Chapter 1 Introduction of Property Insurance

Question 1

A homeowner losing the ability to continue to rent his or her basement suite after a fire is an example of a (an)

a. incidental loss
b. direct loss
c. indirect loss
d. liability

Answer 1

c. indirect loss

Losing rental income from a direct loss such as fire is an indirect loss

Question 2

Identify the doctrine that stipulates that, if a loss to property is attributable to more than one cause occurring simultaneously, any one of which is covered by the insurance policy, the loss is payable under the policy.

a. Concurrent causation
b. Proximate cause
c. Remote cause
d. Fortuitous

Answer 2

a. Concurrent causation

Question 3

In property insurance, what is a deductible?

a. The portion that the insurer pays for a covered loss.
b. It is the amount the insurer will pay in the event of a loss.
c. It is an amount the insured must pay on a claim before the insurance company will cover the rest of the claim.
d. The amount that is applied only once during the renewal term in the event of a loss even though there are several losses.

Answer 3

c. It is an amount the insured must pay on a claim before the insurance company will cover the rest of the claim.

Question 4

In the basic fire policy, for how many days does the removal of insured property extension apply to remove property from an insured location to prevent further damage?

a. 7 days or until the policy expires
b. 8 days or until the policy expires
c. 15 days or until the policy expires
d. 30 days or until the policy expires

Answer 4

a. 7 days or until the policy expires

Question 5

What is the main benefit of a mortgage clause for the mortgagee?

a. Entitles the bank to a larger share of the proceeds if there is a total loss
b. Prevents the insurer from terminating a policy mid-term
c. The policy will cover the mortgagee even if the insured has breached a condition of the policy
d. Entitles the bank to cancel the policy at any time and get a pro rata refund

Answer 5

c. The policy will cover the mortgagee even if the insured has breached a condition of the policy

Question 6

What is the objective of indemnity?

a. Allow the insured to benefit from the claim
b. Provide the full replacement cost at the time of the loss
c. Return the insured as nearly as possible to the financial position he or she was in prior to the loss; no more, no less
d. Allow the insured to obtain a larger settlement with his or her loss

Answer 6

c. Return the insured as nearly as possible to the financial position he or she was in prior to the loss; no more, no less

Question 7

What must the insured have in the subject matter before they can be indemnified for a loss?

a. Utmost good faith
b. Insurable interest
c. Indemnity
d. Agreement

Answer 7

b. Insurable interest

Question 8

Which of the following descriptions is correct as it relates to the statutory conditions in the common law provinces?

a. They apply to oral and written fire insurance contracts.
b. They apply whether included with the fire policy or not.
c. The conditions apply to only accident and sickness policies.
d. The conditions must be identified and printed in every fire insurance policy.

Answer 8

d. The conditions must be identified and printed in every fire insurance policy.

Question 9

Which of the following policy provisions is used to restrict coverage specifically regarding the use, condition, or maintenance of the insured property?

a. Warranties
b. Endorsements
c. Coinsurance clauses
d. Actual cash values

Answer 9

a. Warranties

Question 10

Which statement is true about replacement insurance?

a. It is the current market price.
b. It is not provided in any personal-lines policy.
c. The amount to be paid is the replacement cost less depreciation.
d. Replacement insurance is determined by the purchase price of the insured item.

Answer 10

a. It is the current market price.

Question 11

Which of the following is not an additional peril in the Extended Coverage Endorsement added to the Basic Fire Policy?

a) Riot
b) Smoke
c) By Laws
d) Windstorm

Answer 11

c) By Laws

Question 12

Which of the following statements is false in regards to exclusions?

a) Exclusions are listed on the policy
b) Exclusions remove certain losses from the policy’s coverage
c) Exclusions never increase policy coverage but always restrict it
d) Exclusions are always permanent

Answer 12

d) Exclusions are always permanent

Question 13

Which of the following types of property are excluded on the Basic Fire policy?

a) Jewellery
b) Safes
c) Securities for money
d) Sports Equipment

Answer 13

c) Securities for money

Question 14

Under the Vacancy, Occupancy and Disuse exclusion – loss is excluded while the insured knows the building is vacant for:
a) 30 days
b) 21 days
c) More than 30 consecutive days
d) More than 10 consecutive days

Answer 14

c) More than 30 consecutive days

Question 15

Which of the following individuals would not qualify as insureds under the property policy?

a) Spouse of insured
b) 10 year old daughter of insured
c) Aunt Martha from Ohio
d) Live in maid

Answer 15

c) Aunt Martha from Ohio

Question 16

List the 5 key elements necessary in order for something to be considered a legal contract in Common Law.

Answer 16

1) An agreement
2) between legally capable parties for
3) Consideration (such as money) &
4) demonstrate intent to
5) do something legal

Question 17

Insurance policies differ from other types of contracts because they also have what 3 additional principles?

Answer 17

Indemnity,
Insurable Interest
Utmost Good Faith

Question 18

What 2 extensions of coverage are included in the Basic Fire policy for the insured when a loss is caused by an insured peril?

Answer 18

1) Removal of insured property
2) Debris removal

Question 19

Insurers are in a position of superior knowledge of the terms and conditions in the policy because they are the authors of the contract. The insurance acts required that a policy that limits the indemnity the insured may receive must be clearly marked to that effect.

a. Limitation of Liability clause
b. Identified articles
c. Warranties
d. Named and unnamed perils

Answer 19

a. Limitation of Liability clause

Question 20

If a policyholder caries specific insurance on a particular item or object, the policy that is specific to that item shall respond as the first-loss insurance. Only after all coverage is used under a primary policy can any other policy responses to the loss this is known as

a. Limitation of Liability clause
b. Identified articles
c. Warranties
d. Named and unnamed perils

Answer 20

b. Identified articles

Question 21

If a loss occurs and an amount is paid by the insurer during the policy terms, the policy limits are restored to the full amount shown on the declaration page. Also, payments of any claim-even for policy limits, does not affect the insured’s refund of the premium if the policy is canceled before the end of the term.

a. Limitation of Liability clause
b. Identified articles
c. Warranties
d. Automatic Reinstatement

Answer 21

d. Automatic Reinstatement

Question 22

What are the 5 key elements of a contract

Answer 22

A legal agreement between two capable parties
for a consideration
demonstrating intent
for something that is legal.

Question 23

Other than a legal agreement between two capable parties for a consideration
demonstrating intent for something that is legal. what are the other 3 additional principles.

Answer 23

indemnity,
insurable interest
utmost good faith

Question 24

What are the two basic type of insurance?

Answer 24

personal line
commercial line

Question 25

What are the 9 key elements of a policy?

Answer 25

name of the insurer
name f the insured
The name of the person or persons to whom the insurance money is payable
The amount or method of determining the amount, of premium for the insurance
The subject matter of insurance
The indemnity for which the insurer may become liable
The event on the happening of which liability is to accrue
The effective date of the insurance
The expiry date or method by which it is to be fixed.

Question 26

What are the 3 types of policy written

Answer 26

basic, broad and comprehensive.

Question 27

Basic Fire Policy named perils covers what?

Answer 27

named perils
Fire
Lightning
Explosion of natural coal, or manufactured gas

Question 28

Basic Fire policy exclusions

Answer 28

Electrical devices
Application of heat
War risk
Nuclear incident
Excluded property
Alternation of addition
vacancy, unoccupancy or disuse
volatile substances
Bylaws

Question 29

Basic policy Extensions

Answer 29

Removal of the insured property
debris removal

Question 30

When insurers combine policy forms covering various classes of business in a package

a. broad policy
b. multi-peril policy
c. package policy
d. expansion policy

Answer 30

b. multi-peril policy

Question 31

A homeowners policy form coverage applies to who other than the named insured

Answer 31

-The name insured spouse
- A relative of either the named insured or their spouse living with them
-Any person under the age of 21 in the insured care living with them
-A student who is temporarily living away from home to attend a school if they are still a dependent.

Question 32

What is covered by the Mortgage cause?

Answer 32

The benefit of a mortgage clause is that the policy will cover the mortgagee even if a named insured has breached a condition of the policy. The mortgagee clause creates a separate contract between the insurer and the mortgagee.

Question 33

What is a warranty

a. guarantee that a claim will be paid for an insured peril
b. restricts coverage specifically regarding its use, a condition that must be met
c. limitation of coverage
d. a document that shows the insurer’s ability to pay claims

Answer 33

b. restricts coverage specifically regarding its use, a condition that must be met

Question 34

What is proximity cause?

Answer 34

A cause that in a natural and continuous sequence unbroken by any new and independent cause produced an event and without the event would not happen.

Question 35

concurrent causation

Answer 35

A doctrine that holds that if a loss is attributable to more than one cause any one of which is covered by the insurance policy, the loss is payable under the policy.

Question 36

The insurance act required that what be identified and printed on every insurance policy.

a. payment type
b statutory conditions that bind the insured and insurer
c. mortgagees and lenders
d. extensions

Answer 36

b statutory conditions that bind the insured and insurer