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Chapter 28

MCS 3040 Chapter Notes - Chapter 28: Vehicle Insurance, Subrogation, Disability Insurance


Department
Marketing and Consumer Studies
Course Code
MCS 3040
Professor
Joseph Radocchia
Chapter
28

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Chapter 28
Insurance
Introduction
Insurance Policy: A contract of insurance
Insurer: A company that sells insurance coverage
Insured: One who buys insurance coverage
Premium: The price paid for insurance coverage
Insurance isn’t a panacea for all risks as insurance can be costly and isn’t always available
Insurance doesn't prevent loss from occurring or prevent potential adverse publicity associated with
loss
Insurance legislation’s purposes include…
Mandating the terms that must be found in insurance contracts
Regulation the insurance industry
Putting in place a system of monitoring insurance companies
Basic types of insurance are…
Life and disability insurance
Property Insurance
Liability Insurance
Will the exception of life insurance contracts, insurance policies can be written so that insured pays a
deductible
Insured is responsible for the 1st part of the loss and insurer pays the balance
The Insurance Contract
Duty to Disclose
Duty to Disclose: The obligation of the insured to provide to the insurer all info that relates to the risk being
insured
If the insured fails to do so the insurer may choose not to honor the policy
An insurance company can deny coverage for non disclosure even when the loss has nothing to do
with the matter that it was left undisclosed
The law places a duty of disclosure on the insured for a straightforward reason: the insurer has to be in
a position to fully assess the risk against which the insured wants protection
The only way the insurer can properly assess the risk is if the insured is candid & forthcoming
The insured is usually in the best position to provide insurer with the needed info
Insurable Interest
Insurable Interest: A financial stake in what’s being insured
The test for whether insured has an insurable interest is whether the benefits from its existence and
would be prejudiced from its destruction
Indemnity
Indemnity: The obligation on the insurer to make good the loss
Insured isn’t supposed to profit from the happening of the insured-against event but at most come out
even
Subrogation
Subrogation: The right of the insurer to recover the amount paid on a claim from a 3rd party that caused the
loss
Insurance company also has the right to rebuild, repair or replace what’s damaged so as to minimize
costs
Also has right of salvage
Forfeiture rule: A rule that provides that a criminal shouldn't be permitted to profit from a crime
The Policy
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