Key Point Review Questions Study 4 Flashcards
1) What are the THREE (3) main sections of a personal property policy, and what is outlined in each section?
i. The first section consists of the Declarations or Coverage Summary.
ii. The second section comprises the policy wordings.
iii. The third section is the wording applicable to any endorsements or floaters added to the policy.
2) What are the features of a plain-language policy?
- Issued in a plain-language format, with less formal words, making it clear to the average layperson.
- Even the size of the fonts and length of lines of text were chosen for readability.
3) What is a package policy, and how does it benefit the consumer and the insurer?
- A package policy that covers two or more lines or types of insurance in the same policy.
- Packaging perils from classes of insurance administered by separate departments help to not only enhance coverage but also to cut costs.
4) What is the limit of a package policy?
In a package policy, the limit for personal property is generally a percentage of the dwelling limit. The percentage varies depending on insurer.
5) What is adverse selection, and how do insurers protect themselves against it?
Occurs when those with higher risks may purchase insurance in greater amounts than those with lower risks.
Much of insurance law and practice is designed to control adverse selection.
Insurers protect themselves from adverse selection by attempting to measure risk and either charging more for the higher risks or refusing to coverage them at all.
6) What is a non-package policy, and how does it benefit consumers?
Certain types of residential property do not fit a package policy. Some people prefer a more modest or simpler policy than the popular packages of property and liability. It also serves those that are ineligible for an insurer’s package policy or who have a location that is ineligible for broader coverage.
7) What is a subscription policy?
A single policy covering a risk that is divided among a number of insurers; the policy is issued by the “lead” company and signed by all participating companies.
8) What is a multi-limit policy?
A policy in which an amount of insurance is shown for the dwelling and a separate amount is show for the personal property.
9) What is a single-limit policy, and how will it benefit a consumer?
Shows one amount of coverage encompassing both the building and personal property.
In the event of a partial loss, the insured has the full limit of insurance to apply to the loss, whether the loss is to personal property or to the building.
10) How do the Homeowners forms differ, and how are they similar?
The homeowners forms differ mainly in the property perils.
They are the same in the general organization of their coverage ,the way minimum amounts of insurance are determined for each coverage, and how the premium for them is calculated.
11) What is covered under each of the Homeowners forms?
Homeowners basic form: Named perils, including theft, glass breakage and transportation.
Homeowners broad form: All risks on the dwelling building and detached private structures, the same named perils as insured by the Basic Form on the personal property
Homeowners comprehensive form: All risks on all items.
12) How are Homeowners forms named?
Forms differ from one insurer to the next. They typically reflect the types of perils that are being insured.
Example: limited, standard and comprehensive vs. basic, broad, comprehensive.
13) What is the purpose of a deductible?
The deductible is the insured’s portion of a covered loss.
Small frequent claims are expensive for insurers. To avoid this expense and so reduce premiums for their insures, insurers introduce a deductible on most policies.
14) What are THREE (2) common applications of a deductible?
Separate Items – If the total amount of insurance is subdivided into more than one item, the deductible may apply separately to the amount recoverable under each item.
Occurrence Basis – The deductible may apply to an occurrence. The deductible is subtracted from the total loss of a single event.
Loss Paid in Full if Over Deductible – The policy may provide that no loss be paid below a specified amount but that the loss greater than this amount is paid in full.
15) What is coinsurance, and why would a consumer want to purchase it?
A coinsurance clause in a fire policy obliges the insured to maintain a specified minimum amount of insurance in relation to the value of the property insured or else share with the insurer any partial loss.
16) What is the co-insurance formula?
Amount of insurance carried / Minimum amount of insurance required X Amount of Loss = Amount Recoverable by Insured
17) What is a special limit, and how is it used in a property policy?
Special limits of insurance are technically a part of the personal property coverage. 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.
18) What are additional interests?
Parties not listed as named insureds but who would be financially prejudiced by the loss or destruction of insured property.
19) Who is a loss payee?
The generic term for someone other than the named insured to whom the proceeds of insurance will be paid.
20) How does the provincial government protect the interests of loss Payees?
Provincial legislation protects the interest of loss payees. The insurer may not cancel or alter a policy to the detriment of a payee without prior written notice to the payee.
21) What is a leaseholder?
Leaseholder include not only private interests, which lease property to other private interests, but also the public interest as represented by the Crown in Right of Canada.
22) What is Crown land, and can it be insured?
Crown land is public land owned by federal or provincial governments.
It can be insured, and requires “Her Majesty the Queen in Right of Canada” to be added. However, in some provinces it’s becoming harder to obtain insurance for leased Crown land.
23) What are other leaseholders?
These are residences owned by other persons or commercial entities who lease property to individuals for use as residential property.
24) What is a chattel mortgage?
A type of mortgage that conveys an interest in property other than land and buildings as security for a debt.