Short answer

Question 1

Outline FIVE (5) considerations in evaluating a property risk. (5 marks)

Answer 1

Property risk considerations (any five of the following)
• Acceptable and unacceptable risks
• Claims history
• Financial factors
• Physical factors (COPE—construction, occupancy, protection, and exposure)
• COPE and a single-family dwelling
• Heritage and historic dwellings

Question 2

Explain how insurers prevent some insureds from purchasing insurance far below the total value of their property to save money on premiums. (5 marks)

Answer 2

Insurance to value
• The practical solution to the problem has been for insurers to assume that insureds have bought insurance on the full value of their property.
• That allows the ratemaking process to assign uniform rates to similar risks within groups.
• Coinsurance penalty, applied mostly in commercial policies, helps encourages insurance to value.
• A professional insurance appraisal is the best way to determine a building’s replacement cost, but most insureds find this too expensive to have done regularly. • For personal property risks and for simple commercial risks, most insurers require completion of an estimator or calculator—a formula, devised by professional appraisers, that estimates replacement cost based on features such as the size and location of the dwelling.

Question 3

Identify the critical workplace interpersonal skills brokers and adjusters must use with insureds after a loss has been reported. (5 marks)

Answer 3

Critical workplace interpersonal skills (any five of the following)
• Using tact and diplomacy to reassure and calm an insured
• Recognizing that everyone reacts differently to a crisis • Acknowledging feelings in a neutral way, rather than ignoring them and creating barriers
• Being patient
• Showing respect for the person even when feelings and views may not be understood
• Being observant
• Choosing words carefully, so as not to imply coverage • Listening actively

Question 4

Role of Agent

Answer 4

• Obtains all relevant information about the property and the hazards from Mariana
• Assesses the risk and determines what coverage Mariana requires
• Helps Mariana to complete the application, eliciting all material information from her and further
confirming that the risk fits the insurer’s guidelines
• With Mariana’s help, answers additional questions from the underwriter
• When Mariana calls to report the fire, helps her begin the claims process

Question 5

. Actions of underwriter

Answer 5

• Reviews the application to determine whether it meets the insurer’s underwriting guidelines
• Requests further information from the agent and Mariana to determine whether the coverage
applied for is appropriate
• Decides if additional coverage is needed and helps the agent with additional endorsements or
special coverage
• Accepts the application with any necessary modifications
• During the claims process, helps the agent and the claims department with any questions that
may arise

Question 6

Claims questions

Answer 6

c. Claims questions (any five of the following)
• Does the loss fall within the policy period?
• Does the loss fall within the insuring agreement?
• Do any exclusions apply?
• Do any endorsements apply?
• Have all policy conditions been met?
• Is there a deductible to be applied?
• How much should be paid?
• Is there any other reason not to pay the claim?

Question 7

Outline the benefits of the mortgage clause to a mortgagee. (5 marks)

Answer 7

Mortgagee benefits
• Policy covers mortgagee even if named insured is unable to recover because of breach of a
policy condition.
• Mortgagee is permitted to give notice of loss immediately and proof of loss as soon as
practicable.
• Mortgagee and its assigns are included among those who, acquiring title to the insured property,
are covered under the policy until it is cancelled or expires.
• Mortgagee to be notified of cancellation or any alteration of policy to the prejudice of the
mortgagee.
• Same notice required to mortgagees as to insureds.

Question 8

In the IBC homeowners forms, 15 special limits are described in two groups; name FIVE (5) special
limits that apply only to loss caused by theft. (5 marks

Answer 8

Special limits for theft (any five of the following)
• Works of art
• Jewellery, gems, precious or semi-precious stones, pearls, and watches
• Fur garments, garments trimmed with fur, and all other fur items
• Numismatic property, manuscripts, stamps, and philatelic property
• Collectible cards (such as sports personality cards)
• Collections not subject to any other limitation
• Bicycles, their equipment, and accessories

Question 9

Identify the purpose of a deductible. Describe FOUR (4) ways it is commonly applied. (5 marks

Answer 9

Application of deductibles
• A deductible is the insured’s portion of a covered loss and is intended to prevent small, frequent
claims, reducing administrative costs and premiums.
• The deductible may apply separately to the amount recoverable under each item, if the total
amount of insurance is subdivided into more than one item.
• The deductible may be subtracted from the total amount of loss or damage arising from a single
event (such as a fire or an explosion)—this is the most common application.
• The policy may also state that no loss be paid below a specified amount (the deductible) but that
a loss greater than this amount will be paid in full.
• Or, the policy may indicate a deductible and a loss amount beyond which no deductible applies

Question 10

Discuss why the basic fire policy is important for understanding property insurance today. (5 marks

Answer 10

. Evolution of the basic fire policy
• While the basic fire policy is not really sold on its own today, this policy is the basis of today’s
property policies, so it is important to understand something of its features.
• Fire policies cover direct physical loss or damage to insured property when it occurs as a result of
an insured peril.
• At first, those perils comprised fire, lightning, and explosion of natural, coal, or manufactured gas.
• Over time, as client needs changed, additional perils were added to fire policies.
• Today, fire policies have become property policies, which insure against multiple perils—either
named perils or all perils that are not excluded

Question 11

Identify five different classes or specialized forms of coverage that insurers may sell within either
personal-lines or commercial-lines property insurance. (5 marks

Answer 11

. Classes of property insurance and specialized coverage (any five of the following)
• Marine insurance
o Inland marine insurance
o Marine cargo insurance
• Aviation insurance
• Crop insurance
• Builders risk
• Earthquake insurance
• Equipment breakdown (boiler and machinery insurance)
• Flood insurance
• Habitational insurance
o Homeowners insurance
o Tenants/renters insurance
o Condominium unit owners insurance

Question 12

Define an insurance contract. Outline the elements or principles that makes it different from other
contracts. (5 marks

Answer 12

The insurance contract
• The insurance contract is an agreement or promise between two or more persons, or parties, that
is intended to be legally enforceable.
• The written form of the insurance contract is issued by the insurer to the insured as a policy.
• Insurance contracts or policies include the principle of indemnity—that the insured party shall not
receive more than the actual loss suffered.
• Insurance contracts or policies include the concept of insurance interest—that the insured must
stand to benefit from the continued existence of the insured property or be prejudiced by its loss.
Copyright © The Insurance Institute of Canada 3
• Insurance contracts or policies also include the principle of uberrimae fidei, or utmost good faith,
which requires the insured to act with a high standard of honesty and disclose those facts that a
reasonable person ought to know are material

Question 13

What is covered by homeowners policy

Natalya recently bought a new house where she will live with her new husband, Jonah. She is taking
out a personal property insurance policy and would like to discuss the policy in detail. How will her
following questions be answered by the insurance agent?

Answer 13

What is covered by homeowners policy?
• The subject matter of the insurance in Natalya’s homeowners policy is her dwelling and its
contents belonging to the members of her household.
• Property insurance is first-party insurance, protecting the first party to the insurance contract
against the risk of financial harm resulting from loss or damage to the insured property.
• In the event of a loss, Natalya and her household members must demonstrate an insurable
interest in the property that has sustained the loss or damage.
• In contrast, liability insurance is third-party insurance, protecting the insured against the risk that a
third party will suffer loss or injury for which the insured is legally liable.
• Natalya would need to get personal liability insurance to protect herself against a situation
experienced by her father.

Question 14

Natalya has heard that there are circumstances that could void her policy in the event of a fire.
Identify some of the general exclusions to basic fire insurance. (5 marks

Natalya recently bought a new house where she will live with her new husband, Jonah. She is taking
out a personal property insurance policy and would like to discuss the policy in detail. How will her
following questions be answered by the insurance agent?

Answer 14

Exclusions to basic fire policy (any five of the following)
• Electrical devices
• Application of heat
• War risks
• Nuclear incident
Copyright © The Insurance Institute of Canada 4
• Excluded property • Alterations and additions • Vacancy, unoccupancy, or disuse • Volatile substances • Bylaws

Question 15

Natalya recently bought a new house where she will live with her new husband, Jonah. She is taking
out a personal property insurance policy and would like to discuss the policy in detail. How will her
following questions be answered by the insurance agent?

. Who is covered by the homeowners policy?

Jonah’s son Micah is 14 and lives with Jonah and Natalya. Amelia, Natalya’s daughter, is 19 and
away at university but lives with her mother on her school breaks. Natalya’s brother Niki is
planning to move to Canada and will be living in the finished basement until he can find a job.
Finally, Jake, a classmate of Micah, has been living with the family temporarily because there are
some problems at home. Natalya is wondering how the homeowners insurance policy will protect
all the members of her household. (5 marks

Answer 15

Who is covered by the homeowners policy?
• Jonah is covered by the policy, as the spouse of the named insured.
• Micah is also covered, as he is a relative of Jonah’s, and a dependant under the age of 21.
• Niki will be covered when he moves in because he is a relative of the named insured
• Amelia is covered as a student who is temporarily living away from home to attend university and
still dependent on the named insured.
• Jake’s personal property is covered as he is a minor under the care of Natalya and Jonah.

Question 16

Outline five questions pertaining to an applicant’s personal information that an insurer must be able to
answer. (5 marks)

Answer 16

Questions about personal information (any five of the following)
• What personal information is collected?
• Why is it collected?
• How is it collected?
• What is it used for?
• Where is it kept?
• How is it secured?
• Who has access to or uses it?
• To whom is it disclosed?
• When is it disposed of

Question 17

Identify five provisions in the articles of the Civil Code of Québec that are similar to the statutory
conditions for property insurance. (5 marks

Answer 17

Civil Code provisions
• Some provisions stipulate the rights and obligations of the insured and the insurer concerning a
material change in risk and define when vacancy becomes material (Articles 2466–2468).
• Some provisions are similar to Statutory Conditions 6, 7, and 12 (Requirements After Loss,
Fraud, and When Loss Payable). (Articles 2470–2474)
• Some provisions specify that the contract may only be assigned with consent of the insurer and
then only to someone with insurable interest, similar to Statutory Condition 3. (Articles 2475–
2476)
• Some provisions address termination requirements, as well as notice to lienholders. (Articles
2477–2479)
• One provision requires the insured not to abandon the property following loss and to allow the
insurer to inspect the damage, similar to Statutory Condition 10—Entry, Control, Abandonment.
(Article 2495

Question 18

Outline five pieces of privacy legislation that can affect property insurers in Canada. (5 marks

Answer 18

3. Privacy legislation
   • Personal Information Protection and Electronic Documents Act (PIPEDA)
   • Freedom of Information and Protection of Privacy Act (FOIPPA)
   • Personal Information Protection Act (PIPA)
   • Access to Information and Protection of Privacy Act

• Act Respecting Access to Documents Held by Public Bodies and the Protection of Personal
Information

Question 19

In the event his mother passes, Chen and his wife may decide to retire to Thailand. If that
happens, Chen plans to transfer the title of their home to their daughter and her husband. Explain
how a specific statutory condition would affect Chen’s decision to change the insurable interest in
the property. (5 marks)

. Chen recently moved from Montreal to Toronto to help his daughter and her husband with their new
business. Chen has purchased a large home for his family, which includes his wife, his elderly
mother, his 35-year-old daughter and her husband, and his two grandchildren. After purchasing
insurance, he has some questions about the statutory conditions in his homeowners policy because
he knows that insurance is a little different outside of Quebec.

Answer 19

Change in interest
• An insurance policy is a personal contract, and Chen cannot assign his rights and obligations
under the contract to another party without the insurer’s consent.
• The change of interest statutory condition identifies exceptions in which the insurer is obliged to
insure a new interest replacing the named insured’s interest, such as bankruptcy or a change of
title.
• Under this condition, the policy protects the new interests, such as Chen’s daughter and her
husband, automatically from the time of the change, regardless of whether the insurer has been
informed.
• Even in such cases, there is a reasonable obligation for the successor, such as the executor of
the estate or receiver in bankruptcy, to notify the insurer of the change in interest within a
reasonable amount of time.
• Since a title change usually comes with other changes, such as occupancy, the insurer should be
made aware so the risk can be re-evaluated

Question 20

Chen wants to ensure he understands what to do in the event of a loss. Explain the statutory
condition of requirements after loss. (5 marks)

. Chen recently moved from Montreal to Toronto to help his daughter and her husband with their new
business. Chen has purchased a large home for his family, which includes his wife, his elderly
mother, his 35-year-old daughter and her husband, and his two grandchildren. After purchasing
insurance, he has some questions about the statutory conditions in his homeowners policy because
he knows that insurance is a little different outside of Quebec.

Answer 20

b. Requirements after loss
• In the event of a loss, Chen must provide notice of a loss to the insurer in writing.
• This notice must be given as soon as possible so that an appropriate investigation to assess
coverage can be undertaken by the insurer.
• Chen must also provide the insurer with a proof of loss.
Copyright © The Insurance Institute of Canada 4
• The proof of loss must include how and when the loss occurred; an inventory of the damaged
property; where the property was at the time of loss; and a declaration that the loss was not
caused by a willful act of the insured.
• The proof of loss should also list any insurance covering the same property; the interest of the
insured and others; and notification of any changes in title, use, or occupation

Question 21

Chen would like to know if it will be possible to cancel his policy, and whether he can be
refunded. Explain how the termination statutory condition works. (5 marks
. Chen recently moved from Montreal to Toronto to help his daughter and her husband with their new
business. Chen has purchased a large home for his family, which includes his wife, his elderly
mother, his 35-year-old daughter and her husband, and his two grandchildren. After purchasing
insurance, he has some questions about the statutory conditions in his homeowners policy because
he knows that insurance is a little different outside of Quebec.

Answer 21

Termination
• A policy may be terminated by either the insured or insurer, but there are requirements.
• If Chen asked to cancel his policy, premiums paid but unearned will be refunded, less a
surcharge to offset the administrative cost; this is known as a short-rate cancellation.
• Chen may be asked to sign a cancellation receipt to show the effective date of cancellation and
cancellation cannot be backdated.
• If the insurer cancels the policy, the statutory condition requires it to do so in writing; with 5 days’
notice if delivered personally, or 15 days’ notice by registered mail.
• This is a pro-rata cancellation and the insurer is required to give a proportional refund of premium
for the unexpired portion of the term with the notice of cancellation

Question 22

Outline the differences between named-perils policies and all-risks policies. (5 marks

Answer 22

Named-perils vs all-risks
• Named-perils policies insure against direct physical loss or damage caused by only the listed
perils.
• With named-perils coverage, the onus is on the insured to prove the loss or damage was caused
by an insured peril and that no exclusion of coverage applies.
• All-risks policies insure against direct physical loss or damage caused by any peril, provided that
the peril is not excluded.
• With all-risks policies, the insured has to prove that loss or damage to insured property at an
insured location occurred during the policy term and that the loss was fortuitous.
• However, with all risks, the onus is on the insurer to prove that an exclusion applies; otherwise,
the physical damage is insured

Question 23

Name FIVE (5) IBC habitational forms in which the named perils are listed in an “insured perils”
section. (5 marks)

Answer 23

. Named-perils section (any five of the following)
• IBC 1151 Homeowners Basic Form
• IBC 1153 Homeowners Broad Form
• IBC 1157 Mobile Homeowners Form
• IBC 1161 Tenants Basic Form
• IBC 1165 Condominium Unit Owners Basic Form
• IBC 1171 Residential Basic Form
• IBC 1173 Seasonal Residence Form

Question 24

Name FIVE (5) common domestic fire hazards that should be eliminated, controlled, or reduced as
much as possible. (5 marks

Answer 24

Fire hazards (any five of the following)
• Cooking hazards
• Unattended portable heaters
• Clothes-dryer lint
• Overloaded electrical circuits
• Faulty or old, outdated wiring
• Unattended candles (for festive or religious ceremonies)
• Wood fireplaces and wood stoves
• Careless smoking and children playing with matches

Question 25

Vivek lives near a large coastal estuary, which means he lives near a river that flows into the ocean.
He’s very concerned about the effects of climate change and severe storms and has heard that his
insurance will not cover flooding. He’s concerned about that, because he knows that water damage is
one of the most frequent causes of damage. He’s also worried about the sewer backing up or a
plumbing malfunction causing a flood, as his coworker had a terrible flood last year in his basement
caused by sewer backup. So, Vivek wants to ensure he’s protected from such problems by
purchasing a sewer back up endorsement. His broker suggests adding an extended water
endorsement to cover his concerns.
a. Clarify Vivek’s understanding of the term “flood” with examples of how people use the term
incorrectly and how such examples might be covered. (5 marks)

Answer 25

a. Incorrect uses of “flood”
• A pipe in the dwelling bursts, causing water to accumulate. This is not a flood and the damage is
covered.
• A toilet overflows, causing water to accumulate. This is not a flood and the damage is covered.
• A dishwasher hose breaks, causing water to accumulate. This is not a flood and the damage is
covered.
• The sewers back up, causing water to accumulate. This is not a flood and the damage is covered.
• The sump pump malfunctions, causing water to accumulate. This is not a flood, but it’s also an
excluded peril, so the damage would not be covered

Question 26

Vivek lives near a large coastal estuary, which means he lives near a river that flows into the ocean.
He’s very concerned about the effects of climate change and severe storms and has heard that his
insurance will not cover flooding. He’s concerned about that, because he knows that water damage is
one of the most frequent causes of damage. He’s also worried about the sewer backing up or a
plumbing malfunction causing a flood, as his coworker had a terrible flood last year in his basement
caused by sewer backup. So, Vivek wants to ensure he’s protected from such problems by
purchasing a sewer back up endorsement. His broker suggests adding an extended water
endorsement to cover his concerns.

b. Vivek is concerned that the exclusion of flooding means he has no protection in the event of a
natural disaster like a hurricane or a major rainstorm. How will Vivek’s standard insurance policy
protect his property if it is damaged in a severe storm? (5 marks)

Answer 26

b. Coverage for severe storm damage
• A flood caused by severe storm that overwhelms the local storm sewers would not be covered.
• A flood caused by the local river overflowing would not be covered.
• A flood cause by a coastal storm surge would not be covered.
• Damage caused by wind during a severe storm would be covered under windstorm or hail peril.
• Damage caused by a lightning strike during a severe storm would be covered under the fire peril.

Question 27

Vivek lives near a large coastal estuary, which means he lives near a river that flows into the ocean.
He’s very concerned about the effects of climate change and severe storms and has heard that his
insurance will not cover flooding. He’s concerned about that, because he knows that water damage is
one of the most frequent causes of damage. He’s also worried about the sewer backing up or a
plumbing malfunction causing a flood, as his coworker had a terrible flood last year in his basement
caused by sewer backup. So, Vivek wants to ensure he’s protected from such problems by
purchasing a sewer back up endorsement. His broker suggests adding an extended water
endorsement to cover his concerns.

c. Explain what constitutes flooding for Vivek and why the IBC 1148 Extended Water Endorsement
may be better than a sewer back up endorsement. (5 marks

Answer 27

Define flood and endorsement coverage
• IBC’s homeowners comprehensive form defines “flood” as waves, tides, tidal waves, tsunami,
dam breaks, seiche, or the rising, the breaking out, or the overflow of any body of water or
watercourse, whether natural or human-made.
• Coverage for damage caused by flood may be added by the IBC 1148 Extended Water
Endorsement.
• It is not necessary to purchase both this endorsement and IBC 1142 Limited Sewer Back Up
Endorsement because the water endorsement provides coverage for both perils.
• In addition to the coverage provided under the limited sewer back up endorsement, the extended
water endorsement also provides coverage for damage caused by flood, ground water, rising of
the water table, and surface water.
• The extended water endorsement also removes the limitation on sewer backup losses that occur
within 72 hours of a flood

Question 28

Marko is a new broker at Assurance Insurance. He is eager to forge good relationships with his
coworkers in underwriting and claims. Part of his strategy is to try to understand both the roles and
responsibilities of his coworkers, as well as their expectations of him. Marko is currently working on
an application for insurance from his client, Anton. Marko wants to make sure he provides all the
necessary information both to his underwriting department, and the necessary information to Anton
regarding his insurance agreement.
a. Outline FIVE (5) key questions regarding the construction factor of COPE the underwriter will
want answered before he or she can assess the physical risk of insuring Anton’s home. (5
marks)

Answer 28

Physical factors: construction
• Is the size of the dwelling inappropriate or perhaps disproportionate to the neighbourhood?
• Is the construction standard, or is it odd or unusual?
• How is the home heated?
• What is the age of the dwelling?
• Is the dwelling currently under construction or undergoing renovations?

Question 29

Marko is a new broker at Assurance Insurance. He is eager to forge good relationships with his
coworkers in underwriting and claims. Part of his strategy is to try to understand both the roles and
responsibilities of his coworkers, as well as their expectations of him. Marko is currently working on
an application for insurance from his client, Anton. Marko wants to make sure he provides all the
necessary information both to his underwriting department, and the necessary information to Anton
regarding his insurance agreement.

b. One of the elements of the protection factor in COPE is fire protection. Outline FIVE (5) questions
related to fire protection the underwriter will consider when assessing the risk of insuring Anton’s
home. (5 marks)

Answer 29

Physical factors: fire protection
• Does the dwelling have access the fire department and/or a fire hydrant?
• Does the dwelling have sprinklers?
• Does the dwelling have fire alarms?
• Is the alarm local or monitored?
• If it is monitored, who is doing the monitoring and how reputable is the service?

Question 30

Marko is a new broker at Assurance Insurance. He is eager to forge good relationships with his
coworkers in underwriting and claims. Part of his strategy is to try to understand both the roles and
responsibilities of his coworkers, as well as their expectations of him. Marko is currently working on
an application for insurance from his client, Anton. Marko wants to make sure he provides all the
necessary information both to his underwriting department, and the necessary information to Anton
regarding his insurance agreement.

c. In the event of a claim of loss from Anton, identify TEN (10) steps the claims adjuster would follow
when evaluating the claim. (5 marks)

Answer 30

. Claims adjuster steps (list all 10 steps for 5 marks)
• Step 1 Does the loss fall within the policy period?
• Step 2 Does the loss fall within the insuring agreement?
• Step 3 Do any exclusions apply?
• Step 4 Do any endorsements apply?
• Step 5 Have all policy conditions been met?
• Step 6 Is there a deductible to be applied?
• Step 7 How much should be paid?
• Step 8 Any other reason not to pay the claim?
• Step 9 Pay the claim.
• Step 10 Notify the underwriter of any information material to the risk that the insurer may be
unaware of

Question 31

Miguel is a new commercial business client. He runs an online retail business selling one-of-a-kind
artisan products from local producers. The business is growing, so he’s decided to purchase a small
warehouse building with a storefront in a hip, up-and-coming neighbourhood with great foot traffic. He
will continue to run the online business, with a small showcase and cafe for limited in-person sales.
The $2 million building is over 100 years old, part of an old industrial area that is being converted to
residential and retail, and Miguel plans to do some renovations. His broker walks Miguel through
several insurance considerations for his new venture.
a. The broker thinks that due to the age and nature of the building, Miguel should add a bylaw
endorsement to his policy; how would the broker explain the importance of such protectionwhen
purchasing an old building? (5 marks)
b. Miguel’s coinsurance clauses requires him to insure up to 80 percent of the building; Miguel has
decided the risk of total loss is low and wants to insure to a $1 million limit to save money on his
premium. Why is this a bad decision on Miguel’s part? (5 marks)
c. Miguel is interested in protecting himself from the cost associated with cyber threats. While it is
not explicitly stated as an exclusion, how would the broker explain to Miguel how cyber threats
are effectively excluded by data and data problem exclusions? (5 marks)

Answer 31

Need for bylaw endorsements
• Most policies exclude any increase in claim amount due to the operation of building bylaws.
• The older a building is, the more it is likely to deviate from current building code requirements.
• The bylaw endorsement provides coverage for the extra costs of meeting building codes.
• Typically, this insurance is needed when insuring older buildings that may not meet current
requirements, such as requirements for accessibility.
• When a building is partly damaged, many municipalities require the whole building be brought up
to current codes, and the bylaws may affect the materials and methods used.

Question 32

Miguel is a new commercial business client. He runs an online retail business selling one-of-a-kind
artisan products from local producers. The business is growing, so he’s decided to purchase a small
warehouse building with a storefront in a hip, up-and-coming neighbourhood with great foot traffic. He
will continue to run the online business, with a small showcase and cafe for limited in-person sales.
The $2 million building is over 100 years old, part of an old industrial area that is being converted to
residential and retail, and Miguel plans to do some renovations. His broker walks Miguel through
several insurance considerations for his new venture.

b. Miguel’s coinsurance clauses requires him to insure up to 80 percent of the building; Miguel has
decided the risk of total loss is low and wants to insure to a $1 million limit to save money on his
premium. Why is this a bad decision on Miguel’s part? (5 marks)

Answer 32

Inadequate insurance limit
• The coinsurance clause in his policy states that he must insure the building to 80
percent of its replacement value.
• Since the building is valued at $2 million, to avoid a coinsurance penalty, he must insure
the building for a minimum of $1.6 million.
• The $1 million limit is only half of its replacement cost and doesn’t meet the insurer’s 80
percent coinsurance requirement.
• If Miguel were to suffer a loss that is less than $1 million, such as $800,000, he will not
be paid the full amount.
• The insurer will calculate the loss settlement on the basis of the coinsurance clause; the
policy will only cover five-eighths of the claim.

Question 33

Miguel is a new commercial business client. He runs an online retail business selling one-of-a-kind
artisan products from local producers. The business is growing, so he’s decided to purchase a small
warehouse building with a storefront in a hip, up-and-coming neighbourhood with great foot traffic. He
will continue to run the online business, with a small showcase and cafe for limited in-person sales.
The $2 million building is over 100 years old, part of an old industrial area that is being converted to
residential and retail, and Miguel plans to do some renovations. His broker walks Miguel through
several insurance considerations for his new venture.

c. Miguel is interested in protecting himself from the cost associated with cyber threats. While it is
not explicitly stated as an exclusion, how would the broker explain to Miguel how cyber threats
are effectively excluded by data and data problem exclusions? (5 marks)

Answer 33

. Cyber risks exclusions
• While there is no cyber exclusion as such in the forms, the data exclusion performs thesame
purpose.
• This wording excludes data, which is defined as information or concepts in any form.
• In addition, loss or damage caused directly or indirectly by a data problem is excluded unless
caused directly by resultant fire, explosion, smoke, or leakage from fire-protective equipment.
• A data problem is defined as erasure, destruction, corruption, misappropriation, or
misinterpretation of data; error in creating, amending, entering, deleting, or using data; or inability
to receive, transmit, or use data.
• These two clauses together effectively remove cyber coverage from the policy.

Question 34

Commercial property insurance wordings include a wide array of forms insuring a variety of different
property; state FIVE (5) different names given to these wordings. (5 marks)

Answer 34

• Fire
• Named perils
• Multi-peril
• All risks
• Inland marine
• Floaters

Question 35

Describe the FIVE (5) general categories into which commercial property exclusions are
grouped. (5 marks)

Answer 35

. Categories of commercial property exclusions
• Risks that are generally not insurable, such as war risks or nuclear contamination.
• Losses that are not accidental or extraneous, and may be considered inherent or inevitable,such
as rust.
• Losses under the control of the insured such as scratching, which is usually due tocarelessness.
• Losses from normal wear and tear.
• Losses excluded because of the particular coverage, such as perils that cost too much to insure,
or property that require their own insurance

Question 36

Outline the FIVE (5) extensions to the limits of insurance in the commercial property broad form. (5
marks)

Answer 36

3. Extensions to limits
   • Temporary locations
   • Newly acquired buildings
   • Newly acquired contents
   • Property in transit
   • Property in the custody of sales representatives

Question 37

State FIVE (5) added coverages and features that might be included with high-value home insurance.
(5 marks

Answer 37

High-valued home insurance (any five of the following)
• Kidnap expense coverage
• Equipment breakdown
• Home invasion coverage
• Home appraisal expenses
• Disappearing deductible
• Cash-out option
• Increased special limits

Question 38

State FIVE (5) hazards that are more common in rented dwellings. (5 marks

Answer 38

. Rented dwellings hazards (any five of the following)
• Maintenance
• Marijuana grow ops (legal)
• Meth labs (illegal)
• Vacancy
• Too many renters
• Vandalism and malicious acts

Question 39

. Describe the exclusions unique to tenants forms, which stem from the absence of building coverage.
(5 marks

Answer 39

. Tenants forms exclusions
• There is no exclusion in the tenants form of buildings or structures used for farming or business
purposes, because there is no coverage for buildings.
• The tenants form excludes lawns and outdoor trees, shrubs, and plants; the homeowners form
excludes only lawns.
• The exclusion in the tenants form of loss due to settling, expansion, contraction, moving, bulging,
buckling, or cracking omits the qualifier about resulting damage to building glass that is found in
the corresponding exclusion of the homeowners form.
• The exclusion in the tenants form of loss caused by birds, vermin, raccoons, rodents, or insects
omits the reference to building glass that is found in the corresponding exclusion of the
homeowners form.
• In the tenants form, the exclusion of theft or attempted theft in or from a dwelling under
construction does not extend to materials or supplies for use in the construction as in the
corresponding exclusion of the homeowners form.

Question 40

Tengfei purchases his first home, a one-bedroom plus den condo in a building downtown. He’s very
happy with the unit he’s purchased; he saw several units in the 10-year-old building, and most looked
exactly the same. His unit is different, though; it has better quality flooring (real hardwood), a rainshower head, and a Japanese-style toilet. Tengfei’s real estate agent puts him in touch with Safety
Insurance Company to secure his insurance. However, Tengfei is resistant to purchasing additional
insurance, believing the building’s insurance will cover him. How should Safety Insurance address
Tengfei’s concerns regarding the following specific issues?
a. Explain to Tengfei how the condo’s insurance works and what additional coverage unit insurance
provides. (5 marks)

Answer 40

a. Condominium corporation insurance
• The condominium corporation insurance policy must cover the entire building, including individual
units, and common property for loss or damage caused by major perils.
• Covered perils include fire, lightning, smoke, windstorm, hail, explosion, water escape, riot or civil
commotion, impact by aircraft or vehicles, and vandalism or malicious acts.
• The corporation’s policy does not cover an owner’s personal property; as such, unit owners can
protect their own personal property under a condominium unit owners form.
• The condo unit form covers the owners for their personal property and liability.
• The condo unit form also includes unique coverages for the building in cases where there may be
a deficiency in coverage under the corporation’s building policy.

Question 41

Tengfei purchases his first home, a one-bedroom plus den condo in a building downtown. He’s very
happy with the unit he’s purchased; he saw several units in the 10-year-old building, and most looked
exactly the same. His unit is different, though; it has better quality flooring (real hardwood), a rainshower head, and a Japanese-style toilet. Tengfei’s real estate agent puts him in touch with Safety
Insurance Company to secure his insurance. However, Tengfei is resistant to purchasing additional
insurance, believing the building’s insurance will cover him. How should Safety Insurance address
Tengfei’s concerns regarding the following specific issues?

b. Tengfei has only had tenants insurance in the past, which covered the contents of his apartment;
he doesn’t understand why he needs to cover any part of the unit’s fixtures. Explain the concept
of the standard unit bylaw and the importance of Coverage U1—Unit Improvements and
Betterments. (5 marks)

Answer 41

Standard unit and upgrades
• The upgraded hardwood floor and bathroom fixtures were likely installed by the previous owner
and are not covered under the corporation’s insurance.
• Tengfei should check the unit bylaw carefully before finalizing his insurance contract and the limit
of the U1 coverage.
• The standard unit bylaw clarifies who is responsible for loss or damage to a unit and whose
insurance policy should respond for repairing the improvements when damaged.
• The bylaw defines the standard unit by describing in detail the original fixtures and finishes in
each unit; the condominium corporation’s building policy covers the items listed in the bylaw.
• The items not found on the list are considered improvements and must be covered under the unit
owner’s policy.

Question 42

Tengfei purchases his first home, a one-bedroom plus den condo in a building downtown. He’s very
happy with the unit he’s purchased; he saw several units in the 10-year-old building, and most looked
exactly the same. His unit is different, though; it has better quality flooring (real hardwood), a rainshower head, and a Japanese-style toilet. Tengfei’s real estate agent puts him in touch with Safety
Insurance Company to secure his insurance. However, Tengfei is resistant to purchasing additional
insurance, believing the building’s insurance will cover him. How should Safety Insurance address
Tengfei’s concerns regarding the following specific issues?

c. Tengfei is confused about the terms of Coverage U2; explain the need for loss assessment
coverage and use the example of extensive damage from a burst pipe to outline how it works. (5
marks)

Answer 42

. Loss assessment
• Under certain circumstances, the condominium corporation might charge a special assessment to
each unit owner if the building’s insurance is insufficient.
• This might occur because of underinsurance, or a coinsurance penalty, loss from an excluded
peril, or a breach in policy conditions.
• For example, if a pipe bursts in one unit and causes damage to the building that exceeds the
policy limit, a special assessment might be charged to all unit owners to cover the difference.
• If the pipe bursts in Tengfei’s unit, he would be assessed the building policy’s deductible.
• The loss assessment coverage would not cover this cost, but some insurers may extend loss
assessment coverage in their policies to include the insured’s share of the building deductible, up
to a specified amount

Question 43

1. Define the term “endorsement.” Describe how an endorsement works. (5 marks)

Answer 43

Define and describe endorsement
• An endorsement is an amendment added to a written document, particularly an agreement
between parties, altering its provisions.
• Endorsements override specific terms in the policy by
o removing coverage for certain property or perils;
o adding warranties or additional conditions;
o altering or removing policy conditions or limitations; or
o offering permission for activities, occupancy, or parties that may not otherwise be
covered.

Question 44

Outline FIVE (5) common types of endorsement. (5 marks)

Answer 44

Types of endorsement (any five of the following)
• Sewer back up endorsement
• Water endorsement
• Earthquake endorsement
• Vacancy permit
• Bylaws endorsement
• Home-based business endorsement
• Identity theft endorsements

Question 45

Outline FIVE (5) common types of floater. (5 marks)

Answer 45

Types of floater (any five of the following)
• Fine arts floater
• Personal articles floater
• Scheduled personal property endorsement
• Other limited property
• Watercraft floaters
• Vacation or recreational trailer floaters

Question 46

Last year Mika started a lifestyle influencer brand that involves making videos in her home, doing
photo shoots, and making deals with vendors for affiliate links on her blog and influence posts on
social media. She has invested in new computer equipment, video and still cameras, microphones,
and some special lights, tripods, and overhead camera set-up equipment. She’s been so successful
that she has quit her full-time job and now dedicates her guest bedroom to her work.
a. Why is it important for Mika to report her business to her insurance agent and adjust her
homeowners policy? (5 marks)

Answer 46

Home-based business insurance
• The failure of an insured to disclose the existence of a home-based business may breach the
statutory conditions. This breach may render the policy void or cause a claim to be denied.
• If the business is a sole proprietorship, determining coverage is much simpler.
• Personal-lines policies such as the homeowners comprehensive form offer no coverage at all for
loss of income due to business interruption, even if there is coverage for contents.
• A home-based business endorsement may be added to the policy to enhance property limits or
perils and ensure proper coverage for property, liability, and consequential losses.
• For a risk where the only business exposure is a computer used for both business and personal
reasons, an insurer may add a computer floater to the homeowners policy to provide coverage for
the business activity.

Question 47

Last year Mika started a lifestyle influencer brand that involves making videos in her home, doing
photo shoots, and making deals with vendors for affiliate links on her blog and influence posts on
social media. She has invested in new computer equipment, video and still cameras, microphones,
and some special lights, tripods, and overhead camera set-up equipment. She’s been so successful
that she has quit her full-time job and now dedicates her guest bedroom to her work.
a. Why is it important for Mika to report her business to her insurance agent and adjust her
homeowners policy? (5 marks)

b. Describe the endorsement that Mika should obtain to protect her new computer purchases.
Outline what that endorsement might cover. (5 marks)
c. Mika’s agent suggests that she consider adding an identity theft endorsement. Describe FIVE (

Answer 47

Computer floater
• The scheduled personal property endorsement is particularly beneficial for insuring computers.
• The computer must be personally owned by the insured (and not, for example, by a company
owned by the insured), but personal computer does not mean that the computer must be
exclusively for personal use.
• The endorsement defines the term “personal computer” as
o the central processing unit and auxiliary equipment, including but not limited to the central
processing unit (CPU); monitor; speakers; modems; keyboards; printers; disk, tape, and
hard drives; cassette tape recorders; and word-processing equipment;
o media, comprising materials on which data are electronically recorded, such as but not
limited to magnetic tapes, diskettes, disk packs, cassettes, USB flash drives, and
portable hard drives; and
o software, comprising programs or instructions stored on media.

Question 48

Last year Mika started a lifestyle influencer brand that involves making videos in her home, doing
photo shoots, and making deals with vendors for affiliate links on her blog and influence posts on
social media. She has invested in new computer equipment, video and still cameras, microphones,
and some special lights, tripods, and overhead camera set-up equipment. She’s been so successful
that she has quit her full-time job and now dedicates her guest bedroom to her work.

c. Mika’s agent suggests that she consider adding an identity theft endorsement. Describe FIVE potential costs the endorsement could cover in the event her identity is compromised.

Answer 48

Covered costs for restoring identity (any five of the following)
• Legal costs to notify the appropriate authorities.
• Liaison between the insured and credit bureaus, credit-card companies, and other financial
institutions.
• Lost wages as a result of time off work to mitigate the loss; coverage is limited to a dollar amount,
usually $500 per week.
• Loan application fees.
• Legal fees to defend against lawsuits as a result of identity theft.
• Long-distance phone charges.
• In some cases, a credit-monitoring service for a specified period after the identity theft.

Question 49

Describe the extended Step 3 of Reading a Policy—review the perils that are insured against, and the
perils that are not—in the context of all-risks coverage and exclusions. (5 marks

Answer 49

Extended Step 3 of Reading a Policy
• All-risks coverage insures against loss or damage caused by a peril that is not excluded.
• It is critical to understand not only the perils insured against under the policy but also the exclusions.
• Determine whether there is coverage under the policy by looking at what is insured under the policy
and under what circumstances. (The onus is on the insured to show that the loss or damage falls
within coverage.)
• If there is coverage, next determine whether any exclusions apply to the circumstances of the loss
or damage. (The onus shifts to the insurer to demonstrate that the coverage is excluded.)
• If an exclusion applies, determine whether there is an exception to the exclusion that restores
coverage despite the exclusion. (The onus falls back to the insured to establish that an exception
is triggered.)

Question 50

State FIVE (5) types of property included in the first group of exclusions, property not insured. (

Answer 50

Property not insured (any five of the following)
• Buildings for business or farming
• Property on exhibit
• Property illegally acquired or subject to forfeiture
• Evidence of debt or title
• Sporting equipment
• Animals, birds, or fish
• Property lawfully seized
• Outdoor radio and TV antennae, including satellite receivers

Question 51

State FIVE (5) types of water damage that are excluded from all three homeowners forms

Answer 51

Water damage exclusions (any five of the following)
• Freezing during heating season
• Continuous or repeated leakage or discharge of water
• Seepage
• Escape from a sewer, septic system, or sump
• Water system or domestic water container (damage to system)
• Building under construction or vacant
• Freezing involving domestic water containers
• Surface water
• Ground water
• Shoreline ice buildup and water-borne ice
• Flood (waves, tides, dam breaks, rising waterways, etc.

Question 52

Yolande retires from teaching and downsizes to a small bungalow that was renovated by the previous
owner, including a new roof. Yolande installs a satellite dish and other amenities. Her new
homeowners policy is based on the broad form, with various endorsements. Yolande and her
boyfriend go on a three-week trip in March. Yolande asks her boyfriend’s daughter Allie to check the
house on her way home from work each day, just to make sure everything is in order.
a. During her time away in March, a polar vortex causes a deep freeze across the province,
surprising everyone. When Allie stops in to check on the house, she discovers an inch of water
on the kitchen floor because a pipe has burst. Will Yolande’s insurance cover the damage caused
by the burst pipe? (5 marks)

Answer 52

Damage caused by freezing
• Freezing is covered during the heating season, unless all members of the insured’s household
are absent for more than a certain number of days.
• That number is left unspecified in the IBC forms, but four consecutive days is a common
standard.
• In the event of such an absence, an exception to the exclusion may restore coverage if the
insured arranges for a competent person to enter the dwelling or detached private structure each
day it is unoccupied.
• The onus is on Yolande to establish that the proper arrangements have been made and Allie
understands them.
• In this case, Allie has checked on the property regularly, so the policy should cover the loss
caused by the burst pipe.

Question 53

Yolande retires from teaching and downsizes to a small bungalow that was renovated by the previous
owner, including a new roof. Yolande installs a satellite dish and other amenities. Her new
homeowners policy is based on the broad form, with various endorsements. Yolande and her
boyfriend go on a three-week trip in March. Yolande asks her boyfriend’s daughter Allie to check the
house on her way home from work each day, just to make sure everything is in order.

b. There is a huge windstorm and debris tears a large hole in Yolande’s roof. Before Allie can deal
with the opening, heavy rain damages the interior and also the house’s contents. Will Yolande’s
insurance cover this type of water damage? (5 marks)

Answer 53

Water damage
• The fourth source of insured water damage involves water entering the dwelling through an
opening that has been suddenly and accidentally created by an insured peril other than water
damage.
• In this case, the windstorm, an insured peril, causes an opening suddenly and accidentally; the
rain starts later but enters through the opening.
• Policy wording does not say the water must enter when the opening is created, but it does have
to be soon enough afterward to have prevented the opening from being temporarily sealed.
• In this case, Yolande does not have a reasonable chance to deal with the wind damage before
the water damage occurs.

• Her policy, which is based on the homeowners basic form, includes this source of water damage
under its water damage peril.

Question 54

Yolande retires from teaching and downsizes to a small bungalow that was renovated by the previous
owner, including a new roof. Yolande installs a satellite dish and other amenities. Her new
homeowners policy is based on the broad form, with various endorsements. Yolande and her
boyfriend go on a three-week trip in March. Yolande asks her boyfriend’s daughter Allie to check the
house on her way home from work each day, just to make sure everything is in order.

c. In the same windstorm, Yolande’s satellite dish is damaged and becomes separated from the
roof, damaging the shingles as it falls to the ground. Will Yolande’s insurance cover this damage?
(5 marks)

Answer 54

Satellite dish damage
• Loss or damage to outdoor radio and TV antennae, including satellite receivers and their
attachments, is not covered when caused by windstorm.
• This exclusion relates to the vulnerability of antennae, towers, dishes, and the like to severe
weather elements and their aftereffects, such as strong winds.
• This exclusion is found in the windstorm or hail peril in the homeowners basic form but reappears
in the broad form and the comprehensive form as a policy exclusion.
• Yolande’s insurance will not cover the costs of replacing the satellite dish damaged in the
windstorm, nor the cost of reinstalling a new one.
• The damage to the roof caused by the satellite receiver will be covered, as it then becomes
debris in the windstorm.

Question 55

Outline the difference between the terms “ground water” and “surface water.” (5 marks)

Answer 55

Ground water vs surface water
• Ground water is water found in the cracks and spaces in soil, sand, and rock beneath the
ground’s surface.
• It may constitute the water table or water from heavy or prolonged rain or melting snow, hail, or
ice that is percolating to the water table.
• Surface water refers to water on the surface of the ground that is not usually there.
• Surface water could be due to a heavy downpour of rain or a rapid melting of snow or ice that
cannot dissipate quickly enough.
• Surface water may also include the escape of water from any source that travels over the surface
of the ground

Question 56

How is the term “vacant” defined in the homeowners forms? In addition, explain how it differs from
“unoccupancy.” (5 marks)

Answer 56

Vacant vs unoccupancy
• Vacant refers to the circumstance where all occupants have moved out with no intention of
returning and no new occupant has taken up residence.
• In the case of a newly constructed house, vacancy is when no occupant has yet taken up
residence.
• Unoccupancy applies to a building with no people in it but to which people intend to return.
• Homes are unoccupied whenever all the occupants are temporarily absent—at work, out
shopping, at entertainment events, or on vacation.
• The distinction in the definition concerns the intention of the occupants.

Question 57

Outline the types of objects that are included in the definition of a domestic water container in the
homeowners forms. (5 marks

Answer 57

3. Domestic water containers (any five of the following)
   • Hot-water heating tanks and their piping and radiators
   • Hot-water storage tanks and associated piping
   • Water reservoirs and dispensers, whether contained in an appliance or not
   • Bathtubs, sinks, or toilets
   • Aquariums or waterbeds
   • Outdoor private swimming pools or wading pools
   • Ornamental pools or fish ponds
   • Hot tub

Question 58

Lisa lives in a rural community where she works in the local town hall as a clerk. She also runs a
small catering business from her home, supplying food for parties and events in her town. In
February, Lisa goes on vacation for a week to Cuba. While on vacation, her neighbour was planning
to check on her house every other day. However, while Lisa is away, there is an ice storm in her area,
and her neighbour is too busy taking care of his property to get to Lisa’s house for a few days.
Unfortunately, Lisa’s house loses power and a large branch falls onto her roof, causing significant
damage. The damage to the roof has made Lisa’s home unfit for occupancy during the winter
months. She will have to find a new place to live while the roof is being repaired. How will Lisa’s
homeowners policy with Country Insurance address the following losses she experiences after this
storm?
a. At the moment, the only place available for Lisa to stay is the bed and breakfast in town, but she
is concerned about the costs of the room and the costs of having to eat out. (5 marks)

Answer 58

Costs of living in a bed and breakfast
• Because Lisa is forced to move out due to roof damage that was caused by an insured peril,
Country Insurance will cover any necessary increase in living expenses.
• The indirect costs of this loss will be covered under the additional living expense coverage of
Coverage D.
• The coverage is intended to allow Lisa to maintain her normal standard of living.
• The nightly costs of the bed and breakfast will be covered.
• As Lisa will not be able to prepare her own meals, the insurance will also cover the extra cost of
eating in restaurants.

Question 59

Lisa lives in a rural community where she works in the local town hall as a clerk. She also runs a
small catering business from her home, supplying food for parties and events in her town. In
February, Lisa goes on vacation for a week to Cuba. While on vacation, her neighbour was planning
to check on her house every other day. However, while Lisa is away, there is an ice storm in her area,
and her neighbour is too busy taking care of his property to get to Lisa’s house for a few days.
Unfortunately, Lisa’s house loses power and a large branch falls onto her roof, causing significant
damage. The damage to the roof has made Lisa’s home unfit for occupancy during the winter
months. She will have to find a new place to live while the roof is being repaired. How will Lisa’s
homeowners policy with Country Insurance address the following losses she experiences after this
storm?

b. Lisa has two large chest freezers where she stores supplies that she picks up on shopping trips
at the closest Costco, which is a two-hour drive away; the food spoiled after several days without
power. Explain how the freezer food extension covers her loss. (5 marks)

Answer 59

. Freezer food extension
• The loss will be covered because it was caused by the accidental interruption of electrical power
on- or off-premises.
• This extension covers Lisa for the value of the spoiled food.
• The extension does not cover the cost associated with replacing the food, such as delivery
charges or driving to the Costco that’s two hours away.
• The extension has a dollar limit but is not subject to a deductible.
• The extension also covers any subsequent damage to the freezer, and the cost of storing food
temporarily in another location.

Question 60

Lisa lives in a rural community where she works in the local town hall as a clerk. She also runs a
small catering business from her home, supplying food for parties and events in her town. In
February, Lisa goes on vacation for a week to Cuba. While on vacation, her neighbour was planning
to check on her house every other day. However, while Lisa is away, there is an ice storm in her area,
and her neighbour is too busy taking care of his property to get to Lisa’s house for a few days.
Unfortunately, Lisa’s house loses power and a large branch falls onto her roof, causing significant
damage. The damage to the roof has made Lisa’s home unfit for occupancy during the winter
months. She will have to find a new place to live while the roof is being repaired. How will Lisa’s
homeowners policy with Country Insurance address the following losses she experiences after this
storm?

c. While doing the roof repair, Lisa’s house catches fire and must be demolished. However, the
cause of the fire is the negligence of the roofers. What is the basis of claim for this loss and how
will the insurer respond? (5 marks)

Answer 60

Fire during repairs
• The liability for the loss lies with the roofing company.
• Country Insurance will pay Lisa for the fire loss.
• Country Insurance will then seek to recover the amount it paid for the loss from the roofers’
insurer.
• Subrogation transfers the insured’s rights of recovery against the roofer to the insurer.
• Subrogation also entitles Country Insurance to sue in the insured’s name when the insurer has
made payment or assumed liability.

Question 61

Homeowners basic form (IBC 1151)

Answer 61

Named perils, including theft, glass breakage, and transportation

Question 62

Homeowners broad form (IBC 1153)

Answer 62

I’ll risk on the dwelling building and detach private structures, the same name perils as insured by the basic form on the personal property

Question 63

Homeowners Comprehensive form (IBC 1155)

Answer 63

All risk on all items