Key Point Review Questions Study 5

Question 1

1) What does the first explanatory statement in habitational policies outline?

Answer 1

The first explanatory statement distinguishes between Section 1, on property insurance, and Section 2, on liability insurance.

Question 2

2) What does the second explanatory statement outline?

Answer 2

The second explanatory statement is in boldface type under the heading Important.
This clause notes that various provisions limit the policy’s coverage and advises the insured to read the policy carefully.

Question 3

3) What is outlined in the Agreement between an insurer and insured?

Answer 3

It says simply that the insurer provides the insurance described in the policy in return for payment of the premium and subject to the specified terms.

Question 4

4) What is the purpose of the Definitions clause?

Answer 4

Definitions of significant terms simplify policy preparation and ensure clarity and uniformity in the use of certain words in the form.
The widespread use of the same definitions also provides better protection for insureds and brokers.

Question 5

5) How is business defined in the Homeowners Comprehensive form?

Answer 5

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

Question 6

6) What is the purpose of the Coverage Summary page?

Answer 6

Outlines what is covered in the policy

Question 7

7) How is data problem defined in the Comprehensive Form?

Answer 7

Erasure, destruction, corruption, misappropriation, or misinterpretation of data; error in creating, amending, entering, deleting, or using data or inability to receive, or use data.

Question 8

8) How is domestic water container defined?

Answer 8

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

Question 9

9) How is dwelling defined in the Comprehensive Form?

Answer 9

The building described on the Coverage Summary Page, wholly or partially occupied by the insured as a private residence.

Question 10

10) How are fungi defined in the comprehensive form?

Answer 10

Fungi, 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 spores or resultant mycotoxins, allergens or pathogens.

Question 11

11) How is ground water defined?

Answer 11

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

Question 12

12) What is covered under the definition of insured in the Comprehensive Form?

Answer 12

The insured, the insured’s spouse, the relatives of the either the insured or the insureds spouse and any person under 21 in their care.
Also include a student who is temporarily living away from home to attend school. But the student must be dependent on the named insured.

Question 13

13) How is premises defined?

Answer 13

The land contained within the lot lines on which the dwelling is situated.

Question 14

14) How is residence employee defined?

Answer 14

A person employed by the insured to perform duties in connection with the maintenance or use of the premises. This includes persons who perform household or domestic services or duties of a similar nature for the insured. This does not include persons while performing duties in connection with the business of the insured.

Question 15

15) How are spores defined?

Answer 15

Includes, but is not limited to, any reproductive particle or microscopic fragment produced by, emitted from or arising out of any fungi.

Question 16

16) How is spouse defined?

Answer 16

Spouse includes not only legally married partners but also partners who live together in a conjugal relationship outside of marriage and have continuously done so for at least three years. If the partners are the natural or adoptive parents of a child, the period is reduced to one year.

Question 17

17) How are surface waters defined?

Answer 17

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

Question 18

18) What is and isn’t considered terrorism in the Comprehensive Form?

Answer 18

Terrorism means ideologically motivated unlawful acts, including but not limited to the use of violence or force or threat of violence or force, committed by or on behalf of any groups, organizations, or governments for the purpose of influencing any government and or instilling fear in the public or a section of the public.
It isn’t protests, demonstrations or self-expression, and it does not apply to individuals not acting on behalf of a group or to malicious acts or vandalism that may occur during a lawful demonstration.

Question 19

19) What is the difference between vacancy and un-occupancy?

Answer 19

Vacancy refers to circumstances where all occupants have moved out with no intention of returning and no new occupants has taken up residence.
Unnoccupancy applies to a building with no people in it but to which people intend to return.

Question 20

20) How is watermain defined in the Comprehensive form?

Answer 20

Pipes forming part of a water distribution system, which convey consumable water but not waste water.

Question 21

21) What does, “we, us, or our” refer to in the Comprehensive Form?

Answer 21

We, Us or Our refer to the company providing the insurance, that is, the insurer.

Question 22

22) What does “you or your” refer to the Comprehensive Form?

Answer 22

You or Your refer to the insured.

Question 23

23) Outline what is covered under Coverage A of the Comprehensive Form.

Answer 23

Coverage for Dwelling Building – which applies to the dwelling itself and certain other property on the premises. Like permanently installed outdoor equipment. It also applies to materials and supplies adjacent to the premises, intended for use in construction or repair of the premises. 10% of the limit can be applied to building fixtures and fittings temporarily removed from the building and 5% of the insured amount to trees, plants and shrubs.

Question 24

24) Outline what is covered under Coverage B.

Answer 24

Detached private structures are separated from the dwelling by a clear space, or are connected to the building by only a fence, utility line or similar connection. Must be meant for private use. examples include a detached garage, garden shed.

Question 25

25) How is personal property defined in Coverage C in the Comprehensive Form?

Answer 25

All movable or temporary property furniture, clothing even stocks or bonds. The opposite of real property (fixed property such as land or buildings).

Question 26

26) How do the Basic, Broad, and Comprehensive forms differ under Coverage C?

Answer 26

In the Comprehensive form, coverage for personal property stored in a warehouse is not restricted to loss by theft, but is limited to 30 days for any peril other than theft. In the Basic and Broad forms, personal property stored in a warehouse is insured only against theft.

Question 27

27) What is covered under Part One of Coverage C in the Comprehensive Form?

Answer 27

Contents of dwelling and personal property owned, worn or used in the premises.

Question 28

28) What is covered under Part Two of Coverage C in the Comprehensive Form?

Answer 28

Property away from the premises

Question 29

29) What is covered under Part Three of Coverage C in the Comprehensive Form?

Answer 29

Property of a student.

Question 30

30) What is excluded under Coverage C of the Comprehensive form?

Answer 30

Excluded property under coverage C – Motorized vehicles or their equipment, camper units, trailers, or their equipment, aviation or their aircraft.

Question 31

31) What is the purpose of the Special Limits of insurance?

Answer 31

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 32

32) What is covered under Coverage D – Additional Living Expense of the Comprehensive form?

Answer 32

The losses covered under Coverage D would be consequential losses that arise when certain circumstances force temporary un-occupancy in all or part of the insured building.
It covers 3 coverages – Additional living expense, Fair Rental Value, Prohibited Access.

Question 33

33) What is covered under Fair Rental Value of Coverage D?

Answer 33

If an insured peril renders the building unfit for occupancy, not only will the insured be displaced, but the insured may also lose the rental income paid by a tenant.

Question 34

34) When does Prohibited Access apply under Coverage D?

Answer 34

Applies when a civil authority such as the police or other authorized emergency personnel, orders the insured dwelling’s occupants to move out for one of two reasons:

1. A neighboring premises has sustained damage that poses danger to the insured premises.
2. A mass evacuation is required as a direct result of a sudden and accidental even within Canada or the United States.

Question 35

35) How is civil authority defined under Coverage D?

Answer 35

Any person acting under the authority of the Governor Genera in Council of Canada or the Lieutenant Governor in Council or a Province 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 36

36) What is the purpose of the extensions of coverage under the Comprehensive Form?

Answer 36

Homeowners’ forms also extend coverage to a number of losses that are incidental to the main loss or are minor losses in their own right. Some of the extensions increase policy limits, others do not.

Question 37

37) What is covered under the Debris Removal extension of coverage in the Comprehensive Form?

Answer 37

Since a loss and the resulting expense for debris removal may involve several coverages under the policy, the IBC Homeowners forms apply an additional 5 percent to the sum of the amounts of insurance for Coverages A, B ,and C.

Question 38

38) How does Moving to Another Home extension of coverage apply?

Answer 38

If the insured acquires a new dwelling in Canada that is to be occupied as a principal residence by the named insured, the coverage will be extended to personal property while in transit to the new residence and for up to 30 days thereafter or until the policy expires, whichever comes first.

Question 39

39) What is covered under the Fire Department Charges extension?

Answer 39

The homeowners forms extend coverage for up to a specified dollar limit (IBC is $1000) for charges incurred to have fire department attend the insured premises to save or protect insured property from loss or damage from further loss.

Question 40

40) What is covered under the Change of Temperature extension?

Answer 40

The extension applies to indirect loss involving personal property kept in the dwelling that would not normally be recoverable under the policy. There must be direct damage to the dwelling or equipment caused by an insured peril to qualify for coverage.

Question 41

41) What is covered under the Freezer Food extension of coverage?

Answer 41

The freezer food extension applies when there is a change in temperature within a food freezer that causes spoilage and resultant loss of food items.

Question 42

42) What is covered under the Lock Replacement extension?

Answer 42

Financial assistance – up to $500 in the IBC forms to rekey locks or replace them, at the insurer’s option. The policy requires the insured to report the theft of keys to the policy as a condition of coverage.

Question 43

43) What is covered under the Tear Out extension?

Answer 43

The tear out extension will pay to repair only the parts that must be torn apart to repair damage to stop a leak and prevent further damage by an insured peril.

Question 44

44) What is covered under the Arson Conviction Reward extension?

Answer 44

The arson conviction reward is a gesture in support of public policy. It can be paid to the insured or anyone who provides information that leads to the conviction of the guilty party.

Question 45

45) What is covered under the Credit or Debit cards, forgery and counterfeit money extension?

Answer 45

Offers protection against loss of cash or debt accrued before the fraud is detected and the reports are filed regarding the theft.

Question 46

46) What is covered under the Inflation Protection extension?

Answer 46

The inflation protection extension automatically increases the amounts of insurance for inflation since the inception of the most recent renewal, anniversary or policy change.

Question 47

47) What is the purpose of the Insured Peril clause?

Answer 47

It describes the essential protection offered by the policy: the cause of loss to insured property that may be covered under the policy. It is that protection (extended, limit and refined) by the other clauses in the policy, that the insurer provides in return for payment of the premium.

Question 48

48) What is required under the Notice of Authorities clause?

Answer 48

Requires that loss or damage due to malicious acts, burglary, robbery or theft be immediately reported by the insured to the police.

Question 49

49) Why is the Exclusions clause one of the most important clauses in the Comprehensive Form?

Answer 49

Because it can extend, limit and refine the protection described under the insured perils clause.

Question 50

50) What is the purpose of the Specified Perils clause in the Comprehensive Form?

Answer 50

It is an exclusion that applies to all losses except that is caused by one of the specified perils.

Question 51

51) What is the purpose of the Basis of the Claims Payments clause of the Comprehensive form?

Answer 51

The clause opens with a statement limiting the insurer’s liability for loss or damage to the dwelling, detached private structures and private property to the insured’s financial interest or the amount of insurance, whichever is less.

Question 52

52) What is actual cash value?

Answer 52

The cost of replacing the property, less any depreciation to it.

Question 53

53) What is replacement cost?

Answer 53

The cost to replace the building at today’s current standards.

Question 54

54) What is guaranteed replacement cost?

Answer 54

An undertaking by the insurer to pay the cost of repairs or replacement of the dwelling building even if it is more than the amount of insurance on the dwelling building, provided certain conditions are met in addition to those that normally govern settlement at replacement cost.

Question 55

55) What coverage is provided under the Pair and Set clause?

Answer 55

If any articles are lost or damaged that were part of a set, the coverage calculates the loss as a reasonable and fair proportion of the total value of the set.

Question 56

56) What coverage is provided under the Parts clause?

Answer 56

It provides that loss or damage to any part of property that consists of several parts will be settled for not more than the insured value of the part lost or damaged, including the cost of installation.

Question 57

57) What is outlined under the Deductible clause?

Answer 57

It provides that were the Special Limits apply, they will apply to losses that exceed the deductible amount. That ensures that the insured will not be doubly penalized by having the deductible apply to a loss after the Special Limit has been applied to it.

Question 58

58) How does Insurance Under More than One Policy apply?

Answer 58

Where the insured has other insurance on specifically described property, the Homeowners Basic form becomes the excess to the scheduled insurance and will pay only after the scheduled insurance has been exhausted. In all other cases, the Homeowners form will pay only its rateable proportion of an insured loss.

Question 59

59) What is subrogation, and how does it work?

Answer 59

Subrogation transfers the insured’s rights of recovery against others to the insurer and entitles it to sue in the insured’s name when the insurer has made payment or assumed liability.

Question 60

60) What is the purpose of the Duties After Loss clause?

Answer 60

It requires the insured, after submitting a Proof of Loss and at the insurer’s request, to submit to examination under oath, produce relevant documents and allow in the insurer to makes copies of them.

Question 61

61) What is outlined in the Statutory Conditions clause?

Answer 61

Provides that the Statutory Conditions apply uniformly to all perils covered by the policy but allows for modifications of those conditions by the policy or endorsements to it.