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BFIN 341 Module 17 > Module 17 > Flashcards

Module 17 Flashcards

1
Q

What 4 things must exist for an agreement to be enforceable by law?

A

1) Consideration
2) Parties must have legal capacity
3) Parties must have the capacity to contract
4) Legal intention by both parties to contract

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2
Q

Consideration

A

Exchange of values, ie. money

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3
Q

What is the minimum age to apply for life insurance for self/others

A

16

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4
Q

What is considered an offer for the insurance applicant?

A

Filling out the application

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5
Q

What demonstrates consideration from the policy owner?

A

Payment of premiums

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6
Q

What demonstrates consideration for the insurance carrier?

A

The insurance contract itself

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7
Q

Does insurable interest need to be on the policy owner or the beneficiary?

A

Policy owner

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8
Q

Representation

A

Mistake in the policy that can be corrected

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9
Q

Warranty

A

Guarantee critical to acceptance of a particular risk - insurer relies on this for underwriting process, ie smoking

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10
Q

Material Fact

A

Fact having definite influence on decision of parties of contract, ie. cancer

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11
Q

What factor can render a contract voidable by the insurer?

A

Misrepresentation of a material fact

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12
Q

Material misrepresentation

A

Both parties of insurance contract must disclose all pertinent information

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13
Q

Mistake of Law

A

If parties are mistaken with regard to legal effect of some facts of contract

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14
Q

Concealment

A

When applicant consciously hides or skews facts

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15
Q

Incontestability Period

A

After 2 years, insurer cannot undo the policy, but within the 2 years, they if they find a misrepresentation, they can void the contract

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16
Q

Uberrimae fidei

A

Insurance contracts are made in the utmost good faith

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17
Q

How does a policy come into affect? (2 things)

A

1) Delivery of policy to policyowner

2) Collection of first premium

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18
Q

What health consideration is required for life insurance applicants?

A

Health cannot deteriorate between application and policy delivery time

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19
Q

Conditional Receipt

A

Carrier provides interim insurance if certain conditions are met

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20
Q

Aleatory

A

2 way - one party pays for insurance, other assumes risk in event of loss

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21
Q

Adhesion

A

One party sets out conditions of contract, the other party MUST accept all of it (no negotiation about conditions)

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22
Q

Unilateral

A

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

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23
Q

Declarations

A

Statement of fact by policy owner that affects risk underwriting by insurer, ex: I am overweight and smoke

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24
Q

Rating

A

Identifies level of risk relative to baseline

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25
Q

Exclusions

A

Something that the insurer will not cover, ie. preexisting health condition

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26
Q

Riders/Endorsements

A

For life insurance policies, amendments to contract that extends coverage (ie. waive premiums in case of disability)

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27
Q

Floaters

A

For property and casualty, but same as riders, ie. Add coverage of shed to home insurance policy

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28
Q

Who do you have an insurable interest on that you can insure?

A

Child, grandchild, spouse, employee or person dependent on you for support or education

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29
Q

What is the difference between requirements for insurable interest for life vs property insurance?

A

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

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30
Q

Indemnity

A

Making good the loss, no more

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31
Q

Valued Contract

A

Amount of benefit payable established in advance (ie. establish that my necklace cost $1000 so that much will be covered in case of loss)

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32
Q

Parol Evidence Rule

A

Once contract is documented in final written form, oral statements CANNOT adjust the contract

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33
Q

Subrogation

A

Transfer of rights from insured to insurer, ie. insurance company handles your MVA claim.
Does not apply to life insurance

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34
Q

Name 5 steps in Risk Management process

A
  1. Set objectives
  2. Identify risks
  3. Select strategies
  4. Implementation
  5. Monitoring
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35
Q

Name and describe 3 types of risk

A
  1. Dire - financially crippling
  2. Substantial - severe, but still able to manage
  3. Minor - small car accident
36
Q

Risk avoidance vs Risk reduction

A

obvious

37
Q

Name two risk control strategies

A

Risk avoidance and risk reduction

38
Q

Name two risk financing strategies

A

Risk Transfers/sharing and risk retention

39
Q

What is risk transfer/sharing

A

Buying insurance

40
Q

Risk retention

A

Pay for losses yourself

41
Q

Legal liability

A

Liability for consequences of negligent act

42
Q

Negligence

A

Causing death, injury or property damage by failing to be reasonable and prudent (ex: not shoveling sidewalk)

43
Q

Named Insured

A

Policy owner

44
Q

Third party

A

Person not in contract, ie. someone who hits you

45
Q

Absolute liability

A

Insurance must cover an accident no matter what, but may go after wrongdoer for the amount (ie. if suspended driver gets into accident)

46
Q

No-Fault

A

Insurer pays loss regardless of who is at fault

47
Q

Deductible

A

Portion that insured pays before getting the loss covered

48
Q

Accident Benefits

A

Covers driver (policy holder) and passengers, pedestrians. For death or injury

49
Q

Family protection

A

Additional insurance to cover injury for self, spouse or dependant

50
Q

Third party liability

A

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

51
Q

Temporary substitute automobile

A

When an insured drivers another person’s vehicle

52
Q

Collision

A

Covers damage to policy holder’s vehicle

53
Q

Comprehensive Insurance

A

Covers loss/damage to an insured automobile from fire, theft, vandalism, glass breakage

54
Q

Waiver of depreciation

A

Do not include depreciation on cost of car for a limited period of time

55
Q

Loss of use

A

Pay for rental car, taxi or public transportation while car is being repaired

56
Q

Which 2 auto insurance coverages are necessary?

A

1) Accident benefits
2) Liability (can determine amount above minimum though)
Collision insurance is rarely mandatory

57
Q

What are some considerations of the driver for the premium of car insurance?

A

1) Geographic location
2) Geographic region
3) Driving experience, driving record, age, sex, marital status
4) How car will be used

58
Q

What are some considerations of the car for the premium of car insurance?

A

1) Value of car
2) Repair/replacement cost
3) Type of vehicle, model

59
Q

Name 3 things that will make a higher premium

A

1) Lower deductible
2) Higher liability coverage
3) Collision coverage

60
Q

When do claims need to be reported to police?

A

1) When the insured plans to make a claim under the policy

2) When the collision must be reported to police

61
Q

Is home insurance mandatory?

A

Nope

62
Q

Comprehensive home insurance

A

Covers building and contents for all risks except any specifically excluded in the policy

63
Q

Basic/Named Perils home insurance

A

Covers perils specifically named in the policy

64
Q

Broad home insurance

A

Provides all peril insurance coverage for building and named-peril coverage for contents covered by policy

65
Q

No-Frills home insurance

A

Bare bones minimal insurance plan for properties that don’t meet normal standards

66
Q

Put the 4 types of home insurance in order by price (low to high)

A

No-frills, basic or named perils, broad, comprehensive

67
Q

Replacement cost

A

Provides reimbursement for cost of replacement item of similar quality and kind

68
Q

Actual Cash Value

A

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

69
Q

Which has higher premiums - replacement cost or actual cash value?

A

replacement cost

70
Q

Liability coverage (on home insurance)

A

Home insurance policies include coverage for personal liability insurance for self and others within immediate household

71
Q

When will liability coverage cover accidents at your home?

A

When the person is employed to maintain your residence

72
Q

Excess liability coverage

A

Extra liability coverage

73
Q

Business insurance

A

To insure a business

74
Q

Product liability insurance

A

For people selling/distributing product

75
Q

Professional liability insurance

A

ie if a lawyer gets sued

76
Q

Canada Health Act

A

All provinces/territories must abide by this federal legislation in order to qualify for full federal contributions for healthcare

77
Q

Name 5 criteria that must be met provincially to qualify for full cash contribution for healthcare

A

1) public administration
2) comprehensiveness
3) universality
4) portability
5) accessibility

78
Q

Resident of a province

A

Person lawfully entitled to be or remain in Canada

79
Q

What are the taxation implications for public health care?

A

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

80
Q

Name 3 categories of dental coverage

A

1) Basic preventative - check ups, filings, extractions
2) Major services - crowns, bridges
3) Orthodontic

81
Q

Coinsurance

A

percentage of eligible expenses in excess of deductible for which the plan member is responsible

82
Q

Selection

A

Policy owner can choose amount of coinsurance and deductible

83
Q

What are taxation implications for private health insurance premiums?

A

Premium paid by employer on behalf of employee is tax deductible by employer and not taxable benefit to employee

84
Q

Are any benefits from public or private health care a taxable benefit?

A

No

85
Q

Uninsurable peril

A

Things that cannot be insured in a home insurance policy such as damage from insects

86
Q

Differentiate between a burglary, robbery and theft

A

1) burglary uses force to enter the building
2) robbery uses violence
3) theft is just something stolen without force or violence

BFIN 341 Module 17 (1 decks)

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