Chapters 4-5

Question 1

What are Declarations?

Answer 1

Statements included in a policy that are agreed to by the insured and form the basis of a contract for insurance

Question 2

What is on the ‘declerations/ coverage summary’ page? (3)

Answer 2

This page outlines:

1) coverage amounts,
2) location of the property,
3) name of the insured, and the property being insured. It usually appears first on a policy.

Question 3

What are Policy Wordings?

Answer 3

they are a preamble describing the general agreements between the insurer and the insured. It includes coverage’s, extensions of coverage, exclusions, and warranties. it is also the basis for the settlement of the claim and will contain any additional conditions or statutory conditions.

Question 4

What are Endorsements and Floaters?

Answer 4

Additional insurance provided for items that may be limited in coverage, not covered, or excluded from coverage in the policy.

Question 5

What is the “ Plain language” wording standard?

Answer 5

It means that the average layperson can read the policy and generally understand its terms. All policies must be presented to the consumer as such.

Question 6

Define “ Package Policy”

Answer 6

A Package policy is built by combining perils from classes or lines of insurance administered by separate departments. It helps to enhance coverage and cut costs. It often offers extensions and settlement options that make the packages more attractive to buyers.

Question 7

Define “ Adverse Selection”

Answer 7

Those with higher risks may purchase insurance in greater amounts than those with lower risks. To combat adverse selection, insurance companies reduce exposure to large claims by limiting coverage or raising premiums depending on the risk. the insurer pays premiums and has extensions that are proportional to the amount of risk their policy presents the insurer (high risk- more limitations, possibility of rejection. low risk- lower premiums) They can also deny the risk entirely.

Question 8

How does the “Package” approach allow insurers to reduce premium?

Answer 8

1) By reducing the risk of adverse selection

2) By issuing uniform contracts, which simplifies policy-issuing and claims adjustments.

Question 9

What is a “ Non-Package” policy?

Answer 9

It is a policy that serves those who prefer simpler/modest insurance to popular packages. It also serves those who are ineligible for an insurer’s package policy or who have a location that is ineligible for broader coverage.

Question 10

What is a “ Subscription” Policy?

Answer 10

A single policy covering a risk that is divided among a number of insurers. It is issued by a “ lead” company (one who assumes the highest percentage of the risk)

Question 11

Define “ Multi-Limit Policy”?

Answer 11

A multi-limit policy is a policy in which separate amounts are given for the dwelling and personal property. Personal property limits are often a percentage of the dwelling limit, but this is not always the case.

Question 12

What is a “Single Limit Policy”?

Answer 12

Is is a policy with an amount of coverage that is meant to encompass the combined limit of the dwelling and the property.

Question 13

What is included in the Homeowners Basic Form? (IBC Form 1151)

Answer 13

Named Perils including theft, glass breakage, and transportation (property in transit)

Question 14

What is included in the Homeowner’s Broad forum? (IBC form 1153)

Answer 14

All risks on the dwelling building and detached private structures, named Perils on Personal Property

Question 15

Whats is included in the Homeowner’s Comprehensive form? (IBC form 1155)

Answer 15

All risks on all items

Question 16

What are 3 common clauses that are used as limitations of liability?

Answer 16

1) Deductible clause
2) Coinsurance clause
3) Special Limits of insurance

Question 17

What are 3 types of deductibles??

Answer 17

1) Separate items: Where the total amount of insurance is divided across several items, the deductible may apply to each individual item, thus limiting the amount recoverable.
2) Occurrence basis: applies to occurrence. The deductible may be subtracted from the total amount of loss or damage arising from a single event insured under all items of the policy.
3) Loss paid in Full if Over Deductible: policy may provide that no loss be paid below a specified amount but that a loss greater than this amount be paid in full (insured must have a loss above and beyond the deductible in order to receive payment for a loss).

Question 18

What is the Coinsurance formula?

Answer 18

Amount of insurance carried, divided by minimum amount of insurance required, multiplied by the amount of the loss. the result is the amount recoverable by the insurer.

Question 19

What are special limits?

Answer 19

They are used to limit the insurer’s exposure to certain types of personal property that would otherwise be covered under the blanket limit for personal property.

Question 20

What are the two kinds of special limits for personal property? Name the 13 items that have special limits in IBC homeowners forms

Answer 20

Special limits can be divided into two groups; Special limits that apply to loss caused by an insured peril, and other special limits specific to theft.
the 13 special limits according to IBC homeowner’s form guidelines;
Special limits caused by insured peril:
1) Business Property
2) Securities
3) Property of a student temporarily living away from home
4) Money, including cash cards or bullion
5)Garden-type tractors, including attachments, accessories and motors
6) Watercraft, their furnishings, equipment, accessories and motors
7) Computer software
8) Spare automobile parts
Other Special limits caused by theft
9) Jewelry, watches, gems, fur garments, and fur-trimmed garments.
10) Numismatic property (coin collections)
11) Manuscripts, stamps, and philatelic property
12) Collectible cards
13) Bicycles, their equipment and accessories

Question 21

Define “ additional interest”

Answer 21

Parties that are not listed as the named insured but who would be financially prejudiced by the loss or destruction of insured property.

Question 22

Define “ Loss Payees”

Answer 22

A generic term for someone other than the named insured to whom the proceeds of insurance will be paid. a cheque issued to the insured will be drawn jointly in the names of the insured (then borrower) and the loss payee. The parties will determine the disposition of the proceeds to reduce or discharge the loan

Question 23

Define “Chattel Mortgage”

Answer 23

Chattel Mortgages: a type of mortgage that conveys an interest in property other than land and buildings as security for a debt.

Question 24

What are the benefits of the mortgage clause to the mortgagee?

Answer 24

• Policy covers mortgagee even if the named insured is unable to recover because of a breach of contract
• Mortgagee is permitted to give a notice of loss immediately and proof of loss as soon as is practicable
• Mortgagee would be covered in the event that they acquire the title of the insured property until the policy is canceled or expired
• Mortgagee is to be notified of any cancellation or alteration of the policy to the prejudice of the mortgagee
• The mortgagee is entitled to the same notice as the insured’s.

Question 25

What are the responsibilities of the mortgagee under the mortgage clause? What material changes must they alert the insurer to?

Answer 25

• Mortgagee must notify insurer on learning of”
  1) Vacancy or Unoccupancy over 30 consecutive days
  2) Any transfer of interest
  3) any increase in hazard
• Mortgagee must pay, on reasonable demand, for any increased hazard from the time it existed until the time the policy is canceled or expired (peroration of premium increase for additional hazard)
• Mortgagee will relinquish(transfer) it’s rights against the insured to the insurer once indemnity (for their portion of the interest) for a loss has been received
• Where other valid insurance exists, the mortgagee’s indemnity can be limited by the amounts offered by said policy so as not to exceed the value of the interest

Question 26

What is a Rate-able Contribution?

Answer 26

When more than one policy covers the same interest at the time of loss, each insurer is liable to the insured for it’s rate-able proportion of the loss unless the insurers agree otherwise in writing.

Question 27

How are the deductibles in rate-able policies handled across a policy with a single insurer?

Answer 27

1) With a single policy: The loss is determined without regard for the deductible. Following that, the deductible is then applied to determine the amount of the insured’s recovery.
2) With two or more policies: The loss is first determined without regard for the deductible. Following that, the highest deductible (if any) is then pro-rated among the insurers (only those that HAVE deductibles) and those pro-rated amounts will be applied to determine the amount of the insured’s recovery.

Question 28

What is “business” in an insurance context?

Answer 28

Any continuous/ regular pursuit undertaken for financial gain, including a trade, profession, or occupation

Question 29

Define “ Coverage Summary” page

Answer 29

It is the clear and legal term for what are referred to formal wordings as ‘declaration’.

Question 30

What is “Data”?

Answer 30

Representations of information or concepts in any form. It does not refer specifically to computer software.

Question 31

What are 3 common Data problems?

Answer 31

1) Erasure, destruction, corruption, misappropriation, misinterpretation of data;
2) Error in creating, amending, entering, deleting or using data; or
3) Inability to receive, transmit, or use data. It does not have to be electronic

Question 32

What are the 5 domestic water containers typically found inside of the dwelling?

Answer 32

Inside the dwelling:

1) Hot-water heating tanks and their piping and radiators;
2) Hot-water storage tanks and associated piping;
3) Water reservoirs and dispensers, whether contained in an appliance or not;
4) Bathtubs, sinks, or toilets; and
5) Aquariums or waterbeds.

Question 33

Name 3 domestic water containers typically found outside of the dwelling.

Answer 33

Outside of the dwelling:

1) Outdoor private swimming pools or wading pools;
2) Ornamental pools or fish ponds; and
3) Hot tubs

Question 34

What is a Domestic water container?

Answer 34

It is a device or apparatus for personal use on the premises for containing, heating, chilling, or dispensing water.

Question 35

Define “ dwelling “

Answer 35

It is the building described on the Coverage Summary page, wholly or partially occupied by the insured as a private residence.

Question 36

Define “ Fungi”

Answer 36

It includes but is not limited to, any form or type of mold, yeast, mushroom, or mildew, whether or not allergenic, pathogenic, or toxigenic, and any substance, vapor, or gas produced by, emitted from, or arising out of any fungi or spore(s) or resultant mycotoxins, allergens, or pathogens.

Question 37

What is Ground Water?

Answer 37

Ground water is water in the soil beneath the surface of the ground, including but not limited to water in wells, underground streams, and percolating waters.

Question 38

Who is considered to be an “ insured” on a habitational policy? What must their relation be to the insured?

Answer 38

The person(s) named as the insured on the coverage summary page, and while living in the household:
1) The insured’s spouse
2) Relatives of either the insured or the spouse
3) Any person under 21 that is in their care
4) A student: (if self-supporting extension does not apply)
Who is enrolled in and actually attends a college or university
Who is dependent on the named insured or spouse for support/care is also insured even if temporarily residing away from their principal residence

Question 39

Define “ premises”

Answer 39

the land contained within the lot lines where the dwelling (or subject) is situated.

Question 40

What is a ‘Residence Employee’? What are the 3 conditions that must be considered?

Answer 40

a person employed by the insured to preform duties in connection with the maintenance or use of the premises.
Conditions:
1) Includes persons who preform household or domestic services or duties of a similar nature for the insured
2) Does not include persons while preforming duties in connection with the business of the insured
3) Can be working Part-Time or Full-Time

Question 41

What are Spores?

Answer 41

‘spores’ includes, but is not limited to, and reproductive particle or microscopic fragment produced by, emitted from, or arising out of any fungi.

Question 42

Who qualifies as a spouse?

Answer 42

1) A man and woman (or two individuals of same sex) who are married.
2) Anyone living together in a conjugal relationship for a period of 3 continuous years.
3) Any two individuals living together in a conjugal relationship, outside of marriage, who are the natural or adoptive parents of the same child. They mujst have lived together for a period of 1 year.

Question 43

What are ‘surface waters’?

Answer 43

water on the surface of the ground where water does not usually accumulate in ordinary watercourses, lakes, or ponds.

Question 44

Define ‘terrorism’

Answer 44

An ideologically motivated unlawful act(s), including but not limited to the use of violence/force or threat of violence/force, committed by or on behalf of any group(s), organizations(s), or governments(s), for the purpose of influencing any government and/or instilling fear in the public or a section of the public. It does not include Legal protests, demonstrations, or self-expression.

Question 45

Define ‘ Vacant’

Answer 45

refers to circumstances where, regardless of the presence of furnishings, all occupants have left with no intention of returning and no new occupant has taken up residence in their stead.

Question 46

What is the difference between Vacancy and unoccupancy?

Answer 46

unoccupacy applies to a property with no people in it but to which people intend to return.

Question 47

What is a ‘watermain’?

Answer 47

They are a series of pipes forming part of the water distribution system, which convey consumable water but NOT wastewater.

Question 48

To whom are we referring to in a Policy when we refer to;

1) We, Us, or Our
2) You or Your

Answer 48

1) The insurer

2) The insured.

Question 49

What does the dwelling/building coverage refer to? (coverage A)

Answer 49

It applies to the dwelling itself and certain other property on the premises. Permanently installed outdoor equipment is also covered (garden lighting, children’s swings or slides, and other similar property.

Question 50

What is a detached private structure? (coverage B)

Answer 50

It applies to structures that are separated from the dwelling by a clear space or is connected by only a fence, utility line, or similar connection, but remains on the insured’s property line. It must be private with no business exposure. It includes garden sheds, greenhouses, free standing sundecks, etc

Question 51

How is personal property broken down? (Coverage C) (3 parts)

Answer 51

1) Contents of dwelling and personal property owned, worn, or used on the premises
2) Property away from premises
3) Property of a Student

Question 52

What are the 3 types of exclusions found under personal property?

Answer 52

1) Motorized vehicles and their equipment (excluding any accessibility devices)
2) Camper units, truck caps, trailers or equipment
3) Aircraft and their equipment

All items of personal property insured under coverage “C” are covered by single amounts of insurance(a blanket limit)

Question 53

What is prohibited access? What are the two main circumstances under which this coverage would apply?

Answer 53

It indemnifies for indirect loss; doesn’t require loss/damage to have occurred to insured dwelling. Where the insured has to leave the premises. Two such examples are:

1) a neighboring property has sustained damage that poses a danger to the insured’s premesis,
2) Where a mass evacuation is required as a direct result of a sudden and accidental event within Canada or USA

Question 54

What are the 6 excluded causes of evacuation? (what is NR WEFT?)

Answer 54

Evacuations for the following reasons are excluded from coverage;

1) Nuclear incident
2) Radioactive contamination
3) War
4) Earthquake
5) Flood
6) Terrorism

Question 55

Who exercises Civil Authority in the case of emergency evacuation?

Answer 55

Any person acting under the authority of the Governor General in Council of Canada or the Lieutenant Governor in Council of a Province, and/or any person acting with authority under a Federal, Provincial, or Territorial legislation with respect to the protection of persons and property in the event of an emergency.

Question 56

What is covered under the debris removal Extension? What happens when the cost of both the initial loss and the reconstruction of the dwelling exceed the policy limit?

Answer 56

the cost of removal of the debris will be given an additional 5% (of the initial limit for the affected coverage).

Question 57

What is the ‘property removed’ extension?

Answer 57

it applies to property removed from the home for no more than 30 days or until the policy expires, whichever works in favor of the insured.

Question 58

What are the rules for contents coverage when moving to another home?

Answer 58

There is no coverage after 30 days for personal property in a newly acquired principal residence. This allows enough time for the insured to secure coverage. It is restricted to Canada, and applies for no more than 30 days.

Question 59

How much can an insured recover for fire department charges?

Answer 59

The insured can claim up to 1000 CAD for fire department charges if the fire department had to attend the scene to mitigate a loss or to prevent further loss or damage.

Question 60

What sort of coverage is offered for sudden change in temperature? (Change in temperature extension)

Answer 60

The ‘change of temperature’ extension applies to indirect loss involving personal property kept in the dwelling that would not normally be recoverable under the policy.

Question 61

What sort of coverage is offered for frozen food?

Answer 61

recovery does not apply to refrigerated foods, only FROZEN. The freezer in question need not be inside of the dwelling. The extension provides:

1) The value of spoiled food
2) Damage to the freezer caused by spoilage
3) Reasonable expenses incurred to prevent the food spoilage while freezer is being repaired. There is an IBC mandated maximum of $2000.

It does not cover the cost of delivery/ transport of replacement food, spoilage due to disconnected power supply, or spoilage caused by the operation of an electrical circuit breaker or fuse.

Question 62

What is the limit for lock replacement claims?

Answer 62

up to $500 where locks need to be changed to guard against loss and unwanted entry.

Question 63

How is Tear-Out treated?

Answer 63

it stipulates that it will not pay to repair all of the parts of the building torn apart to find a leak. It only covers the cost of the repair of parts that must be torn apart in order to mitigate further damage from an insured cause of loss

Question 64

What is the Arson conviction award?

Answer 64

it is a gesture in support of public policy. It can be paid to anyone who provides leads that result in the conviction of a guilty party. it is valued at $1000

Question 65

What kind of coverage is offered for counterfeit money, credit cards, forgery, etc? (5 total)

Answer 65

1) Coverage applies only to cards issued to the insured
2) The insured must have complied with all conditions of the card agreement
3) No coverage is available if the card is used by anyone who resides in the dwelling or who is entrusted with the card
4) No coverage for cards with business exposure (business cards, employers expense cards)
5) The insured’s failure to notify the issuer of the card that it has been lost or stolen would result in a denied claim.
there is no automatic reinstatement of this limit, and it is not subject to a deductible. the limit is $200

Question 66

What is inflation protection?

Answer 66

after a loss or at a policy’s renewal, it automatically increases the amounts of insurance for inflation since the inception or most recent renewal, anniversary or policy change.

Question 67

What is Guaranteed Replacement Cost?

Answer 67

An undertaking by insurer to pay the cost to replace or repair the dwelling even if it’s more than the amount of insurance purchased, provided that certain conditions are met.

1) The dwelling must be insured to 100% of the cost to replace as determined by the provider of the policy
2) The amount of insurance does not fall below the amount determined by the insurer’s valuation methods
3) the insured notify the insurer within 90 days of the start of improvement, extension, or addition to the dwelling.

Question 68

What conditions must the insurance provider meet when settling a claim at replacement cost? (4)

Answer 68

1) replacement must be made promptly
2) replacement must be in the same location
3) payment will be limited to the cost of repairing or replacing the dwelling with new materials or property of like kind/quality, and for like occupancy
4) Settlement will be made only when work is completed and for no more than the actual cost if the work

Question 69

What are the guidelines to settling claims for Data? What will the insurer replace, how, and to what degree? (3)

Answer 69

1) for electronic media; insurer will pay for the cost of reproduction of duplicates
2) For other (paper) records: including books of account, drawings, or card index systems, the insurer will pay the cost of blank books/pages/cards as well as the cost of transcribing/ transferring the records
3) Insurer will settle losses at replacement cost aside from items that are inherently irreplaceable or articles whose value largely depends on their age/history ( memorabilia, collectors items, ect.

Question 70

What is the ‘ rule’ or pair and set settlements?

Answer 70

If any articles are lost or stolen that were a part of a set, the homeowner’s form will calculate the loss as a reasonable and fair portion of the total value of the set.

Question 71

How is the cost of parts settled?

Answer 71

Coverage for loss/damage to any part of property that consists of several parts will be settled for no more than the cost of the damaged part plus installation.

Question 72

What are the insured’s duties after providing proof of loss?

Answer 72

the insured, after submitting POL, is to provide all additional documentation as requested from the insurer, and must allow them to make copies, (supplement to stat con 6), with greater burden on the insured.

Question 73

What is the Statutory Conditions clause?

Answer 73

it provides that statutory conditions apply uniformly to all perils covered by the policy but allows for modification of those conditions by the the policy or endorsements to it