Chapter Two Flashcards

Question

Legality of Object

Answer 1

The contract must be for a lawful purpose. | "Additional Elements to a Contract"

Answer 2

Both parties must have genuine intent to enter into a legally enforceable contract. * Both parties must enter into the contract by their own free will. * Both parties must have a clear understanding of the contract terms and conditions. * Examples of unfair business practices include fraud, deceit, non-disclosure of important facts, coercion, duress, force, or the use of undue influence. The fundamental difference between a contract and a simple agreement (Offer & Acceptance) is that contracts are enforceable by law. | "Additional Elements to a Contract"

Answer 3

A contractual requirement that both parties in an agreement must perform their obligations. If either party doesn't perform their obligations, the law may treat the agreement as invalid. * Any changes must be advised to the insured. * A person has up to 2 weeks (no limit in Quebec) to reject contract after notice of changes. | "The Five Elements of All Contracts"

Answer 4

Refers to the legal ability of a person to enter into a contract. * All parties involved in the contract must be considered legally competent and capable. * Competency and Capacity are generally presumed of an individual unless that person is a minor, mentally incapacitated, insane, under duress or intoxicated. | "The Five Elements of All Contracts"

Answer 5

Insured property made up from many parts. * The insurer is only responsible to pay for the damaged parts and the service of repairing them (not the entire). * ie) If a patio door has a damaged window, the insurer doesn’t pay for replacement of the entire door, or for a new window frame, they only only pay for the repair of the broken glass itself.

Answer 6

Increases in hazard which occur after the insurance policy has been issued. * These must be disclosed if the hazard increases beyond that of the initial hazard present at the creation of the contract.

Answer 7

A portion of the loss which is paid by the insured before they are entitled to receive any payment from the insurance company. The amount in excess of the deductible (if any) will then be received. * Dollar amount - most common * Percentage amount - Specialty insurance (aviation, marine, earthquake, etc.) * Franchise clause - no deductible if loss is greater than a specific amount.

Answer 8

Requirements regarding the actions and behaviors of the insured. * Coverage can be denied if the breach of a condition is directly related to the cause of the loss. * There are both general and statutory conditions. * ie) Maintenance of fire alarms as a condition for insurance.

Answer 9

An additional rate for insuring aditional perils. This rate will be over and above the fire rate. * Fire Rate - Building $0.64 * Extended Coverage (Named Perils) Policy Loading - $0.04 * Broad Form Building (All Risk) Policy Loading - $0.06 ie) A loading of $0.04 for extended coverages (named perils) could be offered versus a $0.06 loading for all risk coverage. If all risk coverage is chosen, that rate combined with the fire rate ($0.64 per $100 of insurance) would amount to $0.70 per $100 of insurance.

Answer 10

A form used by applicants for insurance to make a formal request or offer to enter into a contract with the insurance company. The application is designed by the insurance company in order to evaluate the risk involved. The underwriter must make an informed assessment of the physical hazard and, as much as possible, the extent of moral hazard pertaining to the applicant. Existing law allows insurer to void the insurance policy if the insured witheld a material fact.

Answer 11

An offer which is unconditionally accepted by the other party. * A counter-offer makes original offer invalid. * Negotiation does not make an agreement. Once accepted, the offer cannot be withdrawn, but it can be cancelled in accordance with the termination provisions included in the offer. | "The Five Elements of All Contracts"

Answer 12

A written contract of insurance or a certificate between the insurance company and the insureds that states the details of the insurance. * Includes all documents (clauses, riders, endorsements, etc.) attached to and forming a part of the contract between the parties. * Many insurance companies use model contracts provided by IBC (Insurance Bureau of Canada), and IFC (Informco) rather than developing their own policies. * There is no one standard insurance policy used by all insurance companies.

Answer 13

The cover page of the insurance contract. Includes: * Name of insurance company * Policy Period * Property being insured * Amounts or limits of insurance Brokers must review and countersign on behalf of the insurance company. Failure to properly review endorsements, riders, floaters, etc. can result in future claims problems and omission claims against the brokerage.

Chapter Two Flashcards

Understanding Contracts (37 cards)