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Unformatted text preview: C HAPTER 28 I NSURANCE Objectives After studying this chapter, you should have an understanding of: the role of insurance in risk management the various kinds of insurance the nature of an insurance contract, including the rights and obligations of the insurer and the insured Learning Outcomes Understand the importance of insurance to a business (page 687) Recognize the three broad categories of insurance (page 688) Recognize the various types of insurance (pages 694 703) Recognize the types of risks that a particular business faces (pages 694 703) Understand the amount and type of coverage needed in a business to address each risk (pages 694 703) Understand the rights, obligations, and remedies of the insured, the insurer, the insurance agent, the insurance broker, and the insurance adjuster (pages 688 693) Understand the ramifications of a contract of utmost good faith (pages 688 689) Chapter Summary Insurance is one of the most important ways for a business to manage its risks. Insurance coverage does not reduce risk; rather, it shifts the risk of payment for loss to the insurance company. Each business faces different kinds of risk in its operations so the insurance needs differ from business to business. Therefore, it is important for a business to take the time to evaluate its particular insurance needs. An insurance broker can help with this assessment. Should the insured end up in the unfortunate position of having the wrong type of insurance or inadequate coverage, the insured may have a cause of action against the broker. It is not in the best interests of the insured to hold back unfavourable information with the hopes of reducing the premiums payable under the policy, since the insurance contract is one of utmost good faith. The insurance company can deny coverage for failure on the part of the insured to disclose any and all relevant information. Insurance coverage is intended to protect the insured against a loss, but not to create a windfall for the insured. Therefore, the insured is entitled to collect only to the maximum amount of the loss, subject to the deductible in the policy. All insurance can be grouped into three main categories: life and disability, property, and liability insurance. Within each of these main categories are many specialized types of insurance. 2008 BY NELSON, A DIVISION OF THOMSON CANADA LTD. PART 9: TRANSFERENCE OF RISK Study Outline Use this outline to prepare a complete set of notes for this chapter. Introduction - 687 Insurance policy_____________________________________________________ Insurer _____________________________________________________________ Insured______________________________________________________________ Premium ____________________________________________________________ The Insurance Contract page 688 ______________________________________________________________________ ______________________________________________________________________...
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