Study 5 - Anatomy of a Property Policy (The Homeowners Forms): Summary

Question 1

Opening statements in a homeowners form

Answer 1

One of the statements applies in all provinces and territories except Ontario and Quebec; the other, in Ontario only

• Advises policy contains a clause that may limit the amount payable
• Limitations of liability include deductibles, coinsurance, and the special limits of insurance
• Insurance is a source of indemnity for actual losses, not source of profit

Question 2

1st explanatory statement

Answer 2

Describes the insurance under Section I Property Coverages

Question 3

2nd explanatory statement

Answer 3

Describes the insurance under Section II Liability Coverage

Question 4

Definitions

Answer 4

• Presented in alphabetical order and apply anywhere in the policy
• Simplify policy preparation and ensure clarity and uniformity
• Widespread use leads to fewer misunderstandings

Question 5

Coverage A - Dwelling Building

Answer 5

• Dwelling itself and other property on the premises
• Includes attached structures - carports, solariums, conservatories, patio covers, decks, swimming pools
• Up to 10% may be applied to building fixtures and fittings temporarily removed for repair or seasonal storage
• Up to 5% may be applied to trees, plants, and shrubs outside the dwelling building, limited to non-weather-related damage

Question 6

Coverage B - Detached Private Structures

Answer 6

• Must be separated by a clear space, or be connected only by fence, utility line, or other connection
• Must be private and not used for business purposes
• Example: Garages, garden sheds, greenhouses, etc.

Question 7

Coverage C - Personal Property

Answer 7

All movable or temporary property - furniture, clothing, even stocks or bonds

1. Contents of Dwelling and Personal Property Owned, Worn, or Used on the Premises
   - Property of visitors covered, gesture of goodwill
   - Property of unrelated roomers or boarders is not
2. Property Away from the Premises
   - Temporarily away from the premises, anywhere in the world
   - Non-owned property in the insured’s possession covered by request
   - Property normally kept at other locations excluded
3. Property of a Student
   - Dependent student insured by the policy, temporarily living away from home to attend school

Question 8

Coverage C - Exclusions

Answer 8

• Blanket limit - too many items to list each with its own amount of insurance
• Motorized vehicles or their equipment
• Camper units, truck caps, trailers, or their equipment
• Aircraft or their equipment

Question 9

Special limits of insurance

Answer 9

• Limit the insurer’s exposure to certain types of personal property that would otherwise be covered under the blanket limit for personal property
• 15 special limits

Two groups:

• Loss caused by any insured peril
• Loss caused only by theft

Question 10

Coverage D

Answer 10

• Additional living expense: any necessary increase in living expenses, including moving expenses
• Fair rental value: insured may be entitled to claim fair rental value; must prove the loss

Question 11

Coverage D - Prohibited Access

Answer 11

• Indemnifies for indirect loss, does not require loss or damage to the insured dwelling
• Applies when a civil authority orders occupants to move out (i.e. neighbouring premises has sustained damage, mass evacuation. Excludes six causes: flood, earthquake, war, terrorism, nuclear, radioactive)
• Does not insure against the cancellation of a lease or agreement

Question 12

Extensions of coverage

Answer 12

Coverage extended to losses incidental to the main loss, or minor losses. Some extensions increase policy limits.

Extensions:

• Provide temporary coverage for additional exposures
• Increase or add coverage for less costs
• Expand or restrict coverage under specific situations
• Encourage loss prevention or mitigation

Question 13

What extensions of coverage are included? (13 extensions)

Answer 13

• Moving to another home
• Property removed
• Credit or debit cards, forgery and counterfeit money
• Change of temperature
• Refrigerator or freezer food
• Data
• Debris removal
• Tear out
• Fire department charges
• Lock replacement
• Outdoor trees, plants, and shrubs
• Arson conviction reward
• Inflation protection

Question 14

Insured perils clause

Answer 14

Describes the causes of loss that may be covered

• Basic form: named perils on all property
• Broad form: all risks on the dwelling building and detached structures, named perils on personal property
• Comprehensive form: all risks on all property

Question 15

Notice to authorities clause

Answer 15

Loss due to malicious acts, burglary, robbery, theft, or attempted theft must be reported to law enforcement

Question 16

Basis of claim payment clause

Answer 16

• How the amount of indemnity for a loss will be calculated

- Limits the insurer’s liability to financial interest or amount of insurance

Question 17

Three bases for claim payments

Answer 17

• Actual cash value (ACV): cost of replacing the property, less any depreciation
• Replacement cost: property with value greater than its economic value, cost to replace exceeds ACV
• Guaranteed replacement cost: ignores depreciation; in some cases will pay more than the amount of insurance

Question 18

Basis of claim payment: Personal property

Answer 18

• For electronic media, cost of reproduction is covered; cost of gathering is not covered
• For records, cost of materials and transcribing or copying the records
• All other property settled at replacement cost, except cash value for: (1) Irreplaceable articles (antiques, fine arts), (2) Value depends on their age or history (memorabilia, collector’s items), (3) Property not maintained in good or workable condition, (4) Property no longer used for original purpose

Question 19

Pair and set clause

Answer 19

Calculate the loss as a reasonable and fair proportion of the total value

Question 20

Parts clause

Answer 20

Loss or damage to any part of property of several parts settled for the value of the part

Question 21

Deductible clause

Answer 21

• Limits the insurer’s liability to the amount by which loss exceeds the deductible
• For special limits, the deductible applies only to the portion of the loss which exceeds the special limit amount

Question 22

Amounts not reduced clause

Answer 22

Provides automatic reinstatement of the policy limits after a loss

Question 23

Insurance under more than one policy clause

Answer 23

• Applies where one or more separate policies cover property on a scheduled basis; for jewellery or other valuable property
• Insurance on specifically described property responds first, homeowners forms are excess when that insurance has been exhausted
• Otherwise insurer only liable for rateable proportion of an insured loss

Question 24

Subrogation clause

Answer 24

Transfers rights of recovery to the insurer and entitles it to sue

Question 25

Duties after loss clause

Answer 25

Requires the insured to submit to examination under oath and produce documents

Question 26

Statutory conditions

Answer 26

Apply uniformly to all perils covered by policy, allows for modifications by the policy or endorsements