Insurance Definitions Flashcards
Consideration
is a requirement of all contracts in the common law provinces. It is what one party gives or promises to give in exchange for the act or promise of the other party to the contract.
Indemnity
is a principle of insurance by which insureds, up to the limit of the policy, are fully compensated for the actual cash value of what they have lost, so that they neither gain nor lose as a result of the loss
Actual cash value
is the current cost of replacing an article with a similar one in the cash condition
Rate
The rate is the price of a unit of insurance (usually $100 or $1,000) for a period of one year. It is expressed either in dollars and cents or as a percentage.
Premium
The premium is the amount of money an insurance company charges to provide coverage for a specific item or policy.
Broker
A broker is an independent business person who may place business with any number
Speculative Risk
Exists where there is either a chance of loss or a chance of profit.
Special Risk
The insurance relating to large industrial firms such as factories, multi-location stores ect.
Diversity of Location
Is the writing of insurance in as many different locations as practical.
Diversity of Type of Risk
Writing insurance on as many different kinds of risk as possible.
What is the primary function of Insurance?
To spread risk.
Agents
Represent one insurer and also assist in arranging insurance contracts between applications and insurers.
Contract
Is the agreement enforceable at law, which sets out in detail the arrangements between insured and insurer concerning premiums.
Insurer
Is the one who manages the fund, collects premiums from the insureds, settles with those who suffer loss and carries all the functions that are incidental to these operations.
Moral Hazard
Relates to conditions attributable to the human element of risk.
Insured
Is a member who contributes to the fund by paying premiums and who receives reimbursement from the fund if a loss is suffered.
Physical Hazard
Refers to the subject matter of insurance and concerns those facts which an be ascertained by inspection of the risk.
Hazard
Is a condition which may cause a peril to occur or make the loss more severe.
Negligence
Being the doing of something a reasonable person would not do or the omission to do something a reasonable person would do is the peril insured in LIABILITY INSURANCE.
Peril
Is an event which may cause a loss to occur.
Commercial Lines
The insurance relating to commercial operations such as stores, professional offices ect.
Pure Risk
Entails a chance of loss but no chance of profit.
ex. if an individual owns an automobile, the chance of financial loss arising out a collision constitutes pure risk.
Risk
In simple terms, means chance of loss.
Personal Risk
Encompass the chance of loss arising from one’s own bodily injury or loss of life or loss of income.
Property Risk
Encompass the chance of loss arising from the destruction of or damage to property.
Liability Risks
Encompass the chance of loss arising from an individual’s obligation to pay damages because of injury or death of another damage to another’s property.
Personal Lines
The insurance relating to individuals in their private capacity.
Binder
is the confirmation that insurance coverage is in effect. It can be oral or written.
Binding Authority
Is the capacity to confirm to applicants that they have coverage against certain happenings or events which, if they occur, may cause financial loss.
Cover Note
Is a notice and confirmation to the insurer that it has been bound to a contract of insurance in accordance with the details given.
Commision
Is the share of the premium allowed to the broker/agent for having produced the business.
Profit Commision
Is an extra commission paid annually to a broker/agent.
Application
Is a request for insurance; it could be oral or written.
Exposure
Is the danger or loss, particularly fire, arising from what happens to another risk close by.
Net Worth
Is assets less liabilities.
Assets
Are all of a company’s wealth.
Liablities
Are money owing.
Coding
Is the use of symbols such as number or letters to represent information appearing in policies or loss records.
Net Premiums
Are premiums after the producer’s commission has been deducted.
Coverage
Is the term used for insurance protection.
Utmost good faith
Implies a standard of honesty greater than that usually required in most ordinary contracts.
Misrepresentation
Is misleading the insurer as to material facts affecting a policy or the settlement of a loss either by directly lying or by not disclosing certain information.
Material Fact
Is something affecting a contract of insurance important enough to change the agreement between the company and the policyholder.
Deductible
Is the amount of a loss which the insured must pay.
Statutory Conditions (common law provinces)
are conditions required by law as promulgated by provincial legislatures.
General Conditions (Quebec)
Are statutory in nature in that provincial legislation sets out the subject matter that must be covered by these conditions although it does not specify thee exact words that must be used.
Policy
Is the instrument evidencing a contract. It states the exact terms and provisions of the contract, in other words, the agreement made between the insured and the insurers.
Subscription Policy
Is used usually to insure large risks.
Endorsement
Means any writing on the back of a policy which varies the terms of the contract.
Pro Rata Cancellation
Is cancellation of a policy when the return premium paid is the full proportionate part due for the unexpired term.
Short Rate or Short Date Cancellation
Is applicable when the policyholder cancels before a policy reaches its natural expiration.
Nondisclosure or Concealment
Means that failure to disclose a material fact.
To Void a policy
Means to treat it as if it never existed.
Plaintiff
is the one who brings a lawsuit against another who is called the DEFENDANT.
Extension Policies
Provide coverage over and above that provided by the basic compulsory government plans. They are often used to increase limits and/or reduce deductibles. They may be issued by a government insurer or by private insurers.
Driver’s Abstract
Is a record of an individual’s driving convictions which insurers may obtain from provincial Motor Vehicle Departments.
Minimum Limits
Are the smallest amount of Third Party Liability insurance that may be purchased in any Canadian jurisdiction.
Priorities of Payment
Specify how much a minimum policy limit will apply to bodily injury claims and how much will apply to property damage claims in situations where there is not enough insurance to cover all the combined claims.
Property damage (P.D)
Refers to damage to the property of others, not the insured’s own property.
Bodily injury (B.I)
Refers to any claims resulting from injury to or death of persons other than the insured as defined in the policy.
Onus of Proof
Means burden of proof.
Threshold
Denotes the degree of injury that must be sustained to allow a civil action against the at-fault motorist.
No-fault
is the term used to describe a system for improving the compensatory process for automobile accident victims by eliminating costly and lengthy litigation.
Simply it means paying certain claims without reference to who was at fault.
Tortfeasor
Is a wrongdoer or in other words, the party responsible for the accident.
No-fault benefit schedule
is a schedule stating the benefits and amounts that will be paid under the policy.
Collateral benefits
Are any sources of entitlement outside of the automobile policy.
Deductible
is the amount of a loss which the insured must pay himself.
Direct Compensation
Is the system of recovering damages for which a third party motorist is responsible from one’s own insurer.
Fault Charts
Are a series of charts and rules for the determining fault in various types of accident situations.
Primary Insurance
Is first pay insurance.
Proof of Loss
Is a sworn declaration by a insured giving detail of the claim which is being made.
Salvage
Is the property remaining after the loss which still has some value.
