Study 1-2: Key terms

Question 1

Fraud

Answer 1

(1) Methods used to deceive to cause an unwarranted favourable decision for one’s own benefit. (2) Deliberate misrepresentation or misstatement. (3) Concealment of facts that should at the time be made known.

Question 2

Misrepresentation

Answer 2

Incorrect or missing information about a material fact that is offered, or not, by an applicant or insured with or without the intent to mislead.

Question 3

Material fact

Answer 3

A fact that would affect a contract of insurance enough to influence an insurer’s decision regarding whether to accept or reject the risk or the premium to be set. Material facts must be disclosed by the applicant if asked about.

Question 4

Claim

Answer 4

The assertion of a demand made by one party against another for indemnity or restitution for personal injury or property damage arising out of negligence or a contractual right.

Question 5

Vehicle identification number

Answer 5

The number usually found on the dashboard of a vehicle on the driver’s side, usually listed on the vehicle registration and title. The VIN is a combination of letters and numbers 17 characters in length that can be used to identify the make, model, and year of a car.

Question 6

Utmost good faith

Answer 6

A legal principle calling for the highest standards of integrity on the part of the insured and the insurer.

Question 7

Indemnity

Answer 7

A contract, expressed or implied, to repay in the event of a loss. The insured neither gains nor loses.

Question 8

Broker

Answer 8

A licensed independent person or firm who acts on behalf of an insured in placing business with insurance companies.

Question 9

Producer

Answer 9

A broker or an agent who sells insurance.

Question 10

Intermediary

Answer 10

(1) The agent/broker negotiating insurance or reinsurance contracts for another. (2) Any party representing another party, in negotiation with a third party.

Question 11

Agent

Answer 11

A person licensed and authorized or employed to act on behalf of another.

Question 12

Independent agent

Answer 12

An agent who contracts with two or more insurance companies to sell their insurance policies to the public.

Question 13

Captive agent

Answer 13

Agents who place all their business with one insurance company. In some instances, they may be salaried employees of the company; in others, they have a contract to write only business that would be acceptable to the one insurance company and are paid on a commission basis.

Question 14

Errors and omissions (E&O) insurance

Answer 14

An insurance form that protects the insured against liability for committing an error or omission in the performance of professional duties. Generally, such policies are designed to cover financial losses rather than liability for bodily injury or property damage.