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BFIN 341 Module 17 > Module 17 > Flashcards

Module 17 Flashcards

(86 cards)

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1
Q

What 4 things must exist for an agreement to be enforceable by law?

A

1) Consideration
2) Parties must have legal capacity
3) Parties must have the capacity to contract
4) Legal intention by both parties to contract

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2
Q

Consideration

A

Exchange of values, ie. money

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3
Q

What is the minimum age to apply for life insurance for self/others

A

16

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4
Q

What is considered an offer for the insurance applicant?

A

Filling out the application

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5
Q

What demonstrates consideration from the policy owner?

A

Payment of premiums

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6
Q

What demonstrates consideration for the insurance carrier?

A

The insurance contract itself

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7
Q

Does insurable interest need to be on the policy owner or the beneficiary?

A

Policy owner

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8
Q

Representation

A

Mistake in the policy that can be corrected

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9
Q

Warranty

A

Guarantee critical to acceptance of a particular risk - insurer relies on this for underwriting process, ie smoking

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10
Q

Material Fact

A

Fact having definite influence on decision of parties of contract, ie. cancer

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11
Q

What factor can render a contract voidable by the insurer?

A

Misrepresentation of a material fact

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12
Q

Material misrepresentation

A

Both parties of insurance contract must disclose all pertinent information

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13
Q

Mistake of Law

A

If parties are mistaken with regard to legal effect of some facts of contract

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14
Q

Concealment

A

When applicant consciously hides or skews facts

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15
Q

Incontestability Period

A

After 2 years, insurer cannot undo the policy, but within the 2 years, they if they find a misrepresentation, they can void the contract

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16
Q

Uberrimae fidei

A

Insurance contracts are made in the utmost good faith

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17
Q

How does a policy come into affect? (2 things)

A

1) Delivery of policy to policyowner

2) Collection of first premium

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18
Q

What health consideration is required for life insurance applicants?

A

Health cannot deteriorate between application and policy delivery time

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19
Q

Conditional Receipt

A

Carrier provides interim insurance if certain conditions are met

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20
Q

Aleatory

A

2 way - one party pays for insurance, other assumes risk in event of loss

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21
Q

Adhesion

A

One party sets out conditions of contract, the other party MUST accept all of it (no negotiation about conditions)

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22
Q

Unilateral

A

One party agrees to fulfill conditions of contract so long as the other party does their part. Ex: the insured can stop paying at any time and loses their coverage

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23
Q

Declarations

A

Statement of fact by policy owner that affects risk underwriting by insurer, ex: I am overweight and smoke

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24
Q

Rating

A

Identifies level of risk relative to baseline

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25
Exclusions
Something that the insurer will not cover, ie. preexisting health condition
26
Riders/Endorsements
For life insurance policies, amendments to contract that extends coverage (ie. waive premiums in case of disability)
27
Floaters
For property and casualty, but same as riders, ie. Add coverage of shed to home insurance policy
28
Who do you have an insurable interest on that you can insure?
Child, grandchild, spouse, employee or person dependent on you for support or education
29
What is the difference between requirements for insurable interest for life vs property insurance?
Life insurance must only have insurable interest at time contract is issued, then can be transferred to someone without insurable interest. Property - must have insurable interest at time of contract formation and at time of loss
30
Indemnity
Making good the loss, no more
31
Valued Contract
Amount of benefit payable established in advance (ie. establish that my necklace cost $1000 so that much will be covered in case of loss)
32
Parol Evidence Rule
Once contract is documented in final written form, oral statements CANNOT adjust the contract
33
Subrogation
Transfer of rights from insured to insurer, ie. insurance company handles your MVA claim. Does not apply to life insurance
34
Name 5 steps in Risk Management process
1. Set objectives 2. Identify risks 3. Select strategies 4. Implementation 5. Monitoring
35
Name and describe 3 types of risk
1. Dire - financially crippling 2. Substantial - severe, but still able to manage 3. Minor - small car accident
36
Risk avoidance vs Risk reduction
obvious
37
Name two risk control strategies
Risk avoidance and risk reduction
38
Name two risk financing strategies
Risk Transfers/sharing and risk retention
39
What is risk transfer/sharing
Buying insurance
40
Risk retention
Pay for losses yourself
41
Legal liability
Liability for consequences of negligent act
42
Negligence
Causing death, injury or property damage by failing to be reasonable and prudent (ex: not shoveling sidewalk)
43
Named Insured
Policy owner
44
Third party
Person not in contract, ie. someone who hits you
45
Absolute liability
Insurance must cover an accident no matter what, but may go after wrongdoer for the amount (ie. if suspended driver gets into accident)
46
No-Fault
Insurer pays loss regardless of who is at fault
47
Deductible
Portion that insured pays before getting the loss covered
48
Accident Benefits
Covers driver (policy holder) and passengers, pedestrians. For death or injury
49
Family protection
Additional insurance to cover injury for self, spouse or dependant
50
Third party liability
Coverage for if policy owner's vehicle injures another party or damages property and policy owner is liable. If resulting claim exceeds the available coverage, you need to pay the rest out of pocket
51
Temporary substitute automobile
When an insured drivers another person's vehicle
52
Collision
Covers damage to policy holder's vehicle
53
Comprehensive Insurance
Covers loss/damage to an insured automobile from fire, theft, vandalism, glass breakage
54
Waiver of depreciation
Do not include depreciation on cost of car for a limited period of time
55
Loss of use
Pay for rental car, taxi or public transportation while car is being repaired
56
Which 2 auto insurance coverages are necessary?
1) Accident benefits 2) Liability (can determine amount above minimum though) Collision insurance is rarely mandatory
57
What are some considerations of the driver for the premium of car insurance?
1) Geographic location 2) Geographic region 3) Driving experience, driving record, age, sex, marital status 4) How car will be used
58
What are some considerations of the car for the premium of car insurance?
1) Value of car 2) Repair/replacement cost 3) Type of vehicle, model
59
Name 3 things that will make a higher premium
1) Lower deductible 2) Higher liability coverage 3) Collision coverage
60
When do claims need to be reported to police?
1) When the insured plans to make a claim under the policy | 2) When the collision must be reported to police
61
Is home insurance mandatory?
Nope
62
Comprehensive home insurance
Covers building and contents for all risks except any specifically excluded in the policy
63
Basic/Named Perils home insurance
Covers perils specifically named in the policy
64
Broad home insurance
Provides all peril insurance coverage for building and named-peril coverage for contents covered by policy
65
No-Frills home insurance
Bare bones minimal insurance plan for properties that don't meet normal standards
66
Put the 4 types of home insurance in order by price (low to high)
No-frills, basic or named perils, broad, comprehensive
67
Replacement cost
Provides reimbursement for cost of replacement item of similar quality and kind
68
Actual Cash Value
Insurer will value loss based on actual value considering age, depreciation, obsolescence. You get a cheque for that amount, but can spent it on whatever you want
69
Which has higher premiums - replacement cost or actual cash value?
replacement cost
70
Liability coverage (on home insurance)
Home insurance policies include coverage for personal liability insurance for self and others within immediate household
71
When will liability coverage cover accidents at your home?
When the person is employed to maintain your residence
72
Excess liability coverage
Extra liability coverage
73
Business insurance
To insure a business
74
Product liability insurance
For people selling/distributing product
75
Professional liability insurance
ie if a lawyer gets sued
76
Canada Health Act
All provinces/territories must abide by this federal legislation in order to qualify for full federal contributions for healthcare
77
Name 5 criteria that must be met provincially to qualify for full cash contribution for healthcare
1) public administration 2) comprehensiveness 3) universality 4) portability 5) accessibility
78
Resident of a province
Person lawfully entitled to be or remain in Canada
79
What are the taxation implications for public health care?
1) If province taxes employer to help cover cost of provincial health services, no taxable benefit 2) If individual pays premium himself, no tax deduction 3) If employer pays premium on behalf of employee, taxable benefit
80
Name 3 categories of dental coverage
1) Basic preventative - check ups, filings, extractions 2) Major services - crowns, bridges 3) Orthodontic
81
Coinsurance
percentage of eligible expenses in excess of deductible for which the plan member is responsible
82
Selection
Policy owner can choose amount of coinsurance and deductible
83
What are taxation implications for private health insurance premiums?
Premium paid by employer on behalf of employee is tax deductible by employer and not taxable benefit to employee
84
Are any benefits from public or private health care a taxable benefit?
No
85
Uninsurable peril
Things that cannot be insured in a home insurance policy such as damage from insects
86
Differentiate between a burglary, robbery and theft
1) burglary uses force to enter the building 2) robbery uses violence 3) theft is just something stolen without force or violence

BFIN 341 Module 17 (1 decks)

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