Module 17 Flashcards
What 4 things must exist for an agreement to be enforceable by law?
1) Consideration
2) Parties must have legal capacity
3) Parties must have the capacity to contract
4) Legal intention by both parties to contract
Consideration
Exchange of values, ie. money
What is the minimum age to apply for life insurance for self/others
16
What is considered an offer for the insurance applicant?
Filling out the application
What demonstrates consideration from the policy owner?
Payment of premiums
What demonstrates consideration for the insurance carrier?
The insurance contract itself
Does insurable interest need to be on the policy owner or the beneficiary?
Policy owner
Representation
Mistake in the policy that can be corrected
Warranty
Guarantee critical to acceptance of a particular risk - insurer relies on this for underwriting process, ie smoking
Material Fact
Fact having definite influence on decision of parties of contract, ie. cancer
What factor can render a contract voidable by the insurer?
Misrepresentation of a material fact
Material misrepresentation
Both parties of insurance contract must disclose all pertinent information
Mistake of Law
If parties are mistaken with regard to legal effect of some facts of contract
Concealment
When applicant consciously hides or skews facts
Incontestability Period
After 2 years, insurer cannot undo the policy, but within the 2 years, they if they find a misrepresentation, they can void the contract
Uberrimae fidei
Insurance contracts are made in the utmost good faith
How does a policy come into affect? (2 things)
1) Delivery of policy to policyowner
2) Collection of first premium
What health consideration is required for life insurance applicants?
Health cannot deteriorate between application and policy delivery time
Conditional Receipt
Carrier provides interim insurance if certain conditions are met
Aleatory
2 way - one party pays for insurance, other assumes risk in event of loss
Adhesion
One party sets out conditions of contract, the other party MUST accept all of it (no negotiation about conditions)
Unilateral
One party agrees to fulfill conditions of contract so long as the other party does their part. Ex: the insured can stop paying at any time and loses their coverage
Declarations
Statement of fact by policy owner that affects risk underwriting by insurer, ex: I am overweight and smoke
Rating
Identifies level of risk relative to baseline
Exclusions
Something that the insurer will not cover, ie. preexisting health condition
Riders/Endorsements
For life insurance policies, amendments to contract that extends coverage (ie. waive premiums in case of disability)
Floaters
For property and casualty, but same as riders, ie. Add coverage of shed to home insurance policy
Who do you have an insurable interest on that you can insure?
Child, grandchild, spouse, employee or person dependent on you for support or education
What is the difference between requirements for insurable interest for life vs property insurance?
Life insurance must only have insurable interest at time contract is issued, then can be transferred to someone without insurable interest.
Property - must have insurable interest at time of contract formation and at time of loss
Indemnity
Making good the loss, no more
Valued Contract
Amount of benefit payable established in advance (ie. establish that my necklace cost $1000 so that much will be covered in case of loss)
Parol Evidence Rule
Once contract is documented in final written form, oral statements CANNOT adjust the contract
Subrogation
Transfer of rights from insured to insurer, ie. insurance company handles your MVA claim.
Does not apply to life insurance
Name 5 steps in Risk Management process
- Set objectives
- Identify risks
- Select strategies
- Implementation
- Monitoring
Name and describe 3 types of risk
- Dire - financially crippling
- Substantial - severe, but still able to manage
- Minor - small car accident
Risk avoidance vs Risk reduction
obvious
Name two risk control strategies
Risk avoidance and risk reduction
Name two risk financing strategies
Risk Transfers/sharing and risk retention
What is risk transfer/sharing
Buying insurance
Risk retention
Pay for losses yourself
Legal liability
Liability for consequences of negligent act
Negligence
Causing death, injury or property damage by failing to be reasonable and prudent (ex: not shoveling sidewalk)
Named Insured
Policy owner
Third party
Person not in contract, ie. someone who hits you
Absolute liability
Insurance must cover an accident no matter what, but may go after wrongdoer for the amount (ie. if suspended driver gets into accident)
No-Fault
Insurer pays loss regardless of who is at fault
Deductible
Portion that insured pays before getting the loss covered
Accident Benefits
Covers driver (policy holder) and passengers, pedestrians. For death or injury
Family protection
Additional insurance to cover injury for self, spouse or dependant
Third party liability
Coverage for if policy owner’s vehicle injures another party or damages property and policy owner is liable. If resulting claim exceeds the available coverage, you need to pay the rest out of pocket
Temporary substitute automobile
When an insured drivers another person’s vehicle
Collision
Covers damage to policy holder’s vehicle
Comprehensive Insurance
Covers loss/damage to an insured automobile from fire, theft, vandalism, glass breakage
Waiver of depreciation
Do not include depreciation on cost of car for a limited period of time
Loss of use
Pay for rental car, taxi or public transportation while car is being repaired
Which 2 auto insurance coverages are necessary?
1) Accident benefits
2) Liability (can determine amount above minimum though)
Collision insurance is rarely mandatory
What are some considerations of the driver for the premium of car insurance?
1) Geographic location
2) Geographic region
3) Driving experience, driving record, age, sex, marital status
4) How car will be used
What are some considerations of the car for the premium of car insurance?
1) Value of car
2) Repair/replacement cost
3) Type of vehicle, model
Name 3 things that will make a higher premium
1) Lower deductible
2) Higher liability coverage
3) Collision coverage
When do claims need to be reported to police?
1) When the insured plans to make a claim under the policy
2) When the collision must be reported to police
Is home insurance mandatory?
Nope
Comprehensive home insurance
Covers building and contents for all risks except any specifically excluded in the policy
Basic/Named Perils home insurance
Covers perils specifically named in the policy
Broad home insurance
Provides all peril insurance coverage for building and named-peril coverage for contents covered by policy
No-Frills home insurance
Bare bones minimal insurance plan for properties that don’t meet normal standards
Put the 4 types of home insurance in order by price (low to high)
No-frills, basic or named perils, broad, comprehensive
Replacement cost
Provides reimbursement for cost of replacement item of similar quality and kind
Actual Cash Value
Insurer will value loss based on actual value considering age, depreciation, obsolescence. You get a cheque for that amount, but can spent it on whatever you want
Which has higher premiums - replacement cost or actual cash value?
replacement cost
Liability coverage (on home insurance)
Home insurance policies include coverage for personal liability insurance for self and others within immediate household
When will liability coverage cover accidents at your home?
When the person is employed to maintain your residence
Excess liability coverage
Extra liability coverage
Business insurance
To insure a business
Product liability insurance
For people selling/distributing product
Professional liability insurance
ie if a lawyer gets sued
Canada Health Act
All provinces/territories must abide by this federal legislation in order to qualify for full federal contributions for healthcare
Name 5 criteria that must be met provincially to qualify for full cash contribution for healthcare
1) public administration
2) comprehensiveness
3) universality
4) portability
5) accessibility
Resident of a province
Person lawfully entitled to be or remain in Canada
What are the taxation implications for public health care?
1) If province taxes employer to help cover cost of provincial health services, no taxable benefit
2) If individual pays premium himself, no tax deduction
3) If employer pays premium on behalf of employee, taxable benefit
Name 3 categories of dental coverage
1) Basic preventative - check ups, filings, extractions
2) Major services - crowns, bridges
3) Orthodontic
Coinsurance
percentage of eligible expenses in excess of deductible for which the plan member is responsible
Selection
Policy owner can choose amount of coinsurance and deductible
What are taxation implications for private health insurance premiums?
Premium paid by employer on behalf of employee is tax deductible by employer and not taxable benefit to employee
Are any benefits from public or private health care a taxable benefit?
No
Uninsurable peril
Things that cannot be insured in a home insurance policy such as damage from insects
Differentiate between a burglary, robbery and theft
1) burglary uses force to enter the building
2) robbery uses violence
3) theft is just something stolen without force or violence
