chapter 4

Question 1

The three ways a change to a commercial property policy can be made

Answer 1

1) Endorsement;
2) Rider;
3) Separate policy

Question 2

Endorsement.”

Answer 2

Changes the terms or conditions of the policy.

Question 3

What values are insured on a Glass Rider

Answer 3

1) Glass
2) Artwork on glass \
3) Tape & Foil on glass

Question 4

When would tenants require Glass Riders?

Answer 4

tenants may require glass riders when they have assumed responsibility for damage to glass in a lease

Question 5

What type of information is required by underwriters when insuring glass on a scheduled basis?

Answer 5

1) type, size and number of glass units
2) location of glass
3) information of any lettering, tape, foil or ornamentation

Question 6

What are 2 factors, location wise, that may influence the premium on Glass Riders

Answer 6

1) Interior or exterior

2) level located on building (ie 1st or 2nd floor)

Question 7

3 Examples of loss covered by Glass Riders

Answer 7

1) employee breaks glass while carrying lumber into the store
2) customer breaks glass with floor lamp they just purchased in store
3) glass breaks as a result of buildings foundation settli

Question 8

“Rider.”

Answer 8

Adds coverages to the policy

Question 9

4 coverages provided by the Accounts Receivable Form and provide an example of each

Answer 9

1) amounts which cannot be collected due to loss of account records; lists of clients who have an outstanding amount due
2) interest on loans or lines of credit your client needs to utilise to pay current liabilities; money owed to suppliers must be paid prior to settlement with insurer
3) extra costs in the collection of accounts receivable; amounts paid to collection agencies or overtime wages to staff trying to collect accounts
4) expenses incurred in the reconstruction of records; client hires accounting firm to reconstruct records

Question 10

What is the requirement of insureds when accounts receivable records are not in use and the premises are closed?

Answer 10

accounts receivable records must be stored in a described receptacle

Question 11

2 factors that influence premiums to be charged on Accounts Receivable Forms?

Answer 11

1) Availability of Duplicates

2) Quality of Described Receptacle

Question 12

2 factors that influence premiums to be charged on Valuable Papers and Records while off premises

Answer 12

1) Availability of Duplicates

2) Quality of Described Receptacle

Question 13

When can coverage be extended to insure Valuable Papers and Records while off premises?

Answer 13

1) when being transported outside premises

2) when at other premises on a temporary basis

Question 14

What coverage limit is available to insure Valuable Papers and Records while off premises?

Answer 14

10% of amount of insurance or $5000 - whichever is less

Question 15

What type of electrical disturbance is insured by Valuable Papers & Records Insurance

Answer 15

When caused by lighting damage

Question 16

3 Coverage sections found in EDP policies

Answer 16

1) Loss to data processing systems & component parts (hardware)
2) loss to date processing media & programs (software)
3) extra expenses

Question 17

2 key coverage advantages provided by Section 1 of EDP policies?

Answer 17

1) Broad water losses

2) Mechanical & Electrical breakdown

Question 18

5 causes of mechanical & electrical breakdown insured by Electronic Data Processing (EDP) policies

Answer 18

1) Errors in machine programming
2) Processing
3) Short Circuits
4) Dampness or dryness of atmosphere
5) Extremes of temperature

Question 19

What type of agreement may be requested by insurers when requesting Mechanical and electrical breakdown coverage on Electronic Data \processing policies

Answer 19

Maintenance contract

Question 20

What is the best means to avoiding a loss to media?

Answer 20

proper back-up procedures

Question 21

2 important coverages provided by Boiler & Machinery Policies

Answer 21

1) Explosion of boilers and pressure vessels

2) mechanical & electrical breakdown

Question 22

What is the basic Insuring Agreement in Section 1 of Boiler & Machinery Policies?

Answer 22

Boiler & Machinery policies insure objects against accidents

Question 23

2 types of Boiler & Machinery policies available

Answer 23

1) Limited Form

2) Comprehensive Form

Question 24

Type of Accident & Type of objects insured by the Limited Form

Answer 24

Explosion only; boilers & pressure vessels

Question 25

Describe “Accident” & type of objects insured by the Comprehensive Form

Answer 25

Sudden and accidental breakdown of an object; all objects insured by policy

Question 26

What is the basis of settlement on Boiler & Machinery Policies

Answer 26

Repair or Replacement

Question 27

2 Provisions applicable to loss settlements on Boiler & Machinery

Answer 27

1) Repair or replacement must be completed within one year of loss, when not completed within one year, loss settlement will be ACV
2) no payment will be made when objects are useless or obsolete

Question 28

2 expenses insured by Expediting Expenses found in Boiler & Machinery policies

Answer 28

1) for making necessary repairs

2) while expediting permanent repairs

Question 29

Describe the Suspension Clause found in Boiler & Machinery Policies

Answer 29

when inspectors judge an object to be in a dangerous condition, coverage on object can be suspended immediately

Question 30

Define “Occurrence” found in EQ Clause

Answer 30

all earthquake shocks occurring within 72 hours

Question 31

How are losses calculated with EQ insurance?

Answer 31

When clients have purchased less earthquake insurance than fire insurance, claim settlements will be reduce by same ratio

Question 32

When will total amount of EQ insurance purchased be paid in the event of a claim?

Answer 32

when the amount of earthquake insurance purchased is equal to the amount of fire insurance purchased

Question 33

What are 2 key provisions of coverage in the Consequential Loss Assumption Clause - Cold Storage

Answer 33

1) Direct damage to refrigeration or cooling apparatus 2) Damage must result from an insured peril

Question 34

Why should brokers ask insureds about bylaws that may affect reconstruction of their buildings

Answer 34

when clients suffer losses which are uninsured because of the operation of building code bylaws, courts may find broker responsible when broker failed to advise client of this exposure

Question 35

3 Endorsements that can be added to insure Bylaws Coverage & An Example of Each

Answer 35

1) Increased Cost of Construction; installing sprinkler systems or using up to date building materials
2) Value of the Undamaged Portion of Building; if the building is damaged over a certain percentage it cannot be repaired
3) Demolition & Debris Removal of of the Undamaged Portion of Building; cost to knock down and clean up the undamaged portion of the building

Question 36

2 examples of temporary locations where property may be located and insured by Temporary Locations coverage

Answer 36

1) When at customers premises on a pre-sale trial basis 2) When at a warehouse awaiting pickup by client

Question 37

List locations insured by Newly Acquired Location coverage

Answer 37

1) All locations newly acquired by client

2) in or on vehicles within 100 meters of new location

Question 38

Will Newly Acquired coverage insure losses to property at an exhibition or trade show?

Answer 38

Yes

Question 39

2 Advantages insureds receive when they purchase parcel post coverage from their insurance company

Answer 39

1) Faster Claims Service

2) Lower costs to insure

Question 40

What warranty is often used when Other Transit coverage is purchased?

Answer 40

Locked Vehicle Warranty

Question 41

2 Coverage limits shown when Sales Representatives Coverage is purchased

Answer 41

1) Total limits insured

2) maximum limit per sales representative

Question 42

What does the term “Custody” mean when Sales Representatives coverage is purchased?

Answer 42

Custody means control or care of something by another

Question 43

What type of property is insured using the Peak Season Endorsement?

Answer 43

Stock

Question 44

What is the basis of settlement when any condition is not met in the Replacement Cost Endorsement?

Answer 44

Settlement reverts to Actual Cash Value

Question 45

Explain the coverages found in Vacancy Permit No 1

Answer 45

Permission is granted for vacancy or unoccupancy for time indicated in the permit

Question 46

Explain the coverages found in Vacancy Permit No 2

Answer 46

Permission is granted for vacancy or unoccupancy for time indicated in permit and payment for losses due to fire and lightning shall be limited to three fifths liability

Question 47

“Media.”

Answer 47

The materials, including disks, tapes and punch cards on which data is stored

Question 48

“Data.”

Answer 48

The information stored on media

Question 49

The off-premises coverage provided by the Newly Acquired Location optional coverage extension

Answer 49

Automatic coverage up to 30 days for equipment and stock at any newly-acquired location owned, rented or wholly or partly controlled by the insured.
Also covers property in or on vehicles within 100 metres of such location.

Question 50

Three instances in which insured property is not deemed to be at a temporary location

Answer 50

1) At any location specified in the policy;
2) In transit;
3) At any location owned, rented or wholly or partly controlled by the insured.

Question 51

Two reasons why businesses that use Canada Post to send stock orders should consider insuring under Property in Transit coverage

Answer 51

1) Coverage cost is less;

2) Claims service is faster.

Question 52

The exposures insured by the Property in Transit coverage extension.

Answer 52

All means of transport other than Canada Post.

Question 53

Examples of losses covered by Sales Representative coverage

Answer 53

• At the home of a sales representative
• At a trade show or exhibition
• In the sales representative’s automobile and “otherwise.”

Question 54

Types of businesses that buy an Installment Sales Contract Floater

Answer 54

Manufacturers, wholesalers, retailers and other businesses selling equipment and merchandise on a partial payment plan

Question 55

The point at which Installment Sales Contract Floater coverage ceases to apply.

Answer 55

When payments on the property are completed.

Question 56

Reason for using the Peak Season Endorsement

Answer 56

When the insured’s stock value changes seasonally.

Question 57

Two advantages of the Peak Season Endorsement

Answer 57

1) Saves premium as insured doesn’t have to pay for coverage that’s not needed over the entire policy period;
2) The insured doesn’t have to remember to contact the broker when stock value changes occur.

Question 58

How to properly explain Replacement Cost coverage to clients.

Answer 58

While Replacement Cost includes replacing old property with new property, it also includes the costs to fix or repair lost or damaged property with new and similar materials. The key advantage of this coverage is that all claims are paid on the basis of costs at the time of the loss, without deduction for depreciation.

Question 59

The obligations of the insured before Replacement Cost settlement is made.

Answer 59

1) Replacement must be effected with due diligence and dispatch;
2) Replacement must be on the same or adjacent site;
3) Payment is made only after replacement has been effected.

Question 60

The Inflation Protection Endorsement.

Answer 60

Increases the amount of building insurance to reflect increase in building costs; no charge to insured for interim increases in building value.

Question 61

The situation that would make the insured liable to pay fire department charges.

Answer 61

When a local fire department requires assistance from neighbouring fire departments.

Question 62

“Temporary location.”

Answer 62

A location not specified on the policy that’s not owned, rented or wholly or partly controlled by the insured.

Question 63

“Newly acquired location

Answer 63

A location owned, rented or controlled by the insured that’s within the first 30 days of acquisition.

Question 64

“Replacement cost

Answer 64

The cost of repairing or replacing the property on the same site with new property of like kind and quality and for like occupancy without deduction for depreciation.