Define material facts
- is something affecting the contract of insurance important enough to change the agreement between the company and the policyholder.
ex) determine premium amount, amount and type of coverage, whether or not coverage is provided.
Define misrepresentation.
- misleading the insurer as to material facts affecting the policy or the settlement of a loss either by directly lying or by not disclosing certain info.
What are the 5 components of a policy?
1) intro to preamble aka declaration
2) the insuring agreement
3) statutory conditions
4) policy conditions
- referred to seperately
5) signature clause
- signed by CEO of ins. company
What is a subscription policy?
- used usually to insure large risks
- one insurer known as the lead company prepares the policy but one or more other insurers subscribe to it or participate in covering the risk.
- must be signed by all members
What is a manuscript policy?
- specfically designed/written for a particular risk
- an individual manuscript
What is an endorsement?
- usually an attachment to the policy
- will overrule any wording in the policy which is inconsistent with the endorsement
- restricts or offers more coverage
- either party can request
examples: removal of property, speeding tickets, change of ownership, increase in hazards
What are the rights of mortgagee?
1) losses under the policy are made payable to the mortgagees
2) mortgagee receives loss payment regardless of:
i) insured’s negligence
- grow op.
ii) property becomes more hazardous
- originally producing candles, now producing fireworks
What are the obligations to the mortgagee?
1) must notify insured at once if:
a) vacancy for over 30 days
b) change of ownership
c) increased
2) required to pay insurer on reasonable demand any extra premium required because of increase in hazard from date such hazard existed
What is a certificate of insurance?
- confirms existence of insurance
ex) pink slip for auto
Define coverage.
- is the term used for insurance protection
Define deductible.
- the amount of a loss which the insured must pay.
- same on every claim amount, is a stated amount
- franchise deductible - not payable once the claim exceeds a certain amount
- disappearing deductible - reduces as amount of loss increases
Define statutory conditions.
- conditions required by law as promulgated by provincial legislatures.
- required by law to appear on contracts
- house and auto
- legal conditions imposed by gov
What information does the declaration contain?
1) identifies parties to the contract
2) states commencement date, term, expiry date
3) states premium and rate
4) shows the amount insured
What information does the insuring agreements contain?
1) subject matter of insurance - description of property
2) perils insured against
3) exclusions
4) circumstances under which the insured may receive the proceeds of insurance
What is required according to the Insurance Act if a policy is issued and differs from the written application?
1) insurer must notify the insured of differences
2) the notification must be in writing
3) if the insured does not object to this change within a stated period of time, the policy is deemed to cover as it is written.
What factors influence standardization of coverage?
1) legislation
2) general usage
3) court decisions
What are the rights of the insurer?
1) can deny claim if hazard or negligence is involved, but still have to pay mortgagee.
- they would have to go after insured or assign mortgage to themselves and sell property
Define utmost good faith.
- implies a standard of honesty greater than that usually required in most ordinary contracts.
- is essential when dealing with an insurance contract
- both parties
What is a loss payable clause?
- if you owe mortgagees money, they will have an interest in your property until the debt it paid off.
What is a mortgage clause?
- recognizes the existence of a mortgage on the insured property
- offers more protection to the mortgagee
- mortgagee is named on policy
- lays out certain rights and obligations of the insurer and mortgagee
- seperate clase on policy
INCLUDES:
1) rights of mortgagee
2) obligations of mortgagee
3) rights of insurer
Why are written applications preferrable over oral?
1) avoid misunderstandings
2) becomes a part of the policy
(life and auto require written app.)
What is coinsurance?
- a penalty clause used to encourage insured’s to carry adequate amount of insurance
Explain assignment.
- a contract of insurance is said to be a personal contract
- made by the insurer with the person or firm named in it and may not be substituted unless the insurer consents
- exceptions include: bankruptcy and death
What is transfer and consent?
- when selling a house and transfering insurance at the same time
- insurer must consent by issuing an endorsement (aka transfer and consent)
- premium adjustments are made when property is sold
