Key Terms and Definitions

Question 1

Risk

Answer 1

The chance of financial loss to which an object of insurance is exposed

Question 2

Speculative Risk

Answer 2

The chance of financial gain or loss

Question 3

Pure Risk

Answer 3

The chance of financial loss but no chance of financial gain

Question 4

Insurance

Answer 4

The undertaking of one person to indemnify another against loss or the liability for loss in respect to certain risk or peril the object of insurance may be exposed.

Question 5

Contract

Answer 5

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

Question 6

Consideration

Answer 6

The exchange of something of value between parties.

Question 7

Insurable Interest

Answer 7

One has an insurable interest in the subject matter of insurance when they will suffer financially by a loss

Question 8

Utmost Good Faith

Answer 8

The high standard of honesty that insurers, brokers and insureds are held to when forming insurance contracts.

Question 9

Indemnity

Answer 9

The application of the principal of indemnity ensures that people receive the actual amount of their loss, no more no less.

Question 10

Insurance Binder

Answer 10

A temporary agreement of the insurer to provide specific coverages pending the issue of the policy.

Question 11

Agency Agreement

Answer 11

A written contract between the insurance company and the brokerage that acknowledges their relationship.

Question 12

Void Contract

Answer 12

One which is unable in law to support it’s intended purpose, and is considered never to have existed.

Question 13

Voidable Contract

Answer 13

One which may be voided at the option of the wronged party, but not by the wrongdoer.

Question 14

Peril

Answer 14

The cause of loss.

Question 15

Direct Loss

Answer 15

Occurs when the peril insured actually attacks the object of insurance.

Question 16

Indirect loss

Answer 16

Losses which arise as a consequence of direct loss.

Question 17

Actual Cash Value

Answer 17

New or replacement cost at the time of loss, minus depreciation

Question 18

Replacement Cost

Answer 18

The cost to repair or replace the property at the time of loss with with property that is new or of like quality, without deduction for depreciation.

Question 19

Valued Policy

Answer 19

Both the insured and the insurer agree at the time the policy is issued as to the value of the property being insured. When loss occurs, the agreed amount will be paid.

Question 20

Blanket Coverage

Answer 20

A single limit of insurance for all property that falls in a specific class.

Question 21

Scheduled Coverage

Answer 21

Covered property is itemized on the policy

Question 22

Fiduciary

Answer 22

A person held in a special position of trust and confidence who handles the financial affairs of another.

Question 23

Unearned Premiums

Answer 23

Premiums not yet earned by the insurer which are held in trust to refund the insured in the event of the cancellation of the policy before the term ends.

Question 24

Fire

Answer 24

The presence of a visible flame or glow. Actual ignition or burning is required.

Question 25

Friendly Fire

Answer 25

One which is contained within its proper receptacle.

Question 26

Hostile Fire

Answer 26

One which passes outside the limits assigned to it.

Question 27

Proximate Result

Answer 27

Damage which arises from a natural or continuous sequence of events from the peril causing the loss.

Question 28

Material Change

Answer 28

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

Question 29

Pro Rata

Answer 29

The rate in which refunds will be calculated to the insured when the insurer cancels the policy.

The amount of premiums paid divided by the number of days in the policy, multiplied by the remaining days unused.

Question 30

Short Rate

Answer 30

The rate of return that the insured will receive a refund when they cancel a policy.

Refunded premiums will be calculated pro rata, minus deduction for cancellation fees and administrative charges.

Question 31

Notice of Loss

Answer 31

A written notice submitted immediately by the insured, or the broker on the insured’s behalf, to the insurer in the event of a loss.

Question 32

Proof of Loss

Answer 32

A formal verification under oath detailing the loss and amounts being claimed under the policy

Question 33

Fraud

Answer 33

The deliberate act of deception with the intent to gain a profit

Question 34

Deductible

Answer 34

Amount the insured is required to absorb for each loss for which insurance is provided before receiving payment from the insurer

Question 35

Subrogation

Answer 35

When the insurer has paid a claim for a loss caused by a third party, the Insurance Act allows the insurer to place itself “in the insured’s 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 which exist to make a profit or return on their investment

Question 37

Non-Proprietary Insurers

Answer 37

Insurance companies which are organized for reasons other that profit.
They are owned and controlled by their policyholders and their mandate is to secure insurance at as low a cost as possible.

Question 38

Personal Property

Answer 38

Contents of the 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

Vandalism

Answer 39

The willful or ignorant destruction of property.

Question 40

Malicious Act

Answer 40

Wrongful act done without legal justification or excuse.

Question 41

Vacant

Answer 41

Refers to circumstances where, regardless of the presence of furnishings, all occupants have moved out with no intention of returning and no new occupant has taken up residence.

Question 42

Theft

Answer 42

Includes all means of taking property without the owner’s consent.

Question 43

Additional Living Expenses

Answer 43

Coverage that provides for additional cost of living elsewhere when the dwelling is damaged by an insured peril and the damage is sufficient t make the dwelling until 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 44

Mobile Home

Answer 44

A home that is factory built, on it’s own chassis, and which can be easily moved.

Question 45

Condominium

Answer 45

A system of separate ownership of individual units in a multi unit building.

Question 46

Endorsement

Answer 46

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

Question 47

Fine Arts

Answer 47

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

Question 48

Criminal Law

Answer 48

Category of law that deals with wrongs against society.

Question 49

Civil Law

Answer 49

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

Question 50

Plaintiff

Answer 50

The party making the complaint (suing someone)

Question 51

Defendant

Answer 51

The party who allegedly committed the wrong.

Question 52

Tort

Answer 52

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

Question 53

Strict Liability

Answer 53

Doctrine in law in which “a person is guilty until proven innocent”

Question 54

Negligence

Answer 54

The omission to do what a reasonable person guided by the normal considerations regulating human affairs would do, or the doing of something a reasonable person would not do.

Question 55

Special Damages

Answer 55

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

Question 56

General Damages

Answer 56

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

Question 57

Trespasser

Answer 57

Is one who is on another’s premises for his or her own purpose without the express or implied permission of the occupier.

Question 58

Licensee

Answer 58

A licensee is someone who comes onto the premises for his own purpose but with the occupier’s consent.

A licensee is someone who goes upon the lands of another with express or implied invitation to transact business with the owner or occupant to their own advantage or to the mutual advantage of licensee and occupier.

Question 59

Invitee

Answer 59

Someone who enters by invitation be it express or implied.
Their entry is connected with the owner’s business or with an activity the oner conducts or permits to be conducted on the land and there is mutual benefit or benefit to the owner.

Question 60

Visitor

Answer 60

Classification given to a licensee or invitee under provincial Occupier’s Liability Acts.

Question 61

Joint Liability

Answer 61

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

Question 62

Farming

Answer 62

Ownership, maintenance or use of premises in the production of crops or the care or raising of livestock including all necessary operations.
Also farm markets and roadside stands where they sell the products of the farm.

Question 63

Custom Farming

Answer 63

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

Question 64

Residence Employee

Answer 64

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

Question 65

Farm Employee

Answer 65

Those paid for their work principally connected with farming activities outside the insured’s dwelling, or doing work o behalf on the insured in a neighborly exchange of assistance and there is no obligation to pay.

Question 66

Pink Card

Answer 66

In provinces where automobile insurance is provided by private insurers, a pink card is used to provide proof of financial responsibility.

In provinces having government insurance plans, the pink copy of the certificate of registration serves as proof of financial responsibility.

Question 67

Facility Association

Answer 67

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 68

Driver’s Abstract

Answer 68

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

Question 69

Uninsured Automobile

Answer 69

One in which neither the driver nor the owner has collectible bodily injury liability insurance.

Question 70

Unidentified Automobile

Answer 70

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 out that automobile with the automobile in which the insured is an occupant.

Question 71

General Average

Answer 71

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 72

Temporary Substitute Automobile

Answer 72

One which is temporary 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 73

Occupant

Answer 73

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

Question 74

Newly Acquired Automobile

Answer 74

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 75

Step Licensing

Answer 75

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

Question 76

Ethics

Answer 76

Principals of conduct that governing an individual or group.

Question 77

Professional

Answer 77

A professional is one who possesses special skills or knowledge. They are committed to continuing education, and are a member of an association that regulates their field.

Question 78

Self Regulation

Answer 78

The right of an industry to govern its own affairs.

Question 79

Accident

Answer 79

Means an unintentional or unforeseen occurrence due to external, violent, sudden fortuitous causes beyond the insured’s control.

Question 80

Extended Family

Answer 80

Means the dependent child, spouse, parent, guardian, brother, sister and grandparent of the insured applicant or spouse.

Question 81

Insured

Answer 81

Means an insured applicant, their spouse and any dependent children

Question 82

Insured Applicant

Answer 82

A Canadian resident under 65, insured under their provincial medical insurance plan, who has been named on an invoice application issued by a broker.

Question 83

Sickness

Answer 83

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