Key Terms

Question 1

Risk.

Answer 1

Risk refers to the chance of financial loss to which an object of insurance is exposed.

Question 2

Insurance.

Answer 2

Insurance means the undertaking by one person to indemnify another person against loss or liability for loss in respect of a certain risk or peril to which the object of the insurance may be exposed. OR to pay a sum of money or other thing of value uipon the happening of a certain event.

Question 3

Speculative Risk.

Answer 3

Involves the possibility of either financial loss or gain. When people speculate, there’s always a chance that the venture will fail.

Question 4

Pure Risk.

Answer 4

Involves the chance of financial loss which does not, at the same time, offer a chance of financial gain. When there is no opportunity for a person to profit from a loss, the risk is pure. Only pure risk is insurable.

Question 5

Contract.

Answer 5

A “contract” is an agreement between two or more persons which creates an obligation to do or not to do a particular thing.

Question 6

Consideration.

Answer 6

Is an exchange of something of value between the parties. The following forms include: a return promise, an act performed, or an agreement not to act.

Question 7

Insurable Interest.

Answer 7

People have an insurable interest in the subject matter of an insurance contract when they are able to show that they would suffer financially by a loss.

Question 8

Utmost Good Faith.

Answer 8

The law requires that insurance companies maintain a higher standard of honesty than is needed of other contracts. The complete honesty of the parties is viewed as critical to the contract.

Question 9

Indemnity.

Answer 9

Ensures that people receive the actual amount of their loss, no more and no less. Indemnity is measured by the value of the insured property as it existed immediately prior to a loss.

Question 10

Void.

Answer 10

A Void contract is one which is unable in law to support the purpose for which it was intended.

Question 11

Voidable.

Answer 11

A voidable contract is one which is void as to the wrongdoer but not void as to the wronged party unless he elects to so treat it.

Question 12

Insurance Binders.

Answer 12

The broker has committed the insurer to provide a contract of insurance on the subject matter under discussion. Insurance binders may be oral or written and contain all details to be incorporated into the policy.

Question 13

Agency Agreement.

Answer 13

An insurer’s Agency Agreement will provide the brokerage with the authority to bind the insurer for certain classes of risks and limits.

Question 14

Peril.

Answer 14

A peril is defined simply as “ the cause of the loss”.

Question 15

Direct Loss.

Answer 15

When the object of insurance is actually attacked by an insured peril, the loss to that object is a direct loss.

Question 16

Indirect Loss.

Answer 16

These are losses which arise as a consequence of direct loss. e.g. Loss of food in a freezer when electrical motor malfunctions.

Question 17

Actual Cash Value.

Answer 17

The new or replacement cost of the property at the time of the loss, less depreciation.

Question 18

Replacement Cost Policies.

Answer 18

The repair or replacement of lost or damaged property with new property of like kind and quality without deduction or depreciation.

Question 19

Valued Policies.

Answer 19

Both the insured and the insurer will agree at the time the policy is issued as to the cash value of the property , in the event of a loss, the agreed amount would be paid. e.g. old jewelry, antiques etc.

Question 20

Scheduled Coverage.

Answer 20

A building or expensive equipment, the policy may provide a limit for each item.

Question 21

Blanket Coverage.

Answer 21

A single limit of insurance for all property falling within a specific class.

Question 22

Fiduciary.

Answer 22

A fiduciary is one who occupies a position of special trust or confidence in the handling or supervising of the affairs or funds of another.

Question 23

Unearned Premiums.

Answer 23

Unearned premiums are held in trust in order to refund the insureds in the event the policy is cancelled prior to expiry date.

Question 24

Fire.

Answer 24

The presence of a visible flame or glow. For fire to occur, actual ignition or burning is required.

Question 25

Friendly Fire.

Answer 25

A friendly fire is one that is contained in its proper receptacle. If damage is caused to property deliberately introduced to a friendly fire there's no insurance coverage.

Question 26

Hostile Fire.

Answer 26

Once a fire passes outside the limits assigned to it, it becomes a hostile fire. Fire insurance policies are intended to provide coverage for losses arising fro hostile fires only.

Question 27

Proximate Result.

Answer 27

The policy will pay for all damages which arise proximately, or as a natural and continuous sequence of the peril causing the loss. e.g. Damage caused by water and other extinguishing agents, covered under the fire policy.

Question 28

Material Change.

Answer 28

A material change is any change within the control and knowledge of the insured which: arises after the policy has been issued; and serves to increase the chance of loss. It is something substantial and continuing.

Question 29

Pro Rata.

Answer 29

The amount of the refund to which the insured is entitled shall be calculated on a pro rata basis. The insurer divides the amount of the premium paid by the number of days in the policy period. The amount to be refunded is determined by mul

Question 30

Short Rate Basis.

Answer 30

When the insured terminates the policy the amount of the refund is calculated on a short rate basis. The insurer is allowed to deduct certain admin costs which would not have been incurred had the policy been allowed to remain in force for the contracted term.

Question 31

Notice of Loss.

Answer 31

Notice of loss will be given to the Insurer forthwith "immediately" and in writing.

Question 32

Proof of Loss.

Answer 32

Proof of loss is a formal verification, under oath, of the details and the amounts being claimed under the policy. It is to be filled as soon as practicable.

Question 33

Fraud.

Answer 33

Fraud is defined as a deliberate attempt to deceive, with a view to securing some profit. An honest mistake in a proof of loss doesn't constitute fraud.

Question 34

Deductible.

Answer 34

A deductible represents the amount the insured is required to absorb for each loss for which insurance coverage is provided before receiving any payment from the insurer. There is only one deductible applied to the total amount claimed for loss or damage arising out of a single event.

Question 35

Subrogation.

Answer 35

Subrogation means to put into another's shoes. The Insurance Acts allow the insurer to place itself in the insured's shoes in respect of their right to recover the amount of their loss from the responsible party.

Question 36

Proprietary Insurers.

Answer 36

Exist to make a profit, may either be incorporated or unincorporated. The majority of all insurance written today is written by incorporated proprietary insurers. An example is Lloyds of London.

Question 37

Non-proprietary Insurers.

Answer 37

Organized for reasons other than profit. Owned and controlled by their policyholders who have bonded together to secure insurance at a low cost. No stock or share capital involved. (eg. mutuals, co-operatives)

Question 38

Personal Property.

Answer 38

Homeowners forms provide three different Insuring Agreements for personal property including: 1) On Premises Coverage 2) Off Premises Coverage 3) Property of Students

Question 39

Additional Living Expenses.

Answer 39

The Insuring Agreement provides three coverages including: Additional Living Expense, Fair Rental Value, and Civil Authority. Pays 'additional living expenses' only. Payment is limited to those expenses which were necessarily incurred in order for the insureds to maintain their normal standard of living.

Question 40

Vandalism.

Answer 40

The wilful or ignorant destruction of property.

Question 41

Malicious Act.

Answer 41

A wrongful act done without legal justification or excuse.

Question 42

Vacant.

Answer 42

Referring to the circumstances where, regardless of the presence of furnishings, all occupants have moved out with no intention of returning and no new occupant has taken up residence; or, in the case of a newly constructed house, no occupant has yet taken up residence.

Question 43

Theft.

Answer 43

This is the broadest form of crime coverage available to insureds. Theft includes all means of taking property without the owner's consent. Considerable damage can occur when there has been an unsuccessful theft attempt.

Question 44

Mobile Home.

Answer 44

To insure conventional dwellings, the main differences have been identified as: a) Description of dwelling amended: appliances, furniture and equipment forming a permanent part of the building, permanently attached carports or garages, and awnings, skirting, porches and tie down equipment. b) Emergency Removal Expenses Included: Expenses incurred in disconnecting water and power services and, towing or transporting costs.

Question 45

Condominium.

Answer 45

A system of separate ownership of individual units in a multiple unit building. Common elements include: parking area, landscaping, and recreational areas.

Question 46

Endorsement.

Answer 46

An endorsement is an extra sheet attached to the policy indicating in writing that the insurer and the insured have agreed to a change in the terms of the insurance contract.

Question 47

Fine Arts.

Answer 47

Objects comprising fine arts may include: paintings, pictures, other works of art of rarity, historical value, or artistic merit including: rare books or valuable rugs.

Question 48

Criminal Law.

Answer 48

Criminal law deals with the wrongs against society. It relies upon a system of punishment as a means of enforcing its many rules, all of which are defined by statute in the Criminal Code.

Question 49

Civil Law.

Answer 49

Civil law is concerned with settling disputes between individuals or other legal entities in matters not involving a criminal act.

Question 50

The plaintiff.

Answer 50

The party doing the complaining, initiates the action against the defendant.

Question 51

The Defendant.

Answer 51

The defendant, the party who allegedly committed the wrong.

Question 52

Tort.

Answer 52

A tort is a wrong done to another in breach of a duty laid down by law. It is not a breach of contract.

Question 53

Negligence.

Answer 53

Negligence is the legal equivalent of carelessness. Negligence is the omission to do something which a reasonable man, guided by those ordinary considerations which ordinarily regulate human affairs, would do, or the doing of something which a reasonable and prudent man would not do.

Question 54

Strict Liability.

Answer 54

Activities that give rise to strict liability normally involve situations in which harm to others would result should a mishap occur. Because a person undertaking such activities is usually in a better position to understand the potential danger involved in an extremely hazardous situation, its reasonable to hold that person strictly accountable should someone be harmed. "A person is guilty until proven innocent."

Question 55

Special Damages.

Answer 55

Special damages can be accurately measured and are intended to reimburse the plaintiff for out of pocket expenses. Included are medical, hospital, and nursing fees.

Question 56

General Damages.

Answer 56

These are damages which cannot be quantified with precision in monetary terms but reflected in an amount that the court believes necessary to compensate the aggrieved party fairly. Pain and suffering, loss of future earnings, mental anguish and shock.

Question 57

Trespasser.

Answer 57

Trespassers are people who are on another's premises for their own purposes without the express or implied permission of its occupier.

Question 58

Licensee.

Answer 58

One who comes on to the premises for his own purpose but with the occupier's consent. For example, postal workers, or meter readers.

Question 59

Invitee.

Answer 59

A person is an invitee on land of another if: a) He enters by invitation, express, or implied. b) His entry is connected with the owner's business or with an activity the owner conducts or permits to be conducted on his land. c) There is a mutuality of benefit or benefit to the owner.

Question 60

Visitors.

Answer 60

A common duty to take all reasonable care to ensure that all visitors are reasonably safe in using the premises.

Question 61

Joint Liability.

Answer 61

When two or more people act together so as to cause injury or damage, they are said to be "joint tortfeasers", meaning they are jointly liable.

Question 62

Farming.

Answer 62

The ownership, maintenance, or use of premises for the production of crops or the raising or care of livestock, including all necessary operations. Includes the operation of roadside stands and markets selling the insured's own farm products.

Question 63

Custom Farming.

Answer 63

The use of farm equipment for others away from your farm premises for compensation.

Question 64

Residence Employees.

Answer 64

Whose duties are exclusively in connection with the maintenance or use of the residence premises.

Question 65

Farm Employees.

Answer 65

Those who are paid to perform duties principally connected with farming activities outside the insured's dwelling. These employees represent the greatest risk. Those who help the insured with farm related work in a neighbourly way where the insured is not obligated to pay any money.

Question 66

Pink card.

Answer 66

In provinces where auto insurance is available by private insurers a pink card is used to provide proof of financial responsibility.

Question 67

Unsatisfied Judgement Fund.

Answer 67

When loses are caused by uninsured drivers, funds have been established in all provinces to ensure that the victims of these accidents are provided with some level of compensation.

Question 68

Facility Associations.

Answer 68

To ensure the availability of coverage for applicants who are refused insurance by private insurers, in each province a Facility Association has been established. All insurers writing auto insurance are members and share in the pool.

Question 69

Pure No Fault.

Answer 69

In Manitoba and Quebec, this plan removes the right of legal action against the owners or drivers who cause injury or death to others. All accident victims may claim compensation from their own insurers.

Question 70

Threshold No Fault.

Answer 70

In Ontario, legal action against the responsible party is not permitted unless a certain threshold is exceeded.

Question 71

Driver's Abstract.

Answer 71

The insurer will request a record of the driver's history of the applicant and other drivers from provincial licensing authorities.It's important that all parties of the contract be properly identified.

Question 72

Uninsured Automobile.

Answer 72

Neither the driver or the owner has applicable and collectible bodily injury liability insurance.

Question 73

Unidentified Automobile.

Answer 73

One that causes bodily injury or death to an insured person arising out of actual contact of that auto with the auto in which the insured is an occupant.

Question 74

General Average.

Answer 74

Even though there's no loss to the insured's automobile, the insurer agrees to participate in the general averaging of the amount of the loss among all insurers of autos.

Question 75

Occupant.

Answer 75

Occupant means any person who drives the automobile or, is being carried in or upon or entering into or leaving the automobile. An occupant doesn't have to actually be inside the automobile for coverage to apply.

Question 76

A Newly Acquired Automobile.

Answer 76

Not applicable in BC. Is automatically insured when it replaces an automobile described on the policy and, is in addition to others owned by the insured and which are all insured by the same insurer. Coverage is provided for 14 days.

Question 77

A Temporary Substitute Automobile.

Answer 77

A car being temporarily used as a substitute for the car described on the policy. It cannot be owned by persons living in the same dwelling or another car owned by the insured. It can only fall within this category if the temporary car is used because the car on the policy cannot be used due to a breakdown or needed repair.

Question 78

Step Licensing.

Answer 78

CAIB is offered as a step licensing program. Level !, Level II, and Level III.

Question 79

Ethics.

Answer 79

The principles of conduct governing an individual or group. It relates to moral duty and obligation to others.

Question 80

Professional.

Answer 80

The high standards required of other "professionals" are imposed on insurance brokers by the courts. A commitment to high ethical standards. A high standard of educational preparedness and training, with mandatory continuous education. A formal association with regulating power over its members.

Question 81

Self Regulation.

Answer 81

Creates an environment which holds broker professionalism and consumer protection as primary objectives.

Question 82

Insured.

Answer 82

Insured means an Insured Applicant, his spouse and any Dependent Children.

Question 83

Insured Applicant.

Answer 83

Means a Canadian resident under 65, insured under the government health insurance plan of their province or territory of residence, who has been named on an application issued by his broker.

Question 84

Extended Family.

Answer 84

Means the dependant child, spouse, parent, guardian, brother, sister and grandparent of the Insured Applicant or Spouse.

Question 85

Accident.

Answer 85

An unforeseen and unintended occurrence due to external violent, sudden, fortuitous causes beyond the Insured's control.

Question 86

Injury.

Answer 86

Bodily injury caused by an accident occurring while the Insured is insured.

Question 87

Sickness.

Answer 87

Bodily sickness or disease, contracted and commencing after the policy is issued and while the policy is in effect.