Chapter 10 Insurance Documents and Processes Flashcards
What is the purpose of an insurance application?
An application is a request for insurance. A declaration made by the applicant describing the characteristics of the risk, the amount of insurance required and any other details essential to the proper assessment and evaluation of risk.
What is an oral application?
Is one in which the applicant gives the information orally to the agent/broker who writes it down and submits it to the insurer.
Define coverage.
Is the term used for insurance protection.
When is temporary insurance useful?
Temporary insurance is useful when the insurer does not yet have certain information or confirmations required to issue the policy. Coverage is granted under a cover note or binder and on a limited time period.
Distinguish between a cover note and a binder.
Cover note - is a document issued by agents/brokers which tells the insured that the insurance described therein has been effected.
What is a deductible?
A deductible is the amount of a loss which the insured must pay. It is deducted from the total amount of loss to determine the amount the insurer must pay.
How is a binder cancelled?
Temporary insurance or binders must be cancelled the same way and the same formalities as insurance policies.
Define an insurance policy.
Is the instrument evidencing a contract. It states the exact terms and provisions of that contract, in other words, the agreement made between the insured and the insurer.
What are the basic parts of an insurance policy?
- Declarations
- Insuring agreements
- Statutory conditions/Quebec general conditions
- Policy conditions
- Signature clause
What is “contra proferentem” (against the offeror)?
It means that if there is any disagreement as to the meaning or interpretation of a policy, a court would interpret it in such a way as is most advantageous to the insured.
What is a warranty?
Is a promise by the insured as part of the contract that a specified state of affairs will continue to exist for the duration of the policy.
What is a representation?
Is a statement of existing fact at the time it was made.
What is pro rata cancellation?
Is cancellation of a policy when the return premium paid is the full proportionate part due for the unexpired term.
What is short rate or short date cancellation?
Is applicable when the policyholder cancels before a policy reaches its natural expiration. The insurer pays a return premium that is less than the proportionate or pro-rata part that is still unearned. The difference between the unearned portion and the amount refunded is used to defer admin expenses incurred in the early cancellation.
When is a reinstatement endorsement used?
A policy that has been cancelled can be put back in force upon the agreement of the insured and the insurer.
