Key Terms

Question 1

Deductible

Answer 1

The amount of money a policyholder pays out of pocket first before the insurance begins to cover the balance.
E.g. Loss = $4000; Deductible = $500; Insurer pays $3500.

Question 2

General Insurance

Answer 2

Any insurance product other than travel, life or health insurance.

Question 3

Hazard

Answer 3

Any condition that increases the risk or chance of loss occurring or increases the amount of damage that may happen if there were a loss.
E.g. Exposed electricals, wet ground

Question 4

Indemnify

Answer 4

The action compensating an insured following a loss under the insurance policy.

Question 5

Indemnity

Answer 5

The contractual obligation by the second party (the insurer) to put the first party (the insured) back in the same financial position they were in at the time the loss occurred.

Question 6

Insured/Policyholder

Answer 6

The person or entity who purchases an insurance policy. (First party)

Question 7

Insurer

Answer 7

The insurance company who issues an insurance policy. (Second party)

Question 8

Moral Hazard

Answer 8

Subjective characteristics of an insured or an applicant for insurance that increases the likelihood of loss.
E.g. Dishonesty

Question 9

Object of Insurance

Answer 9

The item that is insured or covered in an insurance policy.

Question 10

Peril

Answer 10

A cause of loss.
E.g. Fire, wind, theft, falling objects, weather, vandalism.

Question 11

Physical Hazard

Answer 11

Observable conditions relating to the object of insurance.
E.g. Tight spaces, height, heat, construction.

Question 12

Premium

Answer 12

The sum of money paid by a person to an insurance company in exchange for an insurance policy.

Question 13

Principle of Indemnity

Answer 13

A basic rule of insurance stating that policyholders receive the actual amount off their loss, no more and no less.

Question 14

Property and Casualty (P&C) Insurance

Answer 14

Another name for general insurance.
Property insurance is coverage for homes, business assets, equipment, and more.
Casualty insurance is coverage against finding a legal responsibility for causing injury to another person or damage to their property.

Question 15

Pure Risk

Answer 15

The chance of financial loss with no chance of financial gain.

Question 16

Registered Insurance Broker

Answer 16

An insurance broker in Ontario who is governed by the Registered Insurance Brokers (RIB) Act.

Question 17

Reinsurance

Answer 17

A form of insurance that can be purchased by an insurance company to limit the amount of loss it might experience at any one time.

Question 18

Registered Insurance Brokers of Ontario (RIBO)

Answer 18

A self-governing, self-funded organization of general insurance brokers in Ontario.

Question 19

Risk

Answer 19

The chance of financial loss occurring, or an object or activity that insured or about to be insured.

Question 20

Risk Retention/Self-insurance

Answer 20

A conscious decision on the part of an organization to self-insure all or a portion of losses rather than purchasing insurance (that is, a planned acceptance of future losses).

Question 21

Speculative Risk

Answer 21

The possibility of either financial loss or gain.

Question 22

Binder

Answer 22

A written or oral agreement giving temporary insurance protection, pending issuance of the insurance policy by the insurer.

Question 23

Broker Binding Authority

Answer 23

The power given to a brokerage under a contractual agreement allowing the brokerage to immediately provide insurance coverage to an applicant up to a pre-agreed limit without first receiving approval from an underwriter.

Question 24

Broker Portal

Answer 24

A software program downloaded to the broker policy management system that allows brokers to upload and download a policy information data to a specific insurance company’s portal.

Question 25

Direct Writer

Answer 25

An insurance company that sells policies directly to customers, typically through call centres and online.