Insurance Policy-Contract of insurance

Premium-Price paid for insurance coverage

Insurer-Company that sells insurance coverage

Insured-person who buys insurance coverage

(condos are smaller to keep prices stable


Limitations of Insurance

-can be costly and is not always available

-insurance does not prevent a loss from occurring

-insurance does not prevent the potential adverse publicity associated with a loss


The Insurance Relationship

An insurance policy is a contract

Insurer(provides protection against a specified loss) themà Insured (purchases protection against a specified loss me


Insurance Legislation

Serves a number of purposes including:

-mandating the terms that must be found in insurance contracts

-regulating the industry by setting out licensing requirements for insurance companies, brokers, and adjusters

-monitoring insurance companies, particularly with respect to their financial operation


3 types of insurance

1) Life and Disability insurance (always get disability when young, nothing really breaks)

2) property insurance (also known as fire insurance)

3) Liability insurance (also known as casualty insurance)


Deductibles(referred to as a loss)

-With the exception of life insurance contracts, insurance policies can be written so that insured pays a deductible

-This means that the insured is responsible for the first part of the loss, and the insurer has liability for balance

-Agreeing to a deductible generally reduces the premiums that the insured must pay

(always max out health insurance, car accident car won’t get fix, you will)


The insurance contract: Specialized Concepts

Duty to Disclose: Obligation of the insured to provide to the insurer all info that relates to the risk being insured

Insurable Interest: Financial stake in what is being insured (you can insure what you own…like jewelry or stuff)

Indemnity: obligation on the insurer to make good the loss (lady was pregnant and didn’t declare stuff)

Subrogation: Right of the insurer to recover the mount paid on a claim from a third party who caused the loss


Forfeiture Rule

-an insured is not permitted to profit from his or her willful misconduct

-if he/she deliberately causes a loss, the forfeiture rule will prevent him/her from collecting on his/her insurance

-for example, if an insured deliberately sets fire to his/her business, he/she cannot collect on his/her fire insurance


The Policy
Rider: A clause altering/adding coverage to a standard insurance policy

Endorsement: Written evidence of a change to an existing insurance policy


Insurance Products: Specialized Business Policies

Auto Insurance

Occupiers’ lability

Comprehensive and general liability insurance

Errors and Omissions insurance

Property insurance

Business interruption loss insurance

Environmental damage insurance

Key person life insurance


*Either increase premium cost, or same cost less coverage


Car insurance

Insurance products: Specialized Business Policies

-Auto insurance

-Occupiers’ Liability

-Comprehensive and general liability insurance

-Errors and omissions (someone forgot to test the water, walkerton someone was responsible for water quality for town called walkerton, water created a current and swept the farmland and manure, and contaminated city water wells, these people don’t know how to deal with that, people started getting E. coli, found guilty of gross negligence)

(Ex. Pools are open but waters are not being tested,

if you go to a city swing, and you get hurt, you are not insured

after rainstorm, beaches are closed, poop is washed into water, feces on water, that is gross negligence, we don’t insure against gross negligence)


-property insurance

-business interruption loss insurance

-environmental damage insurance(pollution)

-key person life insurance


Remedies of the Insured

Against the Broker

-a broker is the middle person between the insurance companies and the insured

-liability may arise if the broker provides negligent advice (false advertising)

-when an insured makes a claim under its policy an insurance adjuster will likely investigate the events and evaluate the loss

-On the adjuster’s advice, the insurer will offer to settle the claim. There may be disagreements between insured and insurer.

-An insurer owes the insured a duty of good faith, including a duty to deal with an insured’s claim in good faith



-one of the simplest and most cost-effective ways of managing risk in a business environment

-An insurance contract is a contact of utmost good faith (revealing the truth, the whole story)

-Insured must have an insurable interest in the item insured to prevent moral hazards

-A business needs to communicate effectively with its insurance broker and insurer to assess the kinds of risks its operation faces and the types of insurance coverage that can address those risks


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