Definitions

Question 1

What is the definition of risk in insurance?

Answer 1

The chance of financial loss to which an object of insurance is exposed

Risk is a fundamental concept in insurance, determining the likelihood of a loss occurring.

Question 2

Define speculative risk.

Answer 2

The chance of financial loss or gain

Speculative risks involve uncertainty and can result in either profit or loss.

Question 3

Define pure risk.

Answer 3

The chance of financial loss but no chance of financial gain

Pure risks are typically insurable as they involve only the potential for loss.

Question 4

What is insurance?

Answer 4

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 insurance may be exposed

Insurance provides financial protection against specified risks.

Question 5

What is a contract?

Answer 5

Agreement between two or more persons which creates an obligation to do or not to do a particular thing

Contracts are essential for establishing the terms of insurance agreements.

Question 6

Define consideration in the context of contracts.

Answer 6

An exchange of something of value between parties

Consideration is necessary for a contract to be legally binding.

Question 7

What is insurable interest?

Answer 7

One has insurable interest in the subject matter of insurance when they will suffer financially by a loss

Insurable interest is a requirement for obtaining insurance coverage.

Question 8

What does utmost good faith mean in insurance contracts?

Answer 8

The law requires insurance contracts maintain a higher standard of honesty than is needed of other contracts

This duty applies to the insured, insurer, and broker.

Question 9

Define indemnity.

Answer 9

Application of the principle of indemnity ensures people receive the actual amount of their loss, no more and no less

Indemnity is a core principle in insurance to prevent profit from a loss.

Question 10

What is an insurance binder?

Answer 10

A temporary agreement in which the insurer agrees to provide certain coverage pending the issuance of the policy

Binders provide immediate coverage before the formal policy is issued.

Question 11

Define agency agreement.

Answer 11

A written agreement or contract between the insurer and the brokerage which acknowledges their relationship

Agency agreements clarify the roles and responsibilities of each party.

Question 12

What is a void contract?

Answer 12

One which is unable in law to support the purpose for which it was intended

Void contracts are treated as if they never existed.

Question 13

Define voidable contract.

Answer 13

A contract that may be voided at the option of the wronged party only and not the wrongdoer

Voidable contracts remain valid until the wronged party chooses to void them.

Question 14

What is a peril in insurance?

Answer 14

The cause of loss

Perils are specific risks covered by an insurance policy.

Question 15

Define direct loss.

Answer 15

Occurs when the peril insured actually attacks the object of insurance

Direct losses are straightforward and directly linked to the insured peril.

Question 16

What is an indirect loss?

Answer 16

Losses which arise as a consequence of a direct loss

Indirect losses can include additional expenses incurred due to a direct loss.

Question 17

What does actual cash value mean?

Answer 17

New or replacement cost of the property at the time of loss, less depreciation

Actual cash value is often used to determine payout amounts in claims.

Question 18

Define replacement cost.

Answer 18

The cost to repair or replace the lost or damaged property with new property of like kind and quality

Replacement cost coverage is often preferred as it does not account for depreciation.

Question 19

What is a valued policy?

Answer 19

Both the insured and insurer 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.

Question 20

What is blanket coverage?

Answer 20

Policy which provides a single limit of insurance for all property falling within a specific class

Blanket coverage simplifies insurance for multiple items under one limit.

Question 21

Define scheduled coverage.

Answer 21

Covered property is itemized on the policy

Scheduled coverage allows for specific items to be insured for their individual values.

Question 22

What is a fiduciary?

Answer 22

One who occupies a special position of trust or confidence in the handling or supervising of the affairs or funds of another

Fiduciaries have a legal obligation to act in the best interest of those they serve.

Question 23

What are unearned premiums?

Answer 23

Premiums not yet earned by the insurer, deemed to be held in trust to refund the insureds if the policy is cancelled prior to expiry date

Unearned premiums represent funds that have not yet been fully earned by the insurer.

Question 24

Define fire in insurance terms.

Answer 24

Involves the presence of a visible flame or glow. Actual ignition or burning is required

Fire coverage typically requires evidence of actual flames.

Question 25

What is **friendly fire**?

Answer 25

A fire that is contained in its proper receptacle ## Footnote Friendly fire is generally not considered a risk for insurance purposes.

Question 26

Define **hostile fire**.

Answer 26

A fire that passes outside of the limits assigned to it ## Footnote Hostile fire can lead to significant losses and is typically covered by insurance.

Question 27

What does **proximate result** refer to?

Answer 27

Damage which arises from a natural or continuous sequence of the peril causing the loss ## Footnote Proximate result is important for determining liability in insurance claims.

Question 28

What is a **material change**?

Answer 28

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 ## Footnote Material changes can affect the validity of an insurance policy.

Question 29

Define **pro rata**.

Answer 29

Basis of return premium calculation when the insurer cancels a policy ## Footnote Pro rata calculations ensure fairness in premium refunds.

Question 30

What is **short rate**?

Answer 30

The basis of return premium calculation when the insured cancels the policy, less any administrative charge or cancellation penalty ## Footnote Short rate calculations typically result in a lower refund than pro rata.

Question 31

What is a **notice of loss**?

Answer 31

Immediate report of loss to insurer by the insured or his representative in writing ## Footnote Timely notice of loss is crucial for processing claims.

Question 32

Define **proof of loss**.

Answer 32

A formal verification, under oath, of the details and amounts being claimed under the policy ## Footnote Proof of loss is often required to substantiate claims.

Question 33

What is **fraud** in insurance?

Answer 33

A deliberate attempt to deceive with a view to securing some profit ## Footnote Fraudulent claims can lead to severe penalties and denial of coverage.

Question 34

What does **deductible** mean?

Answer 34

Represents the amount the insured is required to absorb for each loss before receiving any payment from insurer ## Footnote Deductibles help to lower insurance premiums.

Question 35

Define **subrogation**.

Answer 35

When the insurer has paid a claim for loss caused by a 3rd party, the insurer can recover the amount of the loss from the responsible party ## Footnote Subrogation allows insurers to recoup losses from negligent parties.

Question 36

What are **proprietary insurers**?

Answer 36

Insurance companies which exist to make a profit or return on their investments ## Footnote Proprietary insurers operate with the goal of generating profit.

Question 37

Define **non-proprietary insurers**.

Answer 37

Insurance company which are organized for reasons other than profit, owned and controlled by their policyholders ## Footnote Non-proprietary insurers aim to provide insurance at the lowest cost possible.

Question 38

What is **personal property**?

Answer 38

Contents of the insured's dwelling and other personal property owned, worn or used by the insured while on the premises ## Footnote Personal property coverage is essential for homeowners and renters.

Question 39

Define **vandalism**.

Answer 39

The willful or ignorant destruction of property ## Footnote Vandalism is often covered under property insurance policies.

Question 40

What is a **malicious act**?

Answer 40

Wrongful act done without legal justification or excuse ## Footnote Malicious acts can lead to liability claims.

Question 41

What does **vacant** refer to in insurance terms?

Answer 41

Circumstances where all occupants have moved out with no intention of returning ## Footnote Vacant properties may have different insurance requirements.

Question 42

Define **theft**.

Answer 42

Includes all means of taking property without the owner's consent ## Footnote Theft is a common peril covered by insurance policies.

Question 43

What are **additional living expenses**?

Answer 43

Coverage that provides for additional costs of living elsewhere when the dwelling is damaged by an insured peril ## Footnote This coverage includes loss of fair rental value.

Question 44

What is a **mobile home**?

Answer 44

A home that is factory built on its own chassis and which can be easily moved ## Footnote Mobile homes have specific insurance considerations.

Question 45

Define **condominium**.

Answer 45

A system of separate ownership of individual units in a multiple unit building ## Footnote Condominium insurance typically covers individual units and common areas.

Question 46

What is an **endorsement**?

Answer 46

An extra sheet of paper attached to the policy indicating in writing that the insured and insurer have agreed to a change in the terms of the contract ## Footnote Endorsements modify the original policy terms.

Question 47

What are **fine arts** in insurance terms?

Answer 47

Traditionally includes paintings, pictures, etchings, tapestries and other bona fide works of art of rarity, historical value or artistic merit ## Footnote Fine arts may require specialized coverage due to their value.

Question 48

What is **criminal law**?

Answer 48

Category of law that deals with wrongs against society ## Footnote Criminal law encompasses offenses punishable by the state.

Question 49

Define **civil law**.

Answer 49

Law that concerns itself with settling disputes between individuals or other legal entities not involving a criminal act ## Footnote Civil law addresses non-criminal disputes and can involve compensation.

Question 50

Who is the **plaintiff**?

Answer 50

The party making the complaint ## Footnote Plaintiffs initiate legal action in civil cases.

Question 51

Who is the **defendant**?

Answer 51

The party who allegedly committed the wrong ## Footnote Defendants respond to allegations made by the plaintiff.

Question 52

What is a **tort**?

Answer 52

A wrong done to another in breach of a duty laid down by law ## Footnote Tort law allows individuals to seek compensation for damages.

Question 53

Define **strict liability**.

Answer 53

Doctrine of law in which a person is guilty until proven innocent ## Footnote Strict liability applies in certain cases regardless of intent.

Question 54

What is **negligence**?

Answer 54

The omission to do what a reasonable person would do, or the doing of something which a reasonable and prudent person would not do ## Footnote Negligence is a common basis for tort claims.

Question 55

What are **special damages**?

Answer 55

Damages which can be accurately measured and which are intended to reimburse the plaintiff for out of pocket expenses ## Footnote Special damages are quantifiable and directly related to the loss.

Question 56

Define **general damages**.

Answer 56

Damages which cannot be exactly determined but which reflect an amount the court believes necessary to compensate the aggrieved party fairly ## Footnote General damages address non-economic losses.

Question 57

What is a **trespasser**?

Answer 57

One who is on another's premises for his/her own purpose without the express or implied permission of the occupier ## Footnote Trespassers have limited rights and protections under the law.

Question 58

Define **licensee**.

Answer 58

Someone who comes onto the premises for his own purpose but with the occupier's consent ## Footnote Licensees have more rights than trespassers.

Question 59

What is an **invitee**?

Answer 59

Someone who enters by invitation, be it expressed or implied ## Footnote Invitees are owed the highest duty of care by property owners.

Question 60

Define **visitor**.

Answer 60

Classification given to a licensee or invitee under provincial occupiers liability acts ## Footnote Visitors are protected under specific legal standards.

Question 61

What is **joint liability**?

Answer 61

When two or three people act together so as to cause injury or damage, they are held to be jointly liable ## Footnote Joint liability can complicate legal proceedings.

Question 62

Define **farming**.

Answer 62

Ownership, maintenance or use of premises for the production of crops or the raising or care of livestock ## Footnote Farming includes all necessary operations related to agricultural activities.

Question 63

What is **custom farming**?

Answer 63

Use of insured farm machinery or equipment for others away from insured farm premises for compensation ## Footnote Custom farming does not include work done for others in return for work done by them.

Question 64

Who are **residence employees**?

Answer 64

Those whose duties are exclusively in connection with the maintenance and use of the residence premises ## Footnote Residence employees may have specific insurance coverage needs.

Question 65

Define **farm employee**.

Answer 65

Those paid for their work and who are hired on a part time, seasonal or full time basis to perform duties principally connected with farming activities ## Footnote Farm employees are essential for agricultural operations.

Question 66

What is a **pink card**?

Answer 66

Used to provide proof of financial responsibility in provinces where automobile insurance is provided by private insurers ## Footnote Pink cards are essential for legal driving in certain areas.

Question 67

What is a **facility association**?

Answer 67

An insurance pool in which all licensed automobile insurers participate to provide insurance to those who may be refused insurance by private insurers ## Footnote Facility associations help ensure coverage for high-risk drivers.

Question 68

What is a **driver's abstract**?

Answer 68

A record of the driver's history of the applicant and other drivers which can be obtained from the provincial licensing authorities ## Footnote Driver's abstracts are used to assess risk for insurance purposes.

Question 69

Define **uninsured automobile**.

Answer 69

One in which neither the driver nor the owner has collectible bodily injury liability insurance ## Footnote Uninsured automobiles pose a risk for insured drivers involved in accidents.

Question 70

What is an **unidentified automobile**?

Answer 70

One in which the identity of either the owner or driver cannot be ascertained and causes bodily injury or death to an insured person ## Footnote Unidentified automobiles can complicate claims for injured parties.

Question 71

What is **general average**?

Answer 71

This will pay charges levied against insured when other automobiles are thrown overboard for the safety of the entire venture ## Footnote General average is a principle in maritime insurance.

Question 72

Define **temporary substitute automobile**.

Answer 72

One which is temporarily being used as a substitute for the automobile described on the policy ## Footnote Temporary substitutes are covered under specific conditions.

Question 73

What is an **occupant**?

Answer 73

Any person who drives the automobile or is being carried on or upon or entering into or leaving the automobile ## Footnote Occupants have specific rights and responsibilities under insurance policies.

Question 74

Define **newly acquired automobile**.

Answer 74

One which replaces an automobile described on the policy or is in addition to others owned by the insured ## Footnote Newly acquired automobiles must be reported to the insurer for coverage.

Question 75

What is **step licensing**?

Answer 75

A system which requires a higher degree of knowledge for each increasing step ## Footnote Step licensing is often used in driver education programs.

Question 76

Define **ethics**.

Answer 76

The principles of conduct governing an individual or group ## Footnote Ethics play a crucial role in professional conduct and decision-making.

Question 77

What is a **professional**?

Answer 77

One who possesses special skills or knowledge ## Footnote Professionals are often held to higher standards of conduct.

Question 78

What is **self-regulation**?

Answer 78

The right of an industry to govern its own affairs ## Footnote Self-regulation allows industries to establish their own standards and practices.

Question 79

Define **accident**.

Answer 79

An unforeseen and unintended occurrence due to external, violent sudden, fortuitous causes beyond the insured control ## Footnote Accidents are often covered under various insurance policies.

Question 80

What is **extended family**?

Answer 80

The dependent child, spouse, parent, guardian, brother or sister and grandparent of the insured applicant or spouse ## Footnote Extended family members may be included in certain insurance policies.

Question 81

Who is the **insured**?

Answer 81

Means an insured applicant, his spouse and any dependent children ## Footnote The insured is the primary party covered under an insurance policy.

Question 82

What is an **insured applicant**?

Answer 82

A Canadian resident under age 65 insured under the government health insurance plan of his province of residence ## Footnote Insured applicants must meet specific criteria for coverage.

Question 83

Define **sickness**.

Answer 83

Means bodily sickness or disease contracted and commencing after the policy is issued while the policy is in effect ## Footnote Sickness coverage is essential in health insurance policies.