Study 1 Critical Thinking Questions Flashcards
What is required of a person for him or her to recover for loss or damage to
property covered by property insurance?
To recover for loss or damage to property covered by property insurance, a person
or company must have an insurable interest in that property. That is, the person or
company must stand to benefit from the continued existence of that property or be
prejudiced by its loss.
What additional principles distinguish insurance policies from other types of
contract?
Insurance policies are also distinguished from other types of contract by the additional principles of indemnity and insurable interest, which we discussed
above. A third additional principle is the principle of uberrimae fidei, or utmost good faith, which requires the insured to act with a high standard of honesty and
disclose those facts that a reasonable person ought to know are material.
Why do insurance policies often include deductibles?
A deductible is the insured’s portion of a covered loss. Small, frequent losses are
expensive for insurers to handle and process. To avoid the expenses of handling and
processing small losses, and to reduce premiums for insureds, a deductible is
applied to each loss. Insureds may choose to have their deductible increased in
return for a reduction in their insurance premiums.
What function do exclusions serve in an insurance policy?
N/A
How did the Fire and Extended Coverage Policy come to be?
Responding to consumer need and competitive pressure, insurers began
to move beyond the few perils insured against under the Basic Fire Policy, creating policy wordings that included coverage for additional perils. In time, these additional perils were combined with those covered under the Basic Fire Policy to create a Fire and Extended Coverage Policy.
How much freedom do insurers have to design property policies as they choose?
Today, insurers will often combine the policy forms, covering various classes of
business in package policies that are referred to as multi-peril policies. Combining coverage in one package policy is efficient for insurers and insureds alike.
What must be identified in all property insurance policies to make the intent of coverage clear?
all property insurance policies must identify the named insured and the subject matter of insurance so that the intent of the policy is clear. That is, a property policy must state who is covered and what is covered.
Why would a mortgagee be eligible for protection under a property insurance policy?
Mortgagees and other lenders who
have accepted insured property as security for their loans will be prejudiced by the
loss, damage, or destruction of that property, so they have an insurable interest in it.
What is the difference between first- and third-party insurance?
Property insurance is first-party insurance. It protects the insured—the first party to the insurance contract—against the risk of financial harm resulting from loss or damage to the insured property. Along with the named insured, first parties to the contract may also include other parties with insurable interest in the property, as well as lenders covered under a Mortgage clause and the owners of property in the care of the insured and for which the insured is liable.
In contrast, liability insurance is third-party insurance. It protects the insured against the risk that another person or organization not party to the insurance contract—a third party—will suffer loss or injury for which the applicant is legally liable.
What distinction is made in legislation between personal and commercial
property insurance?
Property insurance includes personal lines insurance and commercial lines insurance. Those categories are not observed in either the Civil Code of Québec or the Insurance Acts.
How do insurance companies distinguish between personal and commercial
property insurance?
Personal lines, or habitational, insurance covers dwellings, detached structures, and personal property belonging to private individuals such as homeowners, tenants, and condominium unit owners. It includes various policy forms and endorsements or riders that are used to provide broader coverage on personal articles such as jewellery, watches, furs, cameras, and musical instruments. Endorsements or riders may also be issued to provide enhanced coverage on objects such as fine arts, paintings, and outboard motors and boats. Personal lines policies typically do not cover business activity. But an insurer may cover personal lines risks that include small, non-hazardous business activities. Often, the insurer will charge an additional premium for such activities. The types of business activity that will be deemed acceptable will vary by insurer.
Commercial lines insurance covers businesses. It is sold to insureds ranging from small, family-run businesses to large, multinational businesses. It is sold to individual proprietorships, partnerships, corporations, and cooperatives. It is sold to retailers, wholesalers, suppliers, and manufacturers. As its size and complexity increase, a business entity will require better, broader, types of commercial insurance coverage. Commercial lines policies provide both property and liability coverage for businesses.
What kinds of document do insurers use to provide personal property
insurance?
Insurance is a contract: an agreement or promise between two or more persons, or parties, that is intended to be legally enforceable. The written form of the insurance contract is issued by the insurer to the insured as a policy
