Study 8 Learning Objectives

Question 1

LO1 Describe the function of the following insurance documents: insurance policies,
certificates of insurance, cover notes and binders, and endorsements.

Answer 1

The following state the details of the insurance contract and its future promise to make
good a loss suffered by the insured:
o Insurance policy forms—state the exact terms and provisions of agreement made between
insured and insurer; can be standard or manuscript wording.
o Certificates of insurance—certify the existence of the insurance; includes renewal certificates.
o Binders and cover notes—legally binding temporary insurance; can be oral or written.
o Endorsements—attached to insurance policy to vary the terms of the contract.

Question 2

Explain the purpose of the sections commonly found in insurance policies

Answer 2

• Insurance policies vary depending on the type of coverage provided, but typically have
five main sections:
1. Coverage summary—states parties to the contract; start date, term, and end date; premium and
rate; and amount insured.
2. Insuring agreements—state subject of insurance; perils covered; exclusions; and how proceeds
of insurance are to be paid.
3. Statutory Conditions/Quebec General Conditions—apply to auto, accident and sickness, and
fire policies.
4. Policy conditions—state the rights/duties of insured/insurer.
5. Signature clause—signed by insurer only.

Question 3

Explain how insurance policies can be assigned, terminated, or renewed.

Answer 3

• An insurance contract cannot be assigned by an insured to another individual.
  o Some exceptions to this rule include assignment under the Bankruptcy Act or death of insured.
• Insureds may assign the proceeds of policies without the consent of their insurers.
• Auto, accident and sickness, and fire policies can only be terminated by following the
  terms of the Statutory Conditions/Quebec General Conditions.
• A void contract is one that never existed in the eyes of the law.
• Renewals may be done in two ways:
  o Specific instructions to the insurer from the insured or agent or broker
  o Automatic renewal