Chapter 1

Question 1

Property Insurance

Answer 1

First-party insurance that indemnifies the owner or user of property for its loss, or the loss of its income-producing ability, when the loss or damage is caused by a covered cause of loss, such as fire or explosion.

Question 2

Insurable interest

Answer 2

An interest that the insured must have in the subject matter of the insurance purchased so that if the event insured against occurs, the insured will suffer a pecuniary loss.

Question 3

Indemnity

Answer 3

A contract, expressed or implied, to repay in the event of a loss. The insured neither gains nor loses.

Question 4

Contract (common law)

Answer 4

An agreement or promise between two or more persons that is intended to be legally enforceable. It is constituted by the acceptance by one party of an offer by the other party to perform or to abstain from performing a specific act. The offer and acceptance may either be expressed or be inferred through the conduct of the parties.

Question 5

Contract (Quebec)

Answer 5

An agreement of wills by which one or several persons obligate themselves to one or several other persons to perform a prestation.

Question 6

Prestation

Answer 6

A duty, a payment, or a service.

Question 7

Uberrimae fidei (utmost good faith)

Answer 7

Of the utmost good faith. The basis of all insurance contracts, it calls for the highest standards of integrity from the insured and insurer. Both parties are bound to exercise good faith and do so by a full disclosure of all information material to the proposed contract.

Question 8

Habitational

Answer 8

Insurance policies include homeowners policies that cover damage to or destruction of the insured’s dwelling, detached private structures (outbuildings), and personal property (contents). Other habitational insurance policies cover tenants (renters) and condominium unit owners.

Question 9

Commercial

Answer 9

Insurance policies cover such property as buildings, stock, and equipment. Other categories of property may also be covered under a commercial property policy.

Question 10

Aviation

Answer 10

Insurance policies provide insurance coverage on the actual airplane itself.

Question 11

Boiler

Answer 11

Boiler insurance, which is also known as boiler and machinery or equipment breakdown insurance, covers accidental physical damage to items such as boilers, pressure vessels, pressurized equipment, mechanical equipment, production and non-production machinery, and electronic equipment that are excluded under a conventional property policy.

Question 12

Builders risk

Answer 12

Insurance policies cover physical loss or damage to property while it is in the course of construction. The coverage applies to material, fixtures and equipment used in construction or renovation of a building or structure. The coverage applies when the physical loss or damage occurs as a result of an insured cause of loss (called a peril)

Question 13

Peril

Answer 13

Event that caused a loss covered by the policy; for example, fire and windstorm.

Question 14

Crop

Answer 14

Insurance policies cover loss or damage to crops that are being grown. Coverages includes loss or damage due to crop loss or losses caused by weather events, insects, hail, disease, drought or frost damage.

Question 15

Earthquake

Answer 15

Insurance covers loss or damage arising from the peril of earthquake, which is typically excluded from conventional property policies. Depending on where an insured is located, earthquake coverage may be difficult or very expensive to purchase.

Question 16

Flood

Answer 16

Insurance policies cover loss or damage arising from the peril of flood, which, like earthquake, is typically excluded from conventional property policies. As with earthquake insurance, an insured’s location may make it difficult or expensive to purchase flood insurance.

Question 17

Marine

Answer 17

Insurance, including marine cargo insurance and inland marine insurance, covers loss of or damage to property in transit at sea or on inland waterways and on land. Examples of such property might include property being shipped by or to an insured, tools and equipment, stock, and contractors equipment located away from the insured’s premises.

Question 18

Elements of the property insurance policy:

Answer 18

1. Name of them insurer
2. Name of insured
3. Name of the person or persons to whom the insurance money is payable
4. Amount, or method of determining the amount, of premium for the insurance.
5. The subject matter of insurance
6. Indemnity for which the insurer may become liable
7. Event on the happening of which liability is to accrue.
8. Effective date of the insurance.
9. Expiry date or method by which it is to be fixed.

Question 19

Deductible

Answer 19

An agreed specified amount that the insured must pay on a claim before the insurance company will cover the rest of the claim. This amount is agreed upon by both the insurer and insured. An insured’s obligation to pay a deductible is not based on whether he or she is at fault.

Question 20

Fire insurance

Answer 20

Coverage for losses from fire, lightning, and explosion. Usually supplemented by extended coverage insurance, including coverage for damage by smoke and water.

Question 21

Exclusion

Answer 21

Risks, perils, or properties defined in the policy as not covered.

Question 22

Exclusions for legislative considerations:

Answer 22

1. Electrical devices exclusion
2. Application of heat exclusion
3. War risks exclusion
4. Nuclear incident exclusion

Question 23

Electrical devices exclusion:

Answer 23

There is no coverage for loss to electrical devices or appliances if the damage is caused by lightning or other electrical currents.

Question 24

Application of heat exclusion:

Answer 24

There is no coverage for loss or damage to items of property that occurs as a result of heat being applied to the item. However resultant fire damage to other property is covered. The intent of this exclusion is to exclude coverage for loss arising from an insured’s failure to properly protect the items of property being worked on.

Question 25

War Risks Exclusion:

Answer 25

There is no coverage for loss or damage arising from foreign or civil war, riot or other civil disturbance.

Question 26

Nuclear incident exclusion:

Answer 26

Loss or damage caused by a nuclear incident is excluded under the basic fire policy. Coverage is, however, provided for resultant loss caused directly by fire, lightning, or explosion of natural, coal, or manufactured gas. The exclusion also rules out coverage for loss by contamination by radioactive material.

Question 27

Excluded property under basic fire policy

Answer 27

There is no coverage for loss or damage to:
Money, books of account, securities for money, evidences of debt or title
Automobiles, tractors and other motor vehicles
Aircraft or
Watercraft

Question 28

Alterations and Additions Exclusion:

Answer 28

Loss or damage to building or its contents that occurs during and as a result of alterations or additions to the building is excluded unless insured has secured written permission from the insurer to undertake the alterations and additions. Ex. Insured adding addition to building and fire breaks out as a result, the insured will not have coverage unless insurer has granted permission to carry out addition.

Question 29

Vacancy, unoccupancy or disuse exclusion:

Answer 29

Loss or damage that occurs where the insured knows the building has been vacant, unoccupied, or shut down for more than 30 consecutive days is excluded under the basic fire policy. The exclusion doesn’t apply after vacancy, unoccupancy, or disuse of the property ends.

Question 30

Volatile substances exclusion:

Answer 30

Basic fire policy excludes loss or damage that occurs when insured knows there is more than a gallon of gasoline, benzene, naphtha, or other substance of an equal or lower flashpoint in the insured’s building.

Question 31

Flashpoint:

Answer 31

Lowest temperature at which a liquid gives off sufficient vapours to form an ignitable mixture with the air; such mixture will ignite on contact with a flame or spark.

Question 32

Statutory conditions

Answer 32

Special prescribed and standardized conditions that the provincial insurance acts require to be included in fire, automobile and accident and sickness policies. Statutory conditions must be identified and printed in every fire policy; however, conditions will still govern the policy even in their absence.

Question 33

By-laws exclusion:

Answer 33

There is no coverage for increased costs of repair or replacement arising from the enforcement or application of a by-law, regulation, ordinance, or law that regulates the zoning or the demolition, repair, or construction of buildings.

Question 34

Extensions in the basic fire policy:

Answer 34

1. Removal of insured property

2. Debris removal

Question 35

Exclusions for underwriting and rating considerations (fire policy):

Answer 35

1. Exluded property
2. Alterations and additions exclusion
3. Vacancy, unoccupancy, or disuse exlusion
4. Volatile substances exclusion
5. By-laws exclusion

Question 36

Removal of insured property extension:

Answer 36

This extension extends any remaining insurance coverage to insured property removed from insured locations to prevent further damage. The extension applies for seven days from the date that removal of property begins or until policy expires, whichever occurs first. Coverage for property at temp. Locations ends after seven days unless insured and insurer have agreed otherwise.

Question 37

Debris removal

Answer 37

In cases of loss insured under basic fire policy, debris may be left behind, and this debris must be removed, especially in cases where property is to be rebuilt or repaired. The BFP extends coverage to include expense of this removal in the amount of insurance chosen by insured. Extension of coverage will not increase amount of insurance, which covers both insured loss and any debris removal expense.

Question 38

Additional Perils: Extended Coverage Endorsement:

Answer 38

1. Explosion (Beyond BFP)
2. Impact by aircraft, spacecraft, or land vehicle
3. Riot, vandalism or malicious acts
4. Smoke
5. Leakage from fire protective equipment
6. Windstorm or hail

Question 39

Extended coverage insurance

Answer 39

An end to that enlarges the coverage afforded by the primary policy. Coverages such as windstorm, hail, smoke and riot are extended coverages on a fire policy.

Question 40

Additional Perils

Answer 40

Do not add to the amount of insurance or the property insured. They simply expand the scope of coverage under the policy by insuring against more causes of loss (perils). Additional premium will be charged.

Question 41

Other Additional perils under fire policy:

Answer 41

Falling object
Glass breakage
Water Damage

Question 42

Multi-peril policy

Answer 42

An insurance policy that typically combines fire and casualty insurance (or fire, casualty, and inland marine coverages) in a single contract such as a Homeowners policy.

Question 43

Who is covered under Property insurance:

Answer 43

Named insured
Business - full name of business must be reflected in the policy.
Mailing address of named insured
Whether business is a sole proprietorship, partnership, corp, or cooperative.

Question 44

On habitational policy such as homeowners form, coverage would apply not only to named insured but also to certain other people:

Answer 44

• Named insured’s spouse
• Relatives of either named insured or named insured’s spouse
• any person under age 21 in the named insured’s care
• These people will each qualify as an insured so long as they reside in the same household as the named insured
• In addition: definition of insured will include a student who is temporarily living away from home to attend a school, college or university. Though student has to be dependent on named insured.
• residence employee, such as housekeeper, nanny, gardener, who works part time or full time may also be eligible for coverage.

Question 45

Mortgage

Answer 45

A mortgage conveys an interest in property as security for a debt. The borrower (Mortgagor) retains possession and use of the property, but the lender (mortgagee) acquires an interest in the property and the right to sell it if the borrower defaults on the debt.

Question 46

Mortgage clause:

Answer 46

A clause in an insurance policy that stipulates the rights and obligations of the insurer and the mortgagee. the main characteristics of this clase are that the mortgagee is granted protection in the event a loss is denied due to the actions of the insured (provided that the mortgagee was not aware of the insured’s wrongful action) and, in return, the mortgagee accepts responsibility to advise the insurer of any misrepresentation or change in risk of which the mortgagee is aware.

Question 47

Subject Matter of Insurance

Answer 47

Subject matter of property policy is property, described in the policy, in which the insured has an interest. It is the property for which the insured will be indemnified if it is damaged or destroyed.

Question 48

First party insurance

Answer 48

Protects first parties - 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.

Question 49

Third party insurance

Answer 49

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.

Question 50

Personal lines

Answer 50

Insurance for individuals and families such as private passenger auto insurance and homeowners policies.

Question 51

Commercial lines

Answer 51

Insurance for businesses, such as commercial property or liability insurance.

Question 52

Property eligible for coverage under commercial property include:

Answer 52

Buildings and other structures (owned or leased by insured)
Furnitures, fixtures, equipment and supplies
Inventory of stock (finished and unfinished)
Money and securities
Accounts receivable
Unit improvements and betterments made to the premises
Boilers
Machinery
Data processing equipment and media (computers)
Valuable papers and records, books of account and documents
Mobile property such as automobiles, trucks and construction equipment
Signs, fences and other outdoor property not attached to a building
Leased equipment.