Key Terms

Question 1

Risk

Answer 1

The chance of financial loss to which the object of insurance is exposed.

Question 2

Speculative Risk

Answer 2

The possibility of financial loss or gain.

When people speculate, there is always a chance the venture will fail. Not insurable.

Question 3

Pure Risk

Answer 3

The chance of financial loss which does not, at the same time, offer a chance of financial gain.

Only pure risk is insurable.

Question 4

Insurance

Answer 4

The undertaking by one person to indemnify another person against loss or liability for loss in respect of a certain risk or peril to which the object of insurance may be exposed… or to pay a sum of money or other thing of value upon the happening of a certain event.

Question 5

Contract

Answer 5

An agreement between two or more persons which creates an obligation to do or not to do a particular thing.

Question 6

Consideration

Answer 6

An exchange of something or value between the parties.

Question 7

Insurable Interest

Answer 7

People have an insurable interest in the subject matter of an insurance contract when they are able to show that they would suffer financially by a loss.

Question 8

Utmost Good Faith

Answer 8

The law requires that insurance contracts maintain a higher standard of honesty than is needed of other contracts. The complete honesty of the parties is viewed as critical to the contract. (Applies to insured, insurer and broker)

Question 9

Indemnity

Answer 9

People receive the actual amount of their loss, no more and no less.

Question 10

Insurance Binder

Answer 10

A temporary agreement in which the insurer agrees to provide certain coverages pending the issuance of the policy.

Question 11

Agency Agreement

Answer 11

A written agreement or contract between the insurer and the brokerage which acknowledges their relationship.

Question 12

Void Contract

Answer 12

Unable in law to support the purpose for which it was intended. Deemed “never have existed”.

Question 13

Voidable Contract

Answer 13

Void as to the wrongdoer but not void as to the wronged party, unless he elects to so treat it.

Question 14

Peril

Answer 14

The cause of the loss.

Question 15

Direct Loss

Answer 15

When the object of insurance is actually attacked by an insured peril.

Question 16

Indirect Loss

Answer 16

Losses which arise as a consequence of direct losses (ex: loss of food in freezer when electrical motor malfunctions).

Question 17

Actual Cash Value

Answer 17

the new or replacement cost of the property at the time of the loss, less depreciation.

Question 18

Replacement Cost

Answer 18

The cost to repair or replace the lost or damaged property with new property of like kind and quality, without deduction for depreciation.

Question 19

Valued Policy

Answer 19

Both the insured and the insurer will agree at the time the policy is issued as to the cash value of the property. In the event of a loss, the agreed amount would be paid.

Question 20

Blanket Coverage

Answer 20

Policy which provides a single limit of insurance for all property falling within a specific class.

Question 21

Scheduled Coverage

Answer 21

Covered property is itemized on the policy.

Question 22

Fiduciary

Answer 22

One who occupies a position of special trust or confidence in the handling or supervising of the affairs or funds of another.

Question 23

Unearned Premiums

Answer 23

Premiums not yet earned by the insurer. Unearned premiums are deemed to be held in trust in order to refund the insureds in event the policy is cancelled prior to expiry date.

Question 24

Fire

Answer 24

Involves the presence of a visible flame or glow, actual ignition or burning is required.

Question 25

Friendly Fire

Answer 25

One that is contained to its proper receptacle.

Question 26

Hostile Fire

Answer 26

One that passes outside the limits assigned to it. Fire insurance policies only cover hostile fires)

Question 27

Proximate Result

Answer 27

Damages which arise from a natural and continuous sequence of the peril causing loss.

Question 28

Material Change

Answer 28

Any change within the control and knowledge of the insured which arises after the policy has been issued and serves to increase the chance of loss.

Question 29

Pro Rata

Answer 29

Basis of return premium calculation when the insurer cancels a policy. The amount of the return premium is arrived at by dividing the amount of premium paid by the number of days in the policy period. The number so obtained (amount to be refunded) is determined by multiplying that amount by the number of days remaining in the policy period.

Question 30

Short Rate

Answer 30

The basis of return premium calculation when the insured cancels the policy. The amount of the return premium is equivalent to that provided on a pro rata basis, less any administrative charge or cancellation penalty.

Question 31

Notice of Loss

Answer 31

Immediate report of loss to insurer by the insured or his representative (agent) in writing.

Question 32

Proof of Loss

Answer 32

A formal verification, under oath, of the details and amounts being claimed under the policy.

Question 33

Fraud

Answer 33

A deliberate attempt to deceive, with a view to securing some profit.

Question 34

Deductible

Answer 34

The amount the insured is required to absorb for each loss for which insurance coverage is provided before receiving any payment from the insurer.

Question 35

Subrogation

Answer 35

When the insurer has paid a claim for loss caused by a third party, the Insurance Act allows the insurer to place itself "in the insureds shoes" in respect of their right to recover the amount of the loss from the responsible party.

Question 36

Proprietary Insurers

Answer 36

Insurance companies who exist to make a profit or return on their investment. May be incorporated or unincorporated.

Question 37

Non-Proprietary Insurers

Answer 37

Insurance companies which are organized for reasons other than profit. They are owned and controlled by their policy holders who have banded together to secure insurance at as low a cost as possible. No stock or share capital involved.

Question 38

Personal Property

Answer 38

Contents of insured's dwelling and other personal property owned, worn or used by the insured while on the premises, which is usual to the ownership or maintenance of a dwelling.

Question 39

Additional Living Expense

Answer 39

Coverage that provides for additional cost of living elsewhere when the dwelling is damaged by an insured peril and the damage is sufficient to make the dwelling unfit for occupancy, or requires that the insured move out while repairs are being made. Also provides for loss of fair rental value if part of the dwelling was rented or being held for rental at the time of the loss.

Question 40

Vandalism

Answer 40

The wilful or ignorant destruction of property

Question 41

Vacant

Answer 41

Referring to the circumstances where, regardless of the presence of furnishing, all occupants have moved out with no intention of returning and no new occupant has taken up residence; or, in the case of a newly constructed house, no occupant has yet taken up residence

Question 42

Theft

Answer 42

Includes all means of taking property without the owner's consent

Question 43

Mobile Home

Answer 43

A home which is factory built on its own chassis and which can be easily moved

Question 44

Condominium

Answer 44

A system of separate ownership of individual units in (a) multiple unit building

Question 45

Endorsement

Answer 45

An extra sheet(s) or slip(s) of paper attached to the policy indicating in writing that the insured and the insurer have agreed to a change in the terms of the insurance contract

Question 46

Fine Arts

Answer 46

Traditionally includes paintings, pictures, etchings, tapestries and other bona fide works of art of rarity, historical value or artistic merit

Question 47

Criminal Law

Answer 47

Category of law that deals with wrongs against society

Question 48

Civil Law

Answer 48

Law that concerns itself with settling disputes between individuals or other legal entities in matters not involving a criminal act

Question 49

Plaintiff

Answer 49

The party making the complaint (suing someone)

Question 50

Defendant

Answer 50

The party who allegedly committed the wrong

Question 51

Tort

Answer 51

A wrong done to another in breach of a duty laid down by law

Question 52

Strict Liability

Answer 52

Doctrine in law in which "a person is guilty until proven innocent"

Question 53

Negligence

Answer 53

The omission to do something which a reasonable man, guided by those ordinary considerations which ordinarily regulate human affairs, would do, or the doing of something which a reasonable and prudent man would not do

Question 54

Special Damages

Answer 54

Damages which can be accurately measured and which are intended to reimburse the plaintiff for out-of-pocket expenses

Question 55

General Damages

Answer 55

Damages which cannot be exactly determined but which reflect an amount the court believes necessary to compensate the aggrieved party fairly

Question 56

Trespasser

Answer 56

Is one who is on another's premises for his/her own purpose without the express or implied permission of the occupier. Their presence is of no value to the occupier and such persons are viewed as having temporarily appropriated the property for their own use

Question 57

Licensee

Answer 57

A licensee is someone who comes on to the premises for his own purpose but with the occupiers consents OR A licensee is someone who goes upon the lands of another with express or implied invitation to transact business with the owner or occupant or to do some act to his advantage or to the mutual advantage of both the licensee and the owner or occupant

Question 58

Invitee

Answer 58

Someone who enters by invitation, be it express or implied. His entry is connected with the owner's business or with an activity the owner conducts or permits to be conducted on his land and there is a mutual benefit or benefit to the owner

Question 59

Visitor

Answer 59

Classification given to a licensee or invitee under Provincial Occupier's Liability Acts

Question 60

Joint Liability

Answer 60

When two or three people act together so as to cause injury or damage, they are held to be jointly liable

Question 61

Farming

Answer 61

Ownership, maintenance or use of premises for the production of crops or the raising or care of livestock, including all necessary operations *Includes the operation of roadside stands and farm markets maintained principally for the sale of the insureds own farm products

Question 62

Custom Farming

Answer 62

Use of insured's farm machinery or equipment for others away from insured's farm premises for compensation. It does not include work done for others in return for work done by them

Question 63

Residence Employee

Answer 63

Those whose duties are exclusively in connection or maintenance and use of the residence premises

Question 64

Farm Employee

Answer 64

Those paid for their work and who are hired on a part time, seasonal or full time basis to perform duties principally connected with farming activities OR Persons engaged in farm related work on behalf of the insured in a neighbourly exchange of assistance for which the insured is not obliged to pay any money

Question 65

Pink Card

Answer 65

In provinces where automobile insurance is provided by private insurers, a PINK CARD is used to provide proof of financial responsibility OR In provinces having compulsory government insurance plans, the PINK COPY of the certificate or registration serves as proof of financial responsibility

Question 66

Facility Association

Answer 66

An insurance pool in which all licensed automobile insurers participate and which provides insurance to those who may be refused insurance by private insurers

Question 67

Driver's Abstract

Answer 67

A record of the driver history of the applicant and other drivers which can be obtained from provincial licensing authorities

Question 68

Pure No Fault Auto Plan

Answer 68

Removes the right of legal action against owners or drivers who cause injury or death to others. Instead, all accident victims, or their legal representatives, may claim compensation from their own insurers (This plan is used in Manitoba and Quebec)

Question 69

Threshold No Fault Auto Plan

Answer 69

Used in Ontario. Under this plan, legal action against the responsible party is not permitted unless a certain "threshold" is exceeded. While this threshold may be monetary, it may also relate to the severity of injuries sustained

Question 70

Unsatisfied Judgement Fund

Answer 70

When losses are caused by uninsured drivers, the innocent victim(s) may be left with no compensation for their losses. Funds have been established in all provinces to ensure that the victims of these accidents are provided with some level of compensation

Question 71

Uninsured Automobile

Answer 71

One in which neither the driver nor the owner has collectible bodily injury liability insurance (as defined in Accident Benefits Coverage)

Question 72

Unidentified Automobile

Answer 72

One in which the identity of either the owner or driver cannot be ascertained and which causes bodily injury or death to an insured person arising out of actual contact of that automobile with the automobile in which the insured is an occupant

Question 73

General Average

Answer 73

Designed to provide payment for ocean marine losses voluntarily incurred for the safety of the entire venture. The insurers of the parties whose property was saved shall contribute to the losses of the parties whose property was sacrificed

Question 74

Temporary Substitute Automobile

Answer 74

One which is temporarily being used as a substitute for the automobile described on the policy. It qualifies only if the described automobile cannot be used because of its breakdown, repair, servicing, loss, destruction or sale

Question 75

Occupant

Answer 75

Any person who drives the automobile or is being carried on or upon or entering into or leaving the automobile

Question 76

Newly Acquired Automobile

Answer 76

One which replaces an automobile described on the policy or is in addition to others owned by the insured which are all insured by the same insurer

Question 77

Step Licensing

Answer 77

A step licensing system is a system which requires a higher degree of knowledge for each increasing step

Question 78

Ethics

Answer 78

The principles of conduct governing an individual or group

Question 79

Professional/Professionalism

Answer 79

A professional is one who posses special skills or knowledge

Question 80

Self-Regulation

Answer 80

The right of an industry to govern its own affairs

Question 81

Insured

Answer 81

An Insured Applicant, his Spouse and any Dependent Children

Question 82

Insured Applicant

Answer 82

A Canadian resident under age 65, insured under the government health insurance plan of his Province or Territory of Residence, who has been named on an invoice/application issued by his broker

Question 83

Extended Family

Answer 83

The dependent child, spouse, parent, guardian, brother, sister and grandparent of the Insured Applicant or spouse

Question 84

Accident

Answer 84

An unforeseen and unintended occurrence due to external, violent, sudden, fortuitous caused beyond the Insured's control

Question 85

Sickness

Answer 85

Bodily sickness or disease, contracted and commencing after the policy is issued and while the policy is in effect

Question 86

Injury

Answer 86

Bodily injury caused by an Accident occurring while the Insured is insured here under