Study 1 - Introduction to Property Insurance

Question 1

Property Insurance

Answer 1

First-party insurance that indemnifies the owner or user of property for it’s 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.

Question 2

Insurable Interest

Answer 2

An interest 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

Question 3

Indemnity

Answer 3

A contract, expressed or implied, to repay the in the event of a loss. The insured neither gains nor loses.

Question 4

Elements of a contract

Answer 4

• An agreement
• Between legally capable parties
• for a Consideration
• Demonstrating intent
• To do something that is legal

Question 5

Uberrimae Fidei

Answer 5

Of the utmost good faith. The basis of all insurance and reinsurance contracts. 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 6

Peril

Answer 6

The event that caused a loss covered by the policy; for example, fire, windstorm

Question 7

Deductible

Answer 7

An agreed amount that the insured must pay before on a claim before the insurance company will cover the rest of the claim

Question 8

Fire Insurance

Answer 8

Coverage for losses from fire, lightning, and limited explosion and also the resultant damage caused by smoke and water, usually supplemented by extended coverage insurance

Question 9

Exclusion

Answer 9

Risks, perils, or properties defined in the policy as not covered

Question 10

Statutory Conditions

Answer 10

Special prescribed and standardized conditions that provincial and territorial insurance acts require to be included in insurance policies.

Question 11

Extended Coverage Insurance

Answer 11

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.

Question 12

Mortgage Clause

Answer 12

A clause that stipulates the rights and obligations of the insurer and the mortgagee

Question 13

First-party Insurance

Answer 13

Protects the named insured and others with an insurable interest in or mortgage on the property

Question 14

Third-party insurance

Answer 14

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 which the insured is lawfully liable

Question 15

Direct loss (or damage)

Answer 15

Damage to property by direct action of a peril insured against, as distinguished from contingent or indirect damage

Question 16

Plain-language policy

Answer 16

Policies written in every 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

Question 17

Warranty

Answer 17

Statement or stipulation or promise in an insurance contract, the breach of which may nullify the contract.

Question 18

Proximate Clause

Answer 18

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

Question 19

Concurrent causation

Answer 19

A doctrine that holds that if a loss to property is attributable to more than one cause, any of which is covered by the insurance policy, the loss is payable under the policy

Question 20

Actual cash value (ACV)

Answer 20

The fair market value of property, taking into account factors that might reduce the augment or reduce the value of the property in question.

Question 21

Replacement insurance

Answer 21

Insurance coverage that indemnifies for loss or damage to insured property at the current market price rather than at a depreciated value. Thus, the rating and premium are based on current cost to replace the insured property.