated in the contract, the insurer is not liable for the loss or damage to property of others.
Change of Interest.
The insurer is liable for loss or damage occurring after an authorized assignment under the Bankruptcy Act or change of title by succession, by operation of law, or by death
Termination
By Insurer: 15 days notice by registered mail or 5 days written notice of termination personally delivered.
Premium returned Pro Rata.
By insured: anytime on request. Premium returned Short Rate
Requirements After Loss
Forthwith give notice in writing.
Proof of loss (complete details of the loss, inventory, when and how loss occurred, no negligence, showing interest of the insured & any changes)
Who May Give Notice and Proof.
Agent of the Insured named in the contract in case of absence or inability of the insured.
Person to whom any part of the insurance money is payable (loss payee)
Insured.
Salvage
In the event of any loss or damage to any property insured under the contract, shall take all reasonable steps to prevent further damage or damage to such property insured, including necessary removal of property to prevent damage or further damage.
Entry, Control, Abandonment
Immediate right of access and entry; and
A further right of access and entry after the insured has secured the property.
Appraisal
In the event of a disagreement as to the value of the property insured, property saved or the amount of loss, it shall be determined by appraisal as provided under the Insurance Act before any recovery under the contract & independently of all other questions. No right to appraisal until a specific demand is made in writing and after proof of loss has been delivered.
When Loss is Payable
With in 60 days after completion of the proof of loss, unless the contract provides for a shorter period.
Replacement
Instead of making payment, may repair, rebuild, or replace the property damaged or lost, giving written notice of its intention so to do within 30 days after receipt of the proofs of loss.
Within 45 days the insurer must proceed with all due diligence to the completion.
Action
Any action or preceding must be commenced within one year next after the loss or damage occurs.
Two years for MB, SK and Yukon.

Prohibit until 60 days or short period fixed on contract after filing of proof of loss.
NOTICE by insured to insurer
Notice of termination of the policy.
Request for appraisal
Notice of legal action against the insurer
NOTICE by insurer to insured
Notice of termination of the policy
Notice of option to exercise "replacement" option
Cheque for settlement of a claim when payment is not provided through the brokerage.
When policies insure against a wide range of perils, insurers generally incorporate " Additional Conditions" List these five additional conditions.
1. Notice to Authorities
2. Sue & Labour
3. No Benefit to Bailee
4. Pair & Set
5. Parts
Notice to Authorities
Where there is a loss due to certain criminal acts, or is suspected, the insured shall give immediate notice to policy or other authorities having jurisdiction. This gives authorities greater chance of recovering items.
Sue & Labour
Insurer takes all reasonable steps to recover lost property.
No Benefit to Bailee
This insurance shall not protect the insurable interest of a carrier or bailee having custody of the insured property.
Pair & Set
When there is a loss or damage to only one item of a pair or set, the loss is not a total loss. The item not lost continues to have value which will be considered in the amount of settlement.
Parts
When there is a loss or damage to a part of insured property which consists of several parts or components, the insurer will pay for the replacement of the lost or damaged part only, including the cost of installation.
List the Contents of Insurance Policy
1. Parties to the contract
2. Policy period
3. Loss payable or payee, if any
4. Types of insurance coverages & amounts for which the insurer may be liable.
5. Rate & premium charged
6. Subject matter of interest
List three examples of direct loss.
1. Fire damage
2. Theft
3. Lightning
List three examples of indirect loss.
1. Business interruption
2. Stock
3. Profits
List the fourteen standard exclusions that are legislated to be in fire insurance policies. Abbrev. ALEC RIC RIC WHAM
1. Application of heat
2. Lightning to electrical devices
3. Electrical current
4. Contamination of radioactive materials
5. Riot
6. Insurrection
7. Civil commotion
8. Rebellion
9. Invasion
10. Civil war
11. War
12. Hostilities
13. Act of foreign enemy
14. Military power