Chapter 1 - Introduction to General Insurance Flashcards
Definition of 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 insurance may be exposed, or to pay a sum of money or other thing of value upon the happening of a certain event.”
Indemnify
The action of compensating an insured following a loss under the insurance policy.
Risk
The danger or chance of financial loss occurring
Risk can be an object or activity that is insured as well
Peril:
The cause of loss. Fire, burglary, and wind are examples of perils.
Object of insurance:
The item that is insured or covered in an insurance policy. Automobiles, buildings, and contractor’s equipment are all examples of objects of insurance.
Indemnity
Indemnity is the contractual obligation by one party (the insurer) to make good the losses suffered by another (the insured) by putting the insured back in the same financial position they were in at the time the loss occurred.
Insured / Policyholder
The person who purchases an insurance policy. Noted as the first party.
Insurer
The insurance company who issues the insurance policy and who compensates or indemnifies a policyholder in the event of a loss. Noted as the second party.
Premium
The sum of money paid by a person to an insurance company in exchange for an insurance policy.
Principle of indemnity
The principle of indemnity is a basic rule of insurance. It states that policyholders receive the actual amount of their loss — no more and no less. To pay more than the loss would enable people to profit; to pay less would result in an incomplete indemnity.
Registered Broker
A Registered Insurance Broker is an independent insurance professional in Ontario who is governed by the Registered Insurance Brokers Act (the RIB Act). Brokers provide independent advice and sell general insurance products from a variety of insurance companies. They represent their client’s best interest when negotiating a contract between the client and the insurance company.1
General insurance
involves any insurance product other than life or health insurance.
Brokers in Ontario are permitted to hold a life insurance license along with a general license; however, because life insurance is quite different from general insurance, a separate exam is required to sell it.
AKA property and casualty (P&C) insurance
Casualty insurance
third-party liability coverage for a loss
where a policyholder is legally responsible for having caused injury to another person or damage to the other person’s property
Personal risk
People are their own greatest asset. Financial loss will almost always accompany the loss of one’s health or life
Property risk
Financial loss occurs when owned property is lost or damaged. For example, if someone’s business is severely damaged in a fire, the financial impact is twofold: they would be faced with (1) the cost of repairing or replacing the property and (2) the loss of business income resulting from the interruption to the business.
