Chapter 3 Flashcards
What are the main components of an insurance policy?
An insurance policy will generally consist of the following: • heading; • preamble; • signature clause; • operative clause; • exclusions; • conditions; • policy schedule; and • information and facilities.
What is the purpose of the operative clause?
The operative clause outlines the actual cover provided by the policy. It is, therefore, essentially the most important section of the policy.
What is the difference between general exclusions and specific exclusions?
General exclusions apply to all sections of the policy, while specific exclusions only apply to particular parts of the policy.
What policy conditions are common to most general insurance policies?
The common policy conditions are as follows:
• the insured must observe and fulfil all the terms of the policy;
• the duty of disclosure is a continuing duty (i.e. it amends the common law position);
• duties of the insured in the event of a claim;
• fraudulent claims condition;
• mitigation clause;
• contribution;
• subrogation;
• average;
• arbitration; and
• cancellation.
What is the difference between an excess, a franchise and a deductible?
An excess is the first amount of each and every claim for which an insured is responsible. A deductible is, in essence, a very large excess. A franchise is a fixed amount (or time period) acting as a threshold to determine whether a claim is payable. If this threshold is exceeded, the claim is paid in full; if not, nothing is payable.
What is a warranty in an insurance policy?
A warranty in an insurance contract is a promise made by the insured relating to facts or performances concerning the risk; it is an undertaking by the insured that something will/will not be done, or that a certain fact does/does not exist.
What three groups or categories can policy conditions be divided into?
Conditions in an insurance policy can be divided into the following three groups:
• conditions precedent to the contract;
• conditions subsequent to the contract;
• conditions precedent to liability.
What are the essential differences between a warranty and a representation?
Warranties must be strictly and literally complied with, are written into the policy (unless implied) and give the insurer the right to repudiate any breach relevant to a loss/damage. A representation is not normally in the policy, need only be substantially correct and allows repudiation of a claim only if a breach is material.
