Study 4 - Anatomy of a Property Policy (Overview): Summary

Question 1

Personal property policies

Answer 1

• Vary between insurers
• Statutory conditions are the same in all policies, as required by the insurance acts
• Insurance Bureau of Canada (IBC) provides suggested policy wordings
• Use plain-language format, average person can read and understand policy
• Font size and type and line length designed for readability, avoid “fine print”

Question 2

Structure of personal property policies

Answer 2

Declarations or coverage summary:

• Coverage and limits
• Location of the property
• Name of the insured
• Property insured

Policy wording or wordings:

• Perils insured against
• The perils and property excluded
• How claims are settled
• Conditions

Endorsements or floaters

Question 3

Types of personal property policies

Answer 3

• Package policy or multi-peril policy: combines forms covering various classes (like property and liability), also called multi-peril policies. Reduces premiums; lowers risk of adverse selection, simplifies administration
• Non-package policy: residential basic form is simpler or more modest than package
• Subscription policy: for large or complex risks or hazards, policy is shared among several insurers
• Multiple-limit policy: outlines separate amounts for dwelling and personal property
• Single-limit policy: one amount of coverage encompassing both the building and the personal property

Question 4

Three key personal property forms

Answer 4

IBC 1151 Homeowners Basic Form:
- Named perils, including theft, glass breakage, and transportation

IBC 1153 Homeowners Broad From
- All risks on the dwelling building and detached structures; the same named perils as basic form for personal property

IBC 1155 Homeowners Comprehensive Form
- All risks on all items

Question 5

Clauses in property insurance

Answer 5

• Limitation of liability: deductibles and coinsurance
• Special limits of insurance: limit insurer’s exposure to types of property otherwise covered
• Additional interests: parties not listed as insured but may be financially prejudiced by the loss (loss payee, leaseholder, mortgagee)
• Rateable contribution: when multiple policies cover the same interest. Each insurer is liable for its rateable proportion of the loss. Insurance acts allow insurers to impose certain restrictions.

Question 6

Role of brokers and agents in regards to property policies

Answer 6

• Determine the needs of the risk to be insured
• Determine whether the risk to be insured meets the insurer’s guidelines
• Help insured to complete application
• Answer underwriter’s questions
• Help the insured if a loss is reported

Question 7

Role of underwriters in regards to property policies

Answer 7

• Receive and review the application
• Check application against underwriting guidelines
• Accept or reject the risk
• Modify with endorsements
• Answer questions if loss reported

Question 8

Role of claims personnel in regards to property policies

Answer 8

• Only review the application and policy wording if a loss is reported
• Determine whether to pay the loss or deny it
• Advise the underwriter if investigation reveals information

Question 9

Best practices for reading a property policy

Answer 9

• Step 1: Review the definitions clause
• Step 2: Review the property that is covered and property that is not covered
• Step 3: Review the perils that are and are not insured against
• Final step: Review the basis of claim settlement, duties after a loss, and the statutory conditions