Chapter 2 - history and functions of insurance Flashcards
What is a surety bond?
- the underwriting of Corporate Surety Bonds is not necessarily an insurance process but closer in nature to banking, but insurers are licensed to write this form of guarentee in Canada
- guarantees that the principal will perform the obligation or undertaking he or she has with a third party.
What are the categories of insurance?
1) social insurance
- provided by the government
EXAMPLES:
- hospitalization, medical plans, unemployment, workers compensation
2) life and health insurance
- provided mostly by life insurers
- provide life, accident, sickness, and disability insurance, pension and other financial services
3) general insurance/ property and casual insurance
- auto, property, business interruption, boiler and machinery, crime, liability, marine, aviation, floater, personal property, commercial property, inland transportation aka inland marine
Define automobile insurance.
- largest single class of general insurance sold in Canada
- provides coverage for legal liability to third parties, accident benefits for the insured, or direct damage to vehicle
- combo of liability, accident and disability, prop damage
Define property insurance.
- insures against loss of or damage to property, both personally owned and commercial.
- can be a multi-risk or all risk policy
Define business interruption insurance.
- provides coverage against loss of income while the property which has been damaged or destroyed by an insured peril is being rebuilt or restored.
- extra expense insurance provides for extra expenses incurred after a loss has occurred.
Define boiler and machinery insurance.
- specialized type of property insurance
- covers types of heating/AC installations, industrial machinery and equipment that standard property policies don’t
- also provides business interruption coverage for such property
Define crime insurance.
includes:
- burglary, robbery, theft, fidelity insurance
(fidelity insurance relates to dishonest acts of employees from stealing cash from the till, to bookkeeping fraud)
Define liability insurance.
- insurance against claims arising out of bodily inury or death of another person or loss/damage ro property of others
Define marine insurance.
- provides both hull (ship) and cargo insurance
- and liability arising out of bodily injury or death of person or loss of/damage property of others.
Define aviation insurance.
- provides hull (plane) insurance and liability arising out of bodily injury or death of person or loss of/damage property of others.
- also aviation general liability policy which covers liability risks arising out of the ownership, maintenance, or operation of airports.
Define floater policies.
- refers to policies which cover items of property that are portable and could be found at different locations.
Define personal property insurance.
- may be insured on individual floaters but its more common to attach a special form called an endorsement to a residential policy
EXAMPLES: - furs, jewellery, sports equipment, electronics, fine arts.
Define commercial property floaters.
- portable items of a commercial nature
EXAMPLES: - contractors equipment, electric or neon signs, patterns, tools, livestock
Define inland transportation insurance.
aka inland marine insurance
- insures against loss of/damage to goods while in transit on land, or during delay incidental to transit.
EXAMPLES: - parcel post, registered mail, trip transit, salespersons’ samples
BUT ALSO INCLUDES: - bridges, wharves, power transmission lines, tunnels, radio, television, and micro-wave transmission towers aka instruments of transportation or communication.
How do you spread the risk?
1) Diversity of type of risk
- large loss in one area, hope that another area offsets or profits in another
2) Volume
- insure large numbers of risks
- maximizes profit
3) Diversity of location
- different geographic locations
(so that one natural disaster doesn’t result in a lot of claims at the same time)
