Podcast
Questions and Answers
What is an example of personal risk?
What is an example of personal risk?
- Loss of owned property due to theft
- Health deterioration due to a chronic illness (correct)
- Legal responsibility for a friend's injury
- Injury resulting from a car accident
What is the main goal of risk transfer in insurance?
What is the main goal of risk transfer in insurance?
- To manage and mitigate financial consequences of potential loss (correct)
- To avoid dealing with any financial loss altogether
- To share risks with other parties
- To eliminate all financial risks
Which method of dealing with risk involves taking financial responsibility for potential losses?
Which method of dealing with risk involves taking financial responsibility for potential losses?
- Transfer of risk
- Retention of risk (correct)
- Avoidance of risk
- Control of risk
Which type of risk is considered uninsurable?
Which type of risk is considered uninsurable?
What is a common way to mitigate risk without eliminating it?
What is a common way to mitigate risk without eliminating it?
Which of the following is NOT a recommended strategy for dealing with risk?
Which of the following is NOT a recommended strategy for dealing with risk?
Why is automobile insurance mandatory in Canada?
Why is automobile insurance mandatory in Canada?
Which definition best describes property risk?
Which definition best describes property risk?
What is true regarding the legal capacity of a trade name?
What is true regarding the legal capacity of a trade name?
Which of the following best defines 'Genuine Intention' in the context of contracts?
Which of the following best defines 'Genuine Intention' in the context of contracts?
In a contract, which of the following acts can be grounds for voiding the agreement?
In a contract, which of the following acts can be grounds for voiding the agreement?
What must be demonstrated to establish insurable interest?
What must be demonstrated to establish insurable interest?
Which of the following is not a factor affecting genuine intention in a contract?
Which of the following is not a factor affecting genuine intention in a contract?
What type of risk is insurable?
What type of risk is insurable?
What is required for an agreement within a contract?
What is required for an agreement within a contract?
What does consideration represent in a contract?
What does consideration represent in a contract?
Which party has the legal capacity to contract?
Which party has the legal capacity to contract?
Which of these contracts is unenforceable?
Which of these contracts is unenforceable?
What must be established for a contract made by a person under the influence of alcohol to be deemed valid?
What must be established for a contract made by a person under the influence of alcohol to be deemed valid?
What happens if a minor enters into a contract?
What happens if a minor enters into a contract?
What denotes the legality of object in a contract?
What denotes the legality of object in a contract?
Which statement best describes 'legal entities' in the context of contracts?
Which statement best describes 'legal entities' in the context of contracts?
What is an example of a speculative risk?
What is an example of a speculative risk?
Who are mortgagees in the context of business partnerships?
Who are mortgagees in the context of business partnerships?
What is a key responsibility of bailees regarding customers' property?
What is a key responsibility of bailees regarding customers' property?
What is the responsibility of a brokerage if it exceeds its binding authority and a loss occurs?
What is the responsibility of a brokerage if it exceeds its binding authority and a loss occurs?
Which document typically outlines the extent of a broker's binding authority?
Which document typically outlines the extent of a broker's binding authority?
What happens if a party lacks an insurable interest in an insurance contract?
What happens if a party lacks an insurable interest in an insurance contract?
What does 'indemnity' in insurance contracts ensure?
What does 'indemnity' in insurance contracts ensure?
What is required for changes to be made to long-term insurance contracts?
What is required for changes to be made to long-term insurance contracts?
What happens when changes to an insurance contract include broadening coverage?
What happens when changes to an insurance contract include broadening coverage?
What is the consequence if essential elements of a contract are not present?
What is the consequence if essential elements of a contract are not present?
What is true regarding insurance binders?
What is true regarding insurance binders?
What are endorsements or riders used for in insurance contracts?
What are endorsements or riders used for in insurance contracts?
What type of contract is an insurance binder considered to be?
What type of contract is an insurance binder considered to be?
What is a floater in the context of insurance?
What is a floater in the context of insurance?
In the context of utmost good faith, who holds the responsibility to provide truthful information?
In the context of utmost good faith, who holds the responsibility to provide truthful information?
When might separate policies be required for additional coverage?
When might separate policies be required for additional coverage?
What indicates that an insurance contract can be terminated?
What indicates that an insurance contract can be terminated?
What action could indicate a lack of good faith from the insurer?
What action could indicate a lack of good faith from the insurer?
What kind of document serves as the basis for an insurance contract until formal policy details are issued?
What kind of document serves as the basis for an insurance contract until formal policy details are issued?
Flashcards
Personal Risk
Personal Risk
Losses affecting health or life that insurance may cover.
Property Risk
Property Risk
Damage or loss of owned property, potentially covered by insurance.
Liability Risk
Liability Risk
Financial responsibility for injuries or damage to others, often covered by insurance.
Avoidance of Risk
Avoidance of Risk
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Controlling of Risk
Controlling of Risk
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Retention of Risk
Retention of Risk
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Transfer of Risk
Transfer of Risk
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Speculative Risk
Speculative Risk
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Pure Risk
Pure Risk
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Insurance Contract
Insurance Contract
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Agreement (Contracts)
Agreement (Contracts)
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Consideration (Contracts)
Consideration (Contracts)
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Insurable Interest
Insurable Interest
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Utmost Good Faith
Utmost Good Faith
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Indemnity
Indemnity
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Insurance Binders
Insurance Binders
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Floater (Insurance)
Floater (Insurance)
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Endorsements/Riders
Endorsements/Riders
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Study Notes
Categories of Risk
- Insurance is a tool for managing risk, offering financial compensation for losses.
- Personal Risk pertains to losses affecting health or life.
- Property Risk relates to damage or loss of owned property.
- Liability Risk involves financial responsibility for injuries or damages to others.
Strategies for Dealing with Risk
- Avoidance of Risk: Eliminates financial loss by avoiding risk entirely; impractical in many cases.
- Controlling of Risk: Involves actions to reduce frequency/severity of losses, e.g., alarms; does not fully eliminate financial loss.
- Retention of Risk: Self-insurance by entities (like corporations) for financial responsibility; deductibles make insureds share the risk.
- Transfer of Risk: Gaining insurance to transfer financial risk; mandatory automobile insurance in Canada due to high potential losses.
Speculative vs. Pure Risk
- Speculative Risk involves potential for both loss and gain; insurers do not cover speculative risks (e.g. gambling).
- Pure Risk presents a chance of loss only; only insurable risk category.
Understanding Insurance Contracts
- Contracts in insurance are legally enforceable agreements between parties.
Five Elements of Contracts
- Agreement: Involves an offer and unconditional acceptance; can be oral or written.
- Consideration: An exchange of value between parties; failure to fulfill consideration voids the agreement.
- Legality of Object: Contracts must have a lawful purpose; illegal contracts are unenforceable.
- Legal Capacity: Parties must have the legal capacity to contract; protection exists for minors and incompetent individuals.
- Genuine Intention: Parties must intend to enter the contract without fraud, duress, misrepresentation, or mistake.
Three Essential Elements of Insurance Contracts
- Insurable Interest: Insured must face financial loss if a covered event occurs; necessary for enforceability.
- Utmost Good Faith: Complete honesty is required from both insurer and insured; misleading information can void the contract.
- Indemnity: Insurance contracts are designed to indemnify for losses; payment must be equal to the loss.
Contract Validity
- Contracts without all essential elements may be void (not applicable in law) or voidable (valid unless one party chooses to void it).
Insurance Binders
- Binders act as temporary insurance contracts; oral confirmations must be documented quickly to avoid disputes.
- Brokers have authority to bind insurers under certain conditions; exceeding this could lead to liability for losses.
Changes and Termination of Insurance Contracts
- Insurance contracts must specify termination conditions; mutual agreement is necessary for changes.
- Contractual changes must be documented and may result in additional premiums.
Specific Terms
- Floater: Coverage for property away from the designated location; applicable for mobile assets.
- Endorsements/Riders: Additional coverage specifics; can be used to amend policies without creating entirely new contracts.
Questions and Reflection
- Students are encouraged to engage by formulating important terms, confusing concepts, and questions to deepen understanding.
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Description
Explore important terms related to insurance contracts as discussed in Chapter 2. This quiz will cover aspects of dealing with risk, including personal, property, and liability risks. Test your knowledge of the foundational concepts in managing risks and financial compensation.
