Study 7 - Implementing the Policy

Question 1

What are the common elements of all insurance policies?

Answer 1

• Declarations page
• Insuring agreements (coverage)
• Exclusions
• Conditions
• Warranties
• Limits and deductibles
• Endorsements
• Signature clause

Question 2

What are the 5 elements of a contract?

Answer 2

Agreement
Consideration
Capacity to contract
Genuine intention
Legality of object

Question 3

What are the three principles of all insurance contracts?

Answer 3

Insurable interest
Indemnity
Utmost good faith

Question 4

What are the terms of binding authority?

Answer 4

• Classes of risks and limits brokerage can bind
• Risks that brokerages cannot bind
• The reporting requirements

Question 5

What is included on the declarations page?

Answer 5

Parties to the contract
Effective and expiry dates
Amount of the premium
The amount insured
Other interested parties

Question 6

What are some potential issues with a declarations page?

Answer 6

• Incorrect spelling of name(s) or address(es)
• Incorrect spelling of loss payee info
• Incorrect total premium
• Incorrect limits of insurance

Question 7

What are some potential issues with insuring agreements?

Answer 7

• Wordings different from presented in quote?

- Has all property been included?

Question 8

What are the three typical types of valuations for insurance policies?

Answer 8

• Actual cash value
• Replacement value
• Agreed or appraised amount

Question 9

What are some potential issues with warranties?

Answer 9

• What conditions/warranties require action or duties by the insured to maintain coverage?
• Do coinsurance clauses correspond to the amounts of insurance required to avoid under-insurance penalties?

Question 10

What are some potential issues with limits & deductibles?

Answer 10

• Are the limits of coverage different than those requested?
• Are deductibles at a reasonable level based on values of the item insured?
• Are deductibles too high for insured to afford?
• Is the insurer able to write the entire line?

Question 11

What three options may an insurer use if they cannot insure 100% of the risk?

Answer 11

• May ask broker to approach other companies to participate on subscription basis
• May contact reinsurance companies
• May arrange excess insurance

Question 12

Who typically has their signature on the signature clause?

Answer 12

The CEO and then countersigned by an agent/employee

Question 13

Define chattel

Answer 13

Any property other than freehold land and leasehold interests in land

Question 14

What are the exceptions to when assignment is allowed?

Answer 14

Bankruptcy
Operation of Law
Death of the named insured
Succession

Question 15

What is the difference between a canceled policy and a voided policy?

Answer 15

Difference between cancelled and voided policies
• To cancel a policy under the policy’s termination conditions, the insurer must send a standard letter for a pro rata cancellation.
• When a policy has been cancelled, claims that occurred before cancellation must be dealt with.
• The insurer can also declare that misrepresentations or non-disclosures made the policy void from the beginning.
• To declare a policy voided, the insurer returns the entire premium to the insured.
• A voided policy means the coverage never existed and no claims can be processed or payments made.