Business Law Chapter 28: Insurance

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Questions and Answers

What is the primary purpose of liability insurance?

To provide payment when the insured is responsible for third-party damage (correct)

To compensate for lost income due to accidents

To cover legal fees in case of lawsuits

To cover loss or damage to the insured's property

How does agreeing to a deductible affect insurance premiums?

It has no effect on the premiums

It typically reduces the premiums (correct)

It causes the insurer to avoid coverage

It increases the premiums significantly

What can happen if an insured fails to disclose relevant information to the insurer?

The insurer must still honor the policy

The insured can demand a lower premium

The policy automatically becomes void

The insurer may refuse to honor the policy (correct)

Which of the following categories is NOT a main category of insurance?

Health insurance Signup and view all the answers

What generally defines contracts of utmost good faith in insurance?

They require full disclosure of relevant risk information Signup and view all the answers

In the example provided, how much will Sunbury pay for windshield replacement with a $250 deductible?

$1,050 Signup and view all the answers

Which insurance category covers damages caused by natural disasters?

Fire insurance Signup and view all the answers

What is a potential impact of climate change on insurance markets?

Increased risk of catastrophic losses Signup and view all the answers

What does the insurance principle of utmost good faith require from the insured?

Full disclosure of information at application and throughout the policy's life. Signup and view all the answers

What is the primary objective of insurance contracts?

To indemnify the insured only for the actual loss suffered. Signup and view all the answers

What is a consequence of the insurer exercising the right of subrogation?

The insurer may pursue legal action against the party responsible for the loss. Signup and view all the answers

What does insurable interest refer to in insurance contracts?

The insured's financial stake in the insured item that would suffer loss if it were damaged. Signup and view all the answers

What is an endorsement in the context of insurance policies?

Written evidence of a change to an existing insurance policy. Signup and view all the answers

What might an insured claim if they have inadequate coverage due to broker negligence?

Breach of contract and/or negligence against the broker. Signup and view all the answers

In the context of insurance, what is a deductible?

The amount the insured must pay out-of-pocket before coverage kicks in. Signup and view all the answers

What do exclusion clauses in an insurance policy specify?

Specific circumstances or events for which coverage is excluded. Signup and view all the answers

What type of risks does cyber-insurance primarily cover for businesses?

Both first-party and third-party risks including defence costs Signup and view all the answers

What distinguishes commercial general liability insurance from other insurance types?

It compensates businesses for liabilities incurred outside normal operations. Signup and view all the answers

Which factor does NOT play a role in determining the coverage terms of cyber-insurance?

The number of employees in the business Signup and view all the answers

Clinical trials insurance primarily covers liabilities arising from which of the following issues?

Injuries due to design flaws and privacy breaches Signup and view all the answers

Which aspect of property insurance is a crucial choice for businesses like Sunbury?

Whether to cover actual cash value or replacement value Signup and view all the answers

Which of the following best describes a common misconception about cyber-insurance?

It provides complete protection against all types of cyberattacks. Signup and view all the answers

What does not influence insurance costs and premiums in a typical market?

The personal preferences of the insurance agent Signup and view all the answers

What aspect often varies significantly among cyber-insurance providers?

The types of coverage included in the policy Signup and view all the answers

Study Notes

Chapter 28: Insurance

Insurance is a vital tool in risk management, transferring risks to an insurer.
An insurance contract outlines the rights and responsibilities of both parties (insurer and insured).
Various insurance types exist, catering to diverse risks.

Business Law in Practice

Simon Balistar, VP of Operations at Sunbury Pharmaceuticals, received a ransomware message.
The message demanded $100,000 in Bitcoin for control of their operating systems, threatening further action if payment wasn't made.
Sunbury manufactures medicines and conducts clinical trials. Their facilities include a manufacturing plant, waste disposal site, and distribution center.
The company had a comprehensive insurance program in place.
Simon sought the advice of Sunbury's CTO, and they immediately contacted authorities for help.

Introduction

Insurance is a core element of risk management, allowing businesses to transfer risks.
Insurance protects against various loss types.
Insurance operates on the exchange of premium payments for coverage.
Severe weather events across Canada are leading to higher insurance costs and policy changes.

Quiz Questions

Question 28.1: Insurance's main benefit is shifting risk away from the business to an insurer.
Question 28.2: Three main categories of insurance are life & disability, property, and liability insurance.

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Description

Explore the critical role of insurance in risk management through Chapter 28. This quiz delves into insurance contracts, types, and real-world applications like cyber threats faced by Sunbury Pharmaceuticals. Understand how proper insurance strategies can safeguard businesses in today's environment.