Define oral application.
- is one in which the applicant gives the info orally to the broker/agent who writes it down and submits it to an insurer.
Define coverage.
- the term used for insurance protection.
Describe the use of written applications.
- are mandatory for A+S and life insurance
Are preferrable when:
1) if the app is to become a part of the policy
2) to avoid honest misunderstandings
3) to help prevent fraud
4) establish that a misrepresentation has been made
What is the purpose of including statutory conditions/general conditions in an insurance policy?
- they state the rights and responsibities of the insured and insurer under policy
- they are required by law to form part of every auto, A+S, and fire insurance policies
- they must be printed on each of these policies
How do the general conditions differ from the statutory conditions?
- policies in quebec contain only the general conditions
- the civil code specifies the points that must be addressed in the general conditions
- however, the civil code does not regulate the exact form in which they appear
- the conditions are statutory in nature but not in name
What are the basic questions asked to determine the coverage provided under an insurance policy?
1) who is covered?
2) what property is covered?
- general definition of property
- specfic description of property
3) what perils are covered?
4) where does the coverage apply?
5) what are the exclusions?
6) who is not covered?
7) what property is not covered?
8) what perils are not insured against?
9) are there locations where coverage does not apply?
10) are there any extensions of coverage?
- if so, which are automatic
- which ones are optional
- which ones are conditional
11) what are the conditions of coverage?
- what must insured do if there is a loss
- what must the insured do if there is a change in risk
- what must be done to recover loss
12) is there anything else to consider?
What option can be used to modify a policy, describe it.
- an endorsement
- are attachments that are used to make changes to a policy
- can be prepared by the broker or insurer
- can restrict or offer more coverage
- must be signed on behalf of the insurer
- if an endorsement changes contract in any way that deletes, reduces, or restricts coverage, the endorsed contract must also be signed by the insured
- two copies should be sent to the insured, one that is attached to their policy, and one for them to sign and send back
- overrules any wording in the policy that is inconsistent with the endorsement
What does the Insurance Act require that the insurer must prove in the happening of the discovery of a misrepresentation?
1) there is in fact a misrep
2) the applicant actually made the misrep at the time he or she applied for the insurance
What is the content of an application?
1) name and of applicant
2) address of applicant
3) previous insurance history
- has applicant has insurance declined, cancelled, or refused, why?
4) previous claims or loss history
- resulting from own negligence?
How is a underwriter’s decision decided, and how is the decision applied?
- once an underwriter determines if there is sufficient infortmation to enable him/her to decide to enter into a contract or not, the risk may be:
1) accepted, rated, and the policy issued
2) accepted subject to certain conditions - require improvements
- limited form of polocy
3) rejected aka declined
Define binder.
- a memorandum of an agreement to insure, issued to record the transaction pending the writing of a policy.
- policy will be issued as soon as all necessary info is at hand
- it will be effective as of the date of issue of the binder
- usually issued by the insurer
- must be written clearly to avoid misunderstandings and possible disputes
Define a cover note.
- is a document issued by agents/brokers which tells the insured that insurance described therein has been effected
- gives insured description of what insurance has been put into effect
- similar to a binder, but is a document given by an insurer to an agent/broker
- confirms coverage is in effect
What is temporary coverage?
- when insurer agrees to cover risk but does not yet have certain info or confirmations required to issue the policy
- is granted under a cover note or binder
- is legally binding coverage whether oral or written
What issues arise from binders, especially oral ones?
1) was a contract actually made?
- an applicant can be under the impression that an oral promise was received that coverage would be in effect, while the intermediary states the promise was only to try to obtain the requested insurance asap.
2) does the intermediary have authority?
- without authority, agents/brokers can’t bind insurers to a risk
- applicants may not be covered
3) what are the provisions of the contract?
- broker/agent must always deliver to the insured something in writing (formal cover note, letter, or handwritten memorandum)
What are the contents of a binder?
1) name and address of insured
2) address at which risk is located
3) time and date of commencement of coverage
4) time and date of expiry of coverage
5) description of property insured
6) amount of insurance bound
- broken down into items or classes of property
7) name of insurer bound
8) exact type and form of contract under which risk is bound
9) any special terms such as deductibles
What are the options if the need to cancel a policy arises?
- in some policies cancellation steps are stated in statutory conditions/general conditions
- cancellation steps state:
i) who may cancel
ii) the period of notice required
iii) how the notice must be given
iiii) how the return premium is to be calculated - in other types of policies, similar provisions are outlined in a termination clause
- insured can cancel at any time on a short rate basis
- the insurer must return excess of premium paid over the short rate premium for expired time
- for protection insurers usually request a written cancellation request
- when insurer cancels, they must five insured a specified period of notice
- this notice must be delivered by registered mail or personal delivery
- a cheque for unearned premium must accompany the notice except in certain circumstances4
- policy is cancelled on a pro rata basis
Define policy.
- is the instrument evidencing a contract
- states exact terms and provisions of the contract aka the agreement between insured and insurer
What are the parts of a policy?
1) declaration
- usually a seperate page
2) insuring agreements
- provides details on coverage
3) statutory conditions/ general conditions
- required by law on some policies
4) policy conditions
- clauses that affect the actions of the insurer and insured under the contract
5) signature clause
- signed by the CEO of insurance company
What information does the declaration include?
1) identifies parties to the contract
2) states commencement and expiry dates of policy
3) premium
4) shows amount insured
5) shows any other interests in the policy (mortgagees)
6) includes description of the subject matter of insurance (but may be included in insuring agreements instead)
What information does the insuring agreements include?
1) subject matter of insurance - description of property covered
2) perils insured
3) exclusions
4) circumstances which the insured may receive proceeds of the insurance
What is a warranty?
- is a promise by the insured as part of the contract that a specified state of affairs will continue to exist for the duration of the policy.
ex) promises to install alarm system
What is a representation?
- a statement of existing fact at the time it was made
ex) I have an alarm system installed
Explain the assignment of insurance policies.
- a contract of insurance is a personal contract
- it is made by the insurer with the person or firm named as the insured
- that party may not substitute another as insured unless insurer consents
What are the steps in transferring and obtaining consent to substitute another insured?
- when individuals sell home and transfer insurance
1) former owner and mortgagee signs off his/her interest in insurance policy
2) new owner of property now has an insurable interest and provides personal deatils to be endorsed onto policy
3) the insurer formally consents by issuing an endorsement
- this document is called a transfer and consent
- premium adjustments is made between old and new insureds when property is sold
