Key Point Review Questions Study 8

Question 1

1) What is the difference between a primary and a secondary home?

Answer 1

The primary home is the one they live in the most of the time; the second home is the one they live in often.

Question 2

2) What insurance coverage is provided for a secondary home?

Answer 2

Insurers will use the same policy forms, for example, the homeowners’ forms, to cover a secondary home as they use to cover a primary home.

Question 3

3) What is distinct about a high-valued home?

Answer 3

High-value homes are distinctive in that they tend to be designed by architects and built with custom features not typically found in a standard home.

Question 4

4) What coverage is available for high-valued homes?

Answer 4

High valued home insurance includes more innovative added coverage, such as home-appraisal expenses, cash-payout options, increased special limits, kidnap expensive coverage and equipment breakdown coverage.

Question 5

5) What is coverage under kidnap expense coverage?

Answer 5

It provides coverage up to to a limit for costs resulting from child abduction, including travel and phone costs, medical, dental and psychiatric fees.

Question 6

6) What coverage is provided under equipment breakdown coverage?

Answer 6

Equipment breakdown coverage provides a specified amount of insurance for accidental breakdown of the equipment or system, even if caused by human error, improper installation, or lack of maintenance.

Question 7

7) What coverage is provided under home invasion coverage?

Answer 7

Should the insured’s family be present during a home invasion, high-valued home insurance may offer up to a specified amount of coverage to help pay medical, psychiatric, home security, and other expenses associated with trauma.

Question 8

8) What is disappearing deductible and how does it work?

Answer 8

Insureds with high-value home insurance are usually concerned with major losses and tend not to report small losses. High-valued home policies usually waive the deductible for a loss of a specified amount – perhaps $10,000 or more, and pay such a loss in full.

Question 9

9) What is a cash-out option and how does it work?

Answer 9

Typically the insured must satisfy certain conditions to receive the replacement cost of a damaged or destroyed building: The building must be promptly rebuilt on the same site, at the same location, with new materials or property of like kind and quality and for like occupancy. If the insured does not comply with these conditions, the insurer will pay only the actual cash value of the damaged property.
Under a high valued home insurance policy, the insured may receive cash payment up to the policy limit without deduction for depreciation and without having to rebuild or replace the damaged or destroyed building.

Question 10

10) How do increased special limits work in respect to homeowners forms?

Answer 10

Significant amounts of valuable property tend to be more common in high-valued homes. That means there is less danger that such property will skew the blanket limit for contents coverage or require separate coverage under a floater. Instead, the high-valued home policy simply increases the special limits for valuable property over what is normally available in standard policies such as the Homeowners forms.

Question 11

11) What is a condominium?

Answer 11

Individual ownership of a single unit in a multi-unit building or group of buildings, including a percentage interest in the part of the total property owned jointly by all unit owners. In an apartment building, each apartment would be considered as a unit, and the stairways, pathways and parking areas would be commonly owned.

Question 12

12) What is the condominium act?

Answer 12

Housing falls within provincial jurisdiction. The activities within a condominium complex must comply with eh provincial legislation governing condominiums. The relevant legislation is called the Condominium act.

Question 13

13) What is a condominium corporation and what function does it play?

Answer 13

A corporation without share capital, created under provincial legislation and whose members are the condominium owners.
The condo owners elect a board of directors from among them to administer the affairs of the condominium corporation.

Question 14

14) What is a standard unit by-law and how does it work in respect to condominiums?

Answer 14

A by-law passed by a condo corporation to assign responsibility between the unit owner and the corporation for loss or damage to a unit and to designate whose insurance policy should cover repairs to damaged improvements.
The by-law defined the standard unit in a condominium corporation by describing in detail the original fixtures and finishes in each unit and specifying that improvements to a unit are not the corporation’s obligation to insure and repair.

Question 15

15) What is covered under condominium corporation insurance?

Answer 15

Each condo corporation is required by statute to have an insurance policy covering the entire building, including individual units, and common property for loss or damage cause by major perils, such as lightning, smoke, windstorm, hail, explosion, water escape, riot or civil commotion, impact by aircraft or vehicles, and vandalism or malicious acts.

Question 16

16) What is the difference in coverage between the Condominium Unit Owner Basic and Comprehensive forms?

Answer 16

The condominium building and common property are covered under the policy of the condominium corporation. The condo unit owners forms omit Coverages A and B for a dwelling and detached private structures.

Question 17

17) What is covered under Coverage C of the Condominium Unit Owner Basic and Comprehensive Forms?

Answer 17

In the condo unit owners forms, the same optional extension of coverage providing 5% of the amount of insurance of the insured’s unit. (Instead of dwelling)

Question 18

18) What is covered under Coverage D of the Condominium Unit Owner Basic and Comprehensive Forms?

Answer 18

Coverage D is the same in both forms, the only difference is referring to the unit instead of dwelling.

Question 19

19) What is covered under Coverage U of the Condominium Unit Owner Basic and Comprehensive Forms?

Answer 19

In addition to providing insurance coverage for the unit owner’s personal property, will cover losses and expenses that are unique to owners of the condo unit.

Question 20

20) What is covered under Coverage U1 of the Condominium Unit Owner Basic and Comprehensive Forms?

Answer 20

U1 covers unit improvements and betterments made or acquired by the insured up to t a specified amount of insurance, including:
• Any building, structure, or swimming pool on the premises
• Materials and supplies on the premises for use in such improvements and betterments.

Question 21

21) What is covered under Coverage U2 of the Condominium Unit Owner Basic and Comprehensive Forms?

Answer 21

Under coverage U2, the condo form will pay up to a specified amount of insurance, for the insured’s share of any special assessment imposed by the condo corporation for loss or damage to the common elements.

Question 22

22) What is covered under Coverage U3 of the condo unit owner’s forms?

Answer 22

If loss or damage occurs to an individual unit and the coverage in the corporation’s building policy is inadequate or insufficient, the unit owner must bear the difference between the amount available from the building insurance and the damage to the individual unit. Coverage U3 under the condo unit forms will cover the difference.

Question 23

23) How does the Basis of Claim Payment of the condo unit owners form work?

Answer 23

The condo forms pay up to the insureds financial interest in the property or the amount of insurance for any one occurrence, whichever is less.

Question 24

24) What coverage is available to tenants?

Answer 24

Covers the tenant’s personal belongings not covered by the landlord’s policy.

Question 25

25) What underwriting concerns do insurers have concerning tenants?

Answer 25

Short-term occupancy: Sometimes tenants move without notifying their insurers. The frequency with which tenants move can generate additional work for the insurer that is time-consuming and costly.
Too Many Roommates: As the number of roommates increases, so does the exposure to vandalism, theft, and liability.

Question 26

26) What is the difference in coverage between the Tenant’s comprehensive and homeowners’ comprehensive forms?

Answer 26

The notable difference is that the tenants forms omit Coverage A and B for a dwelling and detached private structures.

Question 27

27) What is the difference in coverage C between the Tenant’s comprehensive and homeowners comprehensive forms?

Answer 27

The one difference in Coverage C is that the tenants form includes coverage for improvements and betterments. Under the homeowners form, there is no need for a clause addressed to an insured who does not own the building.

Question 28

28) What is the difference in coverage D between the Tenant’s comprehensive and homeowners comprehensive forms?

Answer 28

The amount of insurance for Coverage D in the tenants form is a set percentage of Coverage C.

Question 29

29) What coverage is available for Tear Out in the tenant’s comprehensive form?

Answer 29

The tear out extension in a tenants form applies to any insured tenants improvements or betterments that must be removed or torn apart before insured water damage can be repaired. The difference from the homeowners form reflects the fact that the tenants form doesn’t cover the building.

Question 30

30) What coverage is available for Damage to Dwelling in the tenants comprehensive form?

Answer 30

The comprehensive form extends coverage to allow the insured to apply to up to a specified dollar amount ($500 in the IBC form) of the Coverage C limit to damage:

• To Part of the dwelling the insured occupies as a private residence: if that damage was caused directly by theft or attempted theft.
• To the interior or part of the dwelling the insured occupies as a private residence: if that damage was directly caused by vandalism or malicious acts.
• To the part of the dwelling the insured occupies as a private residence: if that damage was directly caused by impact of a vehicle operated by the insured.

Question 31

What is excluded under the Tenants Comprehensive form?

Answer 31

• The tenants form excludes lawns and outdoor trees, shrubs, and plants
• excludes loss due to settling, expansion, contraction, moving bulging, buckling, or cracking.
• Excludes loss caused by birds, vermin, raccoons, rodents, or insects.
• excludes the theft or attempted theft in or from a dwelling under construction of materials and supplies in the use of the construction.

Question 32

What is the difference in coverage between the tenants basic and homeowners basic forms?

Answer 32

The major difference between the two forms is the difference between named-perils and all risk coverage.

Question 33

33) What is the difference regarding coverage C between basic and comp tenants forms?

Answer 33

In both forms, personal property stored in a warehouse is insured against the peril of theft. The basic form covers such property only against theft. The comprehensive form also covers loss to such property caused by any other peril, but only for 30 days.

Question 34

34) What is a mobile home?

Answer 34

Manufactures housing, commonly called house trailers, usually placed in one location and left there permanently but retaining the ability to be moved, as required in many areas. Behind the cosmetic work fitted at installation to hide the base, there are strong trailer frames, axles, wheels and tow-hitches.

Question 35

35) What is a tie-down?

Answer 35

Heavy straps passing over a mobile home and fastened to the foundations on either side or to the ground if the unit rests on piers or heavy timber.

Question 36

36) What is a modular home, and how does it differ from a mobile home?

Answer 36

Modular homes and mobile homes differ in their construction standards, materials and foundations. Modular homes are built in a factory and moved to the building site in large individual sections.
Unlike a mobile home, a modular home, once placed on a slab or concrete foundation, is not movable and may be considered a permanent structure.

Question 37

37) What coverage is available for mobile homes?

Answer 37

The Mobile homeowners form is a package that includes property and liability coverages. It insures against named perils.

Question 38

38) How do the homeowners and mobile homeowners forms differ?

Answer 38

They differences in coverage between the two forms reflect the differences between mobile homes and traditional homes.

Question 39

39) What coverage is provided under Emergency Removal Expense for mobile homes?

Answer 39

It permits the insured to use up to 5 percent of the amount of insurance under Coverage A for any reasonable expense incurred to remove the building to protect it from an insured peril. The deductible will not apply to this allocation of coverage.

Question 40

40) What is the difference regarding Coverage C – Personal Property between the Mobile Homeowners and the Homeowners basic forms?

Answer 40

In the description of the mobile home building, it includes the appliances, furniture or equipment forming a permanent part of the building. In the homeowners forms, those items would be insured under Coverage C. In the mobile homeowners form, they are excluded under C, as they are insured under A.

Question 41

41) What two exclusions are unique to Mobile Homeowners form?

Answer 41

• Loss or damage occurring while the building is being moved, except in an emergency to protect it when endangered by an insured peril.
• Loss due to conversion, embezzlement, or secretion by any person in possession of the building

Question 42

42) What is a rented dwelling?

Answer 42

A dwelling or apartment unit occupied or available for occupancy by persons other than the owner under a rental agreement, written or oral, with or without compensation for the owner.

Question 43

43) What underwriting risks do rented dwelling pose to insurers?

Answer 43

Maintenance: the owners of rented dwelling may not show as much pride of ownership as they would if they lived in the dwelling.
Marijuana Grow Ops and Meth labs
Vacant Dwelling: When a house is vacant it is more susceptible to damage.
Occupancy – Too Many Renters: Too many people occupying the same dwelling can be hazardous.
Vandalism and Malicious Acts

Question 44

44) What is the Residential Basic Form and what coverage does it provide?

Answer 44

It is a named perils form that offers coverage that is simpler or more modest than the popular package of property and liability insurance. The insured may choose to cover only the building or both the building and contents.

Question 45

45) What is a seasonal dwelling?

Answer 45

A dwelling occupied or intended to be used as a recreational residence, not as a permanent residence. It is usually occupied for only part of the year.

Question 46

46) What coverage is provided for seasonal dwellings under the Seasonal Residence Form?

Answer 46

It is a named perils policy. Similar to the Residential Basic Form.

Question 47

47) What is excluded under the Seasonal Residence Form?

Answer 47

• Fair rental value as a result of the damage to the dwelling by an insured peril
• Fair rental value because access has been prohibited by civil authority
• Personal property away from the premises
• Additional living expense as a result of damage to the dwelling by an insured peril
• Additional living expense because access has been prohibited by civil authority.

Question 48

48) What special limits are available under Coverage C of the Seasonal Residence Form?

Answer 48

If the insured chooses to add coverage for burglary and robbery then the seasonal form applies Special Limits of Insurance under coverage c to loss from the peril to the following property:
Securities, money, jewelry, collectibles, bikes

Question 49

49) What is a hobby farm?

Answer 49

A Small farm operated for pleasure or supplemental income rather than for primary income.

Question 50

50) What coverage is available for hobby farms?

Answer 50

A hobby far policy or rider provides coverage for the dwelling and personal property under the homeowner’s form. The exclusions used in whole or in part for farming purposes is removed, and other specialized coverages are added.
The policy usually provides coverage for the following:
• Outbuildings used for farming purposes
• Livestock
• Poultry and eggs
• Farm Produce
• Farm equipment