Copyright © 2008 Pearson Education Canada 4-1 Chapter 4 General Insurance

Copyright © 2008 Pearson Education Canada

4-1

Chapter 4

General Insurance

Copyright © 2008 Pearson Education

Canada 4-2

Risks of Ownership Property damage or loss Liability for damages


Canada 4-3

Property Damage/loss Owners of

Home, automobile, snowmobile Damage or loss due to

Fire, theft, vandalism


Canada 4-4

Liability for Damages Personal risk liability Negligence Carelessness Ownership

Automobile Building Dog

Renters/lessors


Canada 4-5

The Insurance Principle Pooling/sharing risk

Large number of people Pay regular fee Protection against a hazard


Canada 4-6

Cost of Insurance Two components

1. Pure cost of insurance2. Loading charges


Canada 4-7

1. Pure Cost of Insurance Probability of an event occurring

Predicted by actuaries Cost of compensation

Value of property Number sharing risk

Lower cost for larger number


Canada 4-8

Probability of Event Occurring

Fire, for example Proximity of hazards Flammability of property Proximity of fire-fighting facilities


Canada 4-9

2. Loading Charges Cover insurance company’s costs

Collecting/managing insurance funds Settling claims Dividends to shareholders

Variable from company to company


Canada 4-10

Risk Management Insurable interest Insurable risk Handling risk


Canada 4-11

Insurable Interest Buyer must suffer financial loss

If the insured event occurs Prerequisite to buying insurance Applies to all types of insurance


Canada 4-12

Insurable Risk Loss must result from chance

events E.G. Accidental death

Not caused by deliberate action E.G. Death by suicide


Canada 4-13

Handling Risk Eliminate risk Reduce risk Handle risk yourself Share risk

E.G. Buy insurance


Canada 4-14

Insurance Policy Insurance contract Declaration sheet Insuring agreement Conditions Endorsements/riders Cancellations


Canada 4-15

Insurance Contract Legal contract between

Insured person Insurance company

Mutual of Omaha Insurance Company


Canada 4-16

Declaration Sheet Completed when insurance is

bought Includes such information as

Names Dates Premium Coverage


Canada 4-17

Insuring Agreement Pre-printed part of the policy

showing Kinds of property covered Perils insured against Exclusions How settlements are made

Actual cash value Replacement value


Canada 4-18

Policy Conditions Responsibilities of

Insurer Insured

Termination of policy


Canada 4-19

Endorsements Riders Changes

Ownership Risk situation Coverage addition/deletion


Canada 4-20

Cancellation of Policy Cancel at any time Pay more than prorated premium


Canada 4-21

Claims Process Adjusters Actual cash value insurance Replacement value insurance Insurer’s liability Subrogation procedure


Canada 4-22

Adjusters Appraisal specialists

May be insurance company employees

May be independent Estimate the extent of damages Report to claims department


Canada 4-23

Actual Cash Value Insurance Follows the indemnification principle

Return to previous financial condition Replacement value (usually)

Minus accumulated depreciation Standard depreciation tables

Betterments charged to insured person When repairs improve property

Salvage value belongs to insurance company


Canada 4-24

Replacement Value Insurance Doesn’t follow indemnification

principle Insured may be better off Replace with new

Depreciation not considered Higher premium Very popular


Canada 4-25

Insurance Company’s Liability Can’t exceed

Policy limits Actual cash value of loss Cost of repairs

Minus the deductible


Canada 4-26

Subrogation Procedure Insurer indemnifies claimant for

loss Insurer attempts to recover

damages From person responsible for loss


Canada 4-27

Property Insurance


Canada 4-28

Risks Accidental

Fire, smoke, water Wind, falling objects

Criminal actions Vandalism Theft


Canada 4-29

Coverage Named-peril All-risk Scheduled property rider


Canada 4-30

Named-peril Coverage Protection from specific perils

Listed in contract Typical for household contents


Canada 4-31

All-risk Coverage More comprehensive coverage Covers all risks

Except those specifically excluded Age, rust

Typical for house insurance


Canada 4-32

Scheduled Property RiderValued Contract Endorsement All-risk insurance for certain

possessions Jewelry, coin collections, antiques

Lists items covered Lists value of items

Appraisal Maximum liability

Value when insured Optional automatic inflation adjustment


Canada 4-33

Co-insurance Clause An inducement to purchase

adequate insurance If underinsured

Any settlement pro-rated


Canada 4-34

Mortgage Lender Shares in insurance settlement

If the property is not paid off Not voided by owner’s act or

neglect E.G. Arson by owner

Owner’s claim is void Lender entitled to compensation


Canada 4-35

Inventory Itemized list of assets and their

value Proof of loss established through

Sales receipts Written appraisals Photographs Video recordings


Canada 4-36

Inflation Many policies contain

Automatic adjustment clause


Canada 4-37

Personal Liability Insurance


Canada 4-38

Personal Liability Insurance Coverage

Damage to property Injury to other persons Liability insurance Negligence


Canada 4-39

Automobile Insurance


Canada 4-40

Risk of Automobile Ownership

1. Liability to others2. Personal injury or death3. Damage to vehicle


Canada 4-41

Risk 1. Liability to Others Insurance coverage required

Third-party public liability Compulsory

Does not cover your injuries Does not cover damage to your

car


Canada 4-42

What Does Third Party Liability Cover? Covers someone else’s (a third

party’s) Injury, death, or property damage Due to your negligence

Your negligence must be proven Your fault must be proven E.G. Breach of highway traffic act

may be used to determine negligence


Canada 4-43

How Much Will Insurer Pay? The liability policy limits

E.G. $1,000,000 If the claim is larger than this

You pay the remainder


Canada 4-44

What Is Negligence? Ordinary negligence

Failing to do what is reasonable Failing not to do what is reasonable

Gross negligence Reckless, wanton, willful misconduct Fails to exercise due care by a wide

margin Indifference to probable consequences


Canada 4-45

Risk 2. Personal Injury or Death Risk of personal injury/death

To the car’s occupants, or To persons struck by car

Insurance coverage required Medical insurance or accident

benefits


Canada 4-46

Accident Benefits Coverage No fault

Payments made without reference to fault

Payments made to policy-holder Coverage (variable)

Disability income, medical payments Death payments, funeral expenses

Not compulsory in Newfoundland and Labrador


Canada 4-47

Risk 3. Damage to Vehicle Risk

The vehicle may be stolen or damaged Physical damage coverage

Vehicle’s actual cash value Subject to a deductible amount

No fault Payments made without reference to

fault


Canada 4-48

Types of Physical Damage Coverage All-perils Specified perils Collision Comprehensive


Canada 4-49

All-perils Coverage Broadest coverage Includes everything (and more)

included in Specified perils Collision Comprehensive


Canada 4-50

Specified Perils Coverage Coverage includes only named

risks


Canada 4-51

Collision Insurance Coverage When vehicle collides with another

object Coverage applies

Striking or being struck by another vehicle

One-vehicle accidents Striking guard-rails, trees, rocks, the

ground, etc.


Canada 4-52

If the Collision Is Caused by Another Driver’s Negligence Your insurance company

Pays your damage claim Regardless of fault

Even pays your deductible If the insurance company is successfully

reimbursed through subrogation from the at-fault driver


Canada 4-53

Comprehensive Insurance Coverage Covers perils to your car other

than collision Theft, vandalism, fire, lightning, wind,

hail Perils that may be excluded under

collision Subject to a deductible amount


Canada 4-54

Insurance Rates Affected by Personal characteristics

Age, gender, marital status Type of car

Sport’s utility vehicle, pick-up, 4x4 Use of car

Work or pleasure, distance to work Region

Population, adverse driving conditions


Canada 4-55

No-fault Insurance for Third Party Liability Claims No proof of fault No litigation costs All claims paid quickly Quebec and Manitoba


Canada 4-56

Documents

Copyright © 2008 Pearson Education Canada 4-1 Chapter 4 General Insurance