Study 1 Flashcards
Define Property Insurance
First-Party insurance that indemnifies the owner or user of property for its loss, or the loss of its income producing ability when the loss or damage is caused by a covered peril, such as fire or explosion
Insurable Interest
An interest that the insured must have in the subject matter of the insurance purchased so that if the event insured against occurs, the insured will suffer an economic loss
Indemnity
A contract, expressed or implied to repay in the event of a loss. The insured neither gains nor loses
Contract
An agreement or promise between two or more parties that is intended to be legally enforceable and is constituted by the acceptance by one party of an offer made by another party, to do or to abstain from doing a specific act. The offer and acceptance may either be expressed or be inferred through the conduct of the parties
Contract (Quebec)
An agreement of wills by which one or several persons obligate themselves to one or several other persons to perform a prestation (that is, a duty, a payment, or a service).
Uberrimae Fidei
Of the utmost good faith. The basis of all insurance and reinsurance contracts. Both parties to the contract are bound to exercise good faith and do so by a full disclosure of all information material to the proposed contract
Peril
The event that caused a loss covered by the policy, for example, fire, windstorm
Deductible
An agreed specified amount that the insured must pay on a claim before the insurance company will cover the rest of the claim. This amount is agreed upon by both the insurer and the insured
Fire Insurance
Coverage for losses from fire, lighting, and limited explosion and also the resultant damage caused by smoke and water. Usually supplemented by extended coverage insurance
Exclusion
Risks, perils, or properties defined in the policy as not covered
Flashpoint
The lowest temperature at which a liquid gives off sufficient vapors to form an ignitable mixture with the air
Statutory Conditions
Special prescribed and standardized conditions that the provincial and territorial insurance acts require to be included in insurance policies
Extended coverage insurance
An endorsement that enlarges the coverage afforded by the primary policy. Coverages such as Windstorm, Hail, Smoke and riot are extended coverages on a Fire Policy
Mortgage clause
A clause in an insurance policy that stipulates the rights and obligations of the insurer and the mortgagee
First party insurance
Protects the named insured and others with an insurable interest in or mortgage on the property or who entrust their property to the insured, against loss or damage to the insured property
Third-Party Insurance
Liability insurance is purchased by the insured (the first party) from an insurer (the second party) to compensate or indemnify another (the third party) for damage or loss for which the insured is lawfully liable
Direct Loss
Damage to property by direct action of a peril insured against, as distinguished from contingent or indirect damage
Plain language Policy
Policies written in everyday language so that they are easily understood. Technical terms with their technical meanings are used only where required by law or when substitutions would be misleading
Warranty
Statement or stipulation or promise in an insurance contract, the breach of which may nullify the contract
Proximate cause
A cause that, in a natural and continuous sequence unbroken by any new and independent cause, produces an event and without which the event would not have happened
Concurrent Causation
A doctrine that holds that if a loss to property is attributable to more than one cause, any one of which is covered by the insurance policy, the loss is payable under the policy
Actual Cash Value
The fair market value of property, taking into account factors that might augment or reduce the value of the property in question. Actual Cash value ACV) is usually calculated in one of three ways,
1. Cost to repair or replace less depreciation
2. Fair market value
3. Consideration of all relevant evidence of the value of the damaged property
Replacement Insurance
Insurance coverage that indemnifies for loss or damage to insured property at the current market price rather than a depreciated value. Thus, the rating and premium are based on the current cost to replace the insured property
What is the Consideration paid by insureds or policyholders?
Premium!
Who else does a property policy protect?
The Lenders - like banks, private lender, credit unions
What percent did Property Insurance account for in 2022 direct written premiums through 3 quarters
38.5%
Is insurance tangible? What is it based on
Intangible, based on exchange of promises
Fortuitous Meaning in context of insruance
A Chance Event - loss must be Fortuitous as far as the insured is concerned
The two types of Property Insurance
Personal Lines, Commercial Lines
Former name for Equipment Breakdown Insurance
Boiler and Machinery Insurance
What is Aviation Insurance
Coverage for airplane itself, and buildings equip, and material relating to airport operations
Builders Risk covers
Physical loss or damage to property while it is in the course of construction
Under basic Fire policy, if lighting hits, what is important to know?
No coverage for damage to electrical devices or appliances caused by lightning or other electrical current unless fire originates outside the object
The Two groups of exclusions in the basic fire policy
Exclusions for legislative considerations
Exclusions for Underwriting and rating considerations
examples of “Legislative Considerations”
Elec devices exclusion
application of heat exclusion.
War risks exclusion.
Nuclear incident exclusion
Riot exclusion
examples of Underwriting and rating considerations
Excluded property (money, watercraft etc)
Alterations and Additions Exclusion
Vacancy exclusion
Volatile Substances Exclusion
Bylaws exclusion
Do the statutory conditions govern more than the Fire Insurance?
Not necessarily!! However insurers often extend the stat conditions to the other perils
What’s wacky about Quebec and Stat Conditions?
The Civil code of Quebec does not require that its articles be inserted in the fire insurance contract. There is no equivalent in Quebec of the statutory conditions required in the common law provinces and territories
The two extensions in basic fire policy
- Removal of Insured Property - moving to prevent further dmg
- Debris Removal - expense of the removal chosen by the insured
Calculation of Debris Removal?
5% of the amount of insurance - does not increase the amount of insurance!
Removal of Insured Property Characteristics
- Applies for 7 days from the date that removal of the property begins or until the policy expires, whichever occurs first
- coverage for property at temporary locations ends after seven days or when the policy expires (whichever happens first) unless agreed otherwise
What is a Fire and Extended Coverage Policy
The Additional Perils combined with those covered under the basic fire policy
What were the main perils in Additional Perils v2.0?
Falling Object
Glass Breakage
Water Damage
What were the main perils in Additional Perils v3.0? AKA Multi-peril policies
Theft (casualty peril type)
Loss In Transit (Inland Marine type)
A property policy must state ____ and ____ is covered
Who and What
Type of loss Property Insurance is primarily concerned with
Direct Loss
What is Indirect Loss?
It encompasses other loss suffered as a consequence of the damage to or destruction of the physical property
Additional Living Expenses - type of loss?
Indirect Loss
Business Interruption - type of loss?
Indirect Loss
How do courts feel about enforcing warranties?
Generally favor the insured
Does payment of a claim affect the insureds entitlement to receive a refund of premium if policy is cancelled before end of the term?
No, and policy limits are restored to the full amounts shown on dec page following the loss
Age of dependant covered under property policy
21 and under
