Chapter 5

Question 1

Define material fact

Answer 1

A fact that would affect a contract of insurance enough to influence insurer’s decision regarding whether to accept or reject the risk or the premium to set. Material facts must be disclosed by the applicant if asked about.

Question 2

What is typical information that you would find on the submission to an insurer?

Answer 2

-Name and mailing address of the client
-Location address or addresses
-A description of the business operations
-Details of the age, protection, and construction of all locations
-A complete schedule of coverages and limits of insurance required
-Vehicle descriptions including values, use, and radius of operation
-A list of drivers and they’re driving records
-Liability information such as sales, payroll, or square footage
-A minimum of five years loss history
-Name of the present insurer
-Expiry dates of the existing policy
-Date the quotation is required

Question 3

Define statement of values

Answer 3

The information required when a single rate is to cover more than one item or building. To determine a correct average the rating bureau requires the policyholder to give the value of each separate risk and its contents

Question 4

Define subscription policy

Answer 4

A single policy covering a risk that has divided among a number of insurers; the policies issued by the “lead” company (usually the one with the largest percentage) and signed by all participating companies

Question 5

What are the different ways and insurer can respond to an application?

Answer 5

Request more information
Decline to quote
Quote on all or only part of the risk
Provide no response

Question 6

Define coinsurance clause

Answer 6

A distinct section or provision in an insurance policy that requires an insured to carry separate insurance for a specified amount stated in the policy to be eligible for full coverage. If there is insufficient coverage, the insured must pay part of the loss

Question 7

What should the intermediary do when presenting the quote to the client?

Answer 7

-Explain specific items in the written proposal
-Recommend improved risk management strategies
-Document coverages accepted or declined
-Introduce any expert representative who will assist explaining the coverages provided or the insurer’s services and/or supporting materials
-Confirm that coverage has yet to be bound and that this will be done after the client selects the insurance program
-Explain the premium
-Calculate taxes on the premium where applicable
-Explain payment options and the down payment required
-Offer the intermediary services