1.3 - Who and What are Covered in Property Insurance Flashcards
Named insured
-May be one or more people or it may be a business. In the case of a business, the full name of the business must be reflected in the policy
-demonstrates who the insured party is, and so, whose property is being covered, who is entitled to report and deal with a claim under the policy, and to whom the insurance proceeds, if any, will be payable
-mailing address needs to be accurately declared in the policy in case correspondence needs to be forwarded to the insured
-named insured is listed on the dec page or coverage summary page of the policy
Commercial Policy Named Insured
Owners of a business - whether sole proprietorship, a partnership, a corporation, or a cooperative - are entitled to coverage under the policy. Depending on wording, coverage may also extend to property belonging to officers and employees of the business that is being insured
Habitational Policy Named Insured
coverage applies not only to the named insured but also to certain other people, as long as they reside in the same household as the named insured:
-the named insured’s spouse
-the relatives of either the named insured or the named insured’s spouse
-any person under the age of 21 in the named insured’s care
-definition of insured also includes a student who is temporarily living away from home to attend a school, college, or university, and must be dependent on the named insured
-Residence employee (such as housekeeper, nanny or gardener) who works part-time or full-time for the insured may also be eligible
Mortgages and Mortgaegees
-mortgagee is eligible for protection under the property policy
-a mortgage conveys an interest in property as a security for a debt
-mortgagee acquires an interest in the property and the right to sell it if the borrower defaults on the debt
-mortgagee would be prejudiced by the loss, damage, or destruction of that property as a security for the loan, so they have an insurable interest in it.
-most lenders require insurance on the property to protect their financial interest
Mortgage clause
a clause in an insurance policy that stipulates the rights and obligations of the insurer and the mortgagee
-clause is included in or attached to policies covering a building in which a mortgagee is named as a loss payee in respect of the insurance on the property
-benefit of a mortgage clause for the mortgagee is that the policy will cover the mortgagee even if the named insured has breached a condition of the policy and is therefore unable to recover for a loss.
-Mortgage clause creates a separate contract between the insurer and the mortgagee which remains governed by the perils, exclusions, amounts and limitations applying to the policy itself
Subject matter of insurance
-What is covered
-must be described so there is no uncertainty as to what is eligible for coverage
-may be dwelling, contents, or a commercial building
-must clearly state the address or location and describe the construction and occupancy of the building
Demonstrate insurable interest
-usually property owned by the insured, but can also extend coverage for property belonging to someone other than the insured, provided that the insured is legally liable for the property and has agreed to keep it insured
First Party Insurance
-protects the named insured and others with an insurable interest in or mortgage on the property or who entrust their property to the insured - against loss or damage to the insured property
Third Party Insurance
Liability insurance is purchased by the insured (the first party) from an insurer (the second party) to compensate or indemnify another (the third party) for damage or loss for which the insured is lawfully liable
-a person or organization not party to the insurance contract but whose legal complaint against the insured brings the contract into play
Direct Loss
Damage to property by direct action of a peril insured against, as distinguished from contingent or indirect damage
-value of the physical property that is damaged or destroyed
Indirect loss
arises from direct loss; it encompasses other loss suffered as a consequence of the damage to or destruction of the physical property
-examples covered under property insurance:
>additional living expense
>business interruption (loss of earnings, rents, and rental income, and also extra expense incurred to keep a business in operation after a direct loss)
