Introduction to Insurance Flashcards
What is the main function of insurance?
Spread risk from the few to many (premiums used to pay for losses
What are the 3 types of insurance categories?
- automobile insurance-required by law-has the largest volumes
2.Property insurance-includes personal and business property- 2nd largest volumes
- Liability insurance-provides financial protection when insured is found legally responsible for causing injury or damage
What are the 2 types of insurers?
- Government- eg: EI, WCB = compulsory
2.Private- Blue Cross, Co operators
What are the two types of categories for the types of private insurers?
- Stock Companies: owned by shareholders/profit orientated
2.Mutual companies: owned by policy holders/not profit orientated
What are the 2 ways that insurance is distributed?
- Direct writer: sells its own products direct to consumer using employees, owns book of business
- Independent Broker represents more than one insurer and gets commission- clients belong to the broker.
What is the “removal clause” what does it cover?
covers property up to 7 days if moved to a location to prevent further loss. (usually insurance only good for the location named on the contract
with Fire Insurance what 2 additional perils are covered?
- Lightning damage to property
- Explosion of Coal, Natural or Manufactured Gas: excluding explosion of boilers or pressure vessels
What is the Insurers duty when when replacing vs repairing damaged property?
Repair or Replace: must provide written notice of their intent to do so within 30 days of receiving proof of loss and start the repairs or replacement within 45 days of receiving proof of loss
According to the Insurance Act, list 4 things that need to be included on the declarations page of an Insurance Contract?
- Parties to the Contract
- Loss payable to the contract
- Policy Period: starts 12.01am @ address of named insured
- Coverage and Amount of Insurance
What is “broad form” and how is it different from “named perils”
broad form insures losses not excluded on the policy where as named perils insures against losses that are listed on the policy
What is a contract?
A legally enforceable agreement between 2 or more parties
What is Consideration?
Consideration is an exchange of something of value
What is the difference between “speculative risk” and “pure risk”?
Speculative risk means that there is a chance to gain or lose whereas you can only lose with pure risk. (Pure risk is insurable but speculative risk is not)
What are the 5 elements that must be present in a legal contract?
- Agreement
- Consideration
- Legality of object
- Legal Capacity
- Genuine intention
what is it called when someone intentionally gives up a right or privelege?
A waiver
What is insurance purchased by an insurance company called?
Reinsurance
What is the main object of an insurance contract
To allow the spread of risk
What are the 4 options when dealing with a financial risk?
- Control
- Avoid
- Retention
- Transfer
What is a binder used for in insurance?
A binder is an interim contract of insurance. A temporary policy pending the actual policy
What is an endorsement?
An endorsement is issued by the insurer to show a change has been made that is agreed upon by both insured and insurer
What is solvency?
The ability for the insurer to pay all insured losses.
What is the name of the Provincial body that oversees Insurance?
The BC Insitute of Financial Institutions
What are 2 fiduciary responsibilities of a broker?
- to pay back unearned commissions held in trust if policy is cancelled before expiry
- Forward premiums collected to the Insurer.
What is Subjugation
After the insurer has indemnified the insured they have the legal right to recover losses from the at fault party by Sugjugation.
