Chapter 2 Flashcards
Define Indemnify
To provide compensation for loss or expenses incurred
Define CONTRACT
An agreement or promise between two parties that is I tended to be legally enforceable and is constituted by the acceptance by one party of an offer made by another party, to do or to abstain from doing a specific act.
The offer and acceptance may either be expressed or inferred through the conduct of the parties
Define AGENT
A person licensed and authorized or employed to act on behalf of another
Define BROKER
A licensed independent person or firm who acts on behalf of an insured in placing business with insurance companies
Define ADJUSTER
One who investigates insurance claims, makes recommendations regarding payment of benefits from insurance policies and negotiates payments and settlements
Define INDEPENDENT ADJUSTER
One who adjusts losses on behalf of the insurance companies but is not employed by any one insurance company
Define PUBLIC ADJUSTER
An insurance claims adjuster representing an insured on a fee basis in a claims settlement
Give 3 examples of how an insurance company achieves spread of risk
Volume- insuring a large number of risks - the premiums of the many are pooled to pay for the losses of the few
Diversity of type of risk: if several types of risks are insured, the chance for underwriting profit increases because loss in one class of business may be offset by better than average profit in other classes
Diversity of location: the opposite profit increases with the greater number of locations insured
Define aid to security
Insurance gives peace of mind by substituting a certain premium in place of an unknown loss payment.
Enhancing the feeling of security removing uncertainty allows for many actions that are critical to society- like property ownership or entrepreneurship
What is aid to credit
Granters of credit want to protect their investment - it is virtually impossible to obtain credit without having insurance on the item concerned.
Mortgage- house insurance
New car- proof of insurance
Define telematics
An interdisciplinary girl with telecommunications, vehicular tech, road safety, road transportation and electrical engineering like gps internet - provides safe driving discounts
Define unearned premium
The part of the premium that has not been used or earned or premium representing the unexpired portion of the policy
Define earned premium
The portion of premium earned or charged for the period of time a policy remained effective.
An amount calculated by taking earned premium reserve at the beginning of the period plus the premium written during the period minus the unearned premium reserve at the of the period
Premium actually exposed to loss
Define unearned premium reserve
A reserve fund of an insurance company or reinsurance company representing the unearned premiums
Insurance business is divided into two basic categories- what are they?
Life/Health Insurance
General Insurance
General Insurance is also known as:
Property and casualty insurance
What is property insurance
First party insurance that indemnifies the owner or user for its loss or it’s loss of income producing ability when the loss is caused by a coveted peril (such as fire or explosion)
Define casualty insurance
The area of insurance not particularly or directly concerned with life insurance or automobile insurance.
Most frequently refers to liability, burglary and plate glass insurance but also fidelity and surety
List 5 types of general insurance
Accident- provides benefits for loss as a result if bodily injury
Auto- combining liability to 3rd parties, bodily injury benefits to insureds as defined by the policy and damage to the insured auto
Aviation- covers aircrafts of all types as well as liability associated with operation of aircraft, airstrips and airfields.
Business interruption/ covers loss of income while insured property is being rebuilt or business is being restored after a loss
Casualty- not particularly or directly concerned with life or fire insurance. Particularly bodily and personal injury, crime insurance, robbery, burglary, surety bonding
Cyber- covers liability for damages arising from a cyber attack
Fire- covers losses resulting from fire, lightning and limited explosions
What does real property I suranné cover?
Covers instrumentalities of transportation and communication
Dams, wharves, power transmission lines, pipelines, bridges
What does personal articles and personal effects floaters cover?
Jewelry, fine art, silverware, computer equipment, sports equipment, firearms
What does liability coverage include?
Entire spectrum from personal liability to liability resulting from ownership of premises, operations, products, rendering of professional services, libel, slander.
Virtually any situation where one individual might hold another person responsible for their action or lack of action that resulted in an injury or damage to that individual or that person’s property
What are the five secondary functions of insurance
Aiding security Aiding credit Promoting loss prevention Providing capital Providing employment
What is source of capital?
Capital is money or assets of value- the resource an organization uses to accomplish its goals.
For insurers capital is the value of the company (its shares), the physical property and the premiums it collects
Insurance companies invest large amounts of this money in to the Canadian economy in bonds, stocks, properties (for their own use)
