Study 8 Key Terms

Question 1

Define insurance policy

Answer 1

A written contract of insurance that provides evidence that a contract exists. It states in detail the terms of the contract; that is, the terms of the agreement between insurer and insured.

Question 2

Define standard forms

Answer 2

Any insurance form worded identically by all insurance companies, generally to meet the requirements of local legislation.

Question 3

Define manuscript wording

Answer 3

Policy wording that does not conform to the standard wording in general use within the insurance industry and that is unique to the policy involved.

Question 4

Define certificate of insurance

Answer 4

Written document stating that insurance is in effect. Includes general statement of policy’s coverage.

Question 5

Define renewal certificate

Answer 5

A short-form certificate issued at renewal, referring to the expiring policy and stating that its provisions, clauses, and exceptions continue for another term.

Question 6

Define endorsement

Answer 6

An amendment added to a written document, particularly an agreement between parties, altering its provisions.

Question 7

Define cover not

Answer 7

A document with insurance, or the insurance protection provided.

Question 8

Define binder

Answer 8

A written or oral agreement given by an insurer to insure a risk, pending the issuance of a formal policy. A binder is deemed to be the policy and must be cancelled in the same manner.

Question 9

Define interim receipt

Answer 9

A temporary measure to insure in an agreed manner while waiting for the completed policy to be issued. Also known as a “binder.”

Question 10

Define declarations

Answer 10

Statements included in a policy that are agreed to by the insured and form the basis of the contract of insurance.

Question 11

Define policy conditions

Answer 11

Provisions that state the rights and duties of the insured or insurer.

Question 12

Define subscription policy

Answer 12

A single policy covering a risk that is divided among a number of insurers; the policy is issued by the “lead” company (usually the one with the largest percentage) and signed by all participating companies.

Question 13

Define pro rata cancellation

Answer 13

Cancellation of an insurance policy or a bond with the return premium credit being the full proportion of premium for the unexpired term of the policy.

Question 14

Define short rate cancellation

Answer 14

The cancellation by the insured of a policy before its natural expiration; the insurer pays a return premium that is less than the proportionate part that remains unearned.

Question 15

Define void contract

Answer 15

An illegal contract. In the law, a contract that was never made or never existed. For example, one cannot enter into a contract to commit an illegal act like theft and have it stand up in court. Such a contract is considered a void contract.

Question 16

Define renewal receipt

Answer 16

A certificate attesting that an insurance policy has been extended for another term.

Question 17

Define renewal certificate

Answer 17

A short-form certificate issued at renewal, referring to the expiring policy and stating that its provisions, clauses, and exceptions continue for another term.