Study 1 - 10: Practice Questions Flashcards
Discuss why the basic fire policy is important for understanding property insurance today
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.
Identify five different classes or specialized forms of coverage that insurers may sell within either
personal-lines or commercial-lines property insurance
- Marine insurance (Inland marine insurance, Marine cargo insurance)
- Aviation insurance
- Crop insurance
- Builders risk
- Earthquake insurance
- Equipment breakdown (boiler and machinery insurance)
- Flood insurance
- Habitational insurance (Homeowners insurance, Tenants/renters insurance, Condominium unit owners insurance)
Define an insurance contract. Outline the elements or principles that makes it different from other
contracts
• 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 insurable interest—that the insured must stand to benefit from the continued existence of the insured property or be prejudiced by its loss.
• 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.
Outline five questions pertaining to an applicant’s personal information that an insurer must be able to
answer
- 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?
Identify five provisions in the articles of the Civil Code of Québec that are similar to the statutory
conditions for property insurance
- 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)
Outline five pieces of privacy legislation that can affect property insurers in Canada
• 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
Outline the differences between named-perils policies and all-risks policies
• 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.
Name FIVE (5) IBC habitational forms in which the named perils are listed in an “insured perils” section
- 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
Name FIVE (5) common domestic fire hazards that should be eliminated, controlled, or reduced as much as possible
- 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
Outline the benefits of the mortgage clause to a mortgagee
- 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.
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
- 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
Identify the purpose of a deductible. Describe FOUR (4) ways it is commonly applied
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
Outline the difference between the terms “ground water” and “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.
How is the term “vacant” defined in the homeowners forms? In addition, explain how it differs from
“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.
Outline the types of objects that are included in the definition of a domestic water container in the
homeowners forms
- 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 tubs
