Terms and Coverage Types Flashcards
Actual Cash Value (ACV)
Today’s value minus depreciation.
Depreciation
Determined at the time of loss.
Replacement Cost (RC)
Today’s price, but NO Depreciation is applied.
Replacement Cost can be applied to both building and contents (Coverages A, B & C).
Under Coverage A, claims paid under either the Guaranteed Replacement Cost or Replacement Cost must meet certain criteria, as shown in Section 7.4.7.2. If these criteria are not met, the claim is paid on an ACV basis.
Under Coverage C, the Replacement Cost endorsement must have been included in the policy, otherwise, the claim is paid on an ACV basis. Section 7.4.7.2
Coverage A: Dwelling
Section 7.5.2.1
What it covers:
1. Dwelling & attached structures (i.e. garage)
- Permanently installed outdoor equipment (i.e. child’s swing set)
- Outdoor swimming pool & attached equipment (i.e. above or below ground)
- Materials & supplies located on or adjacent (i.e. construction supplies for a renovation, etc.)
- Building fixtures & fittings permanently removed (i.e. storm doors or shutters)
- Outdoor trees, shrubs, plants & lawns (but not covered against perils like windstorms, hail, or theft)
Coverage A1: The Unit
Section 7.5.2.2
What it covers:
- $100,000 is the automatic limit, and it can be increased.
This is designed to cover the owner of the unit, not the building.
Coverage A (building) is actually provided under the Condominium Corporation Master Policy, in which every unit (or condo) is a part owner.
A1 comes into play if there is a deficiency in the Condominium Corporation Master Policy!
If anything were to happen to the building itself that effects the unit, and the Master Policy didn’t have enough coverage, this coverage will be triggered.
Coverage A2: Loss Assessment
Section 7.5.2.2
What it covers:
1. $10,000 to cover loss assessment.
A loss assessment is when the Master Policy is insufficient to pay for a claim thereby requiring the Condonimum owner to request payment from the Unit owners to cover the gap.
If the Master policy has inadequate limits, or if there has been a co-insurance penalty on the Condonimum owner which resulted in the need for a loss assessment, then A2 is designed to provide coverage to the insured. But, not if it is within the Master Policy’s deductible!
Coverage A3: Unit Improvements or Betterments
Section 7.5.2.2
What it covers:
- The amount shown is the same as A1. To increase A3, one needs to increase A1.
- Unit owner improvements not covered in Corporation Master Policy and exclusively owned by the unit owner such as:
* Material and supplies for the alteration and repair of your unit
* Outdoor fixtures, equipment
* Outdoor domestic water containers inculding swimming pools, hot tubs, saunas
* Trees, plants, shrubs, lawns
These improvements belong to the unit owner and are permanent changes to the unit. Therefore, when selling the unit, the buyer will be receiving a “better” unit.
So, if something were to happen to the whole building and this unit was effected, the Master Policy would only pay for what was originally installed. Therefore, any of these investments (i.e. improvements or betterments) would leave the unit owner at a loss.
Coverage B: Detached Private Structures
Section 7.5.2.3.
10% of Coverage A.
What it covers:
- Detached structures or buildings on premises.Connected by fence, utility line or similar are considered detached
- Separated by clear space.
- Not included under Coverage A.
Automatically included, however, the limit is set to 10% of Coverage A.
Coverage C: Personal Property Contents
Section 7.5.2.4
Personal Property is broken down into 3 sub-sections:
- Contents.
- Special Limits A.
- Special Limits B.
Contents
- On Premises
- Off Premises
- Student
Contents - On Premises
All items that are usually kept only at home, like;
Dwelling contents, clothing, personal items (owned or used).
Contents - Off Premises
- Items that are normally kept at home, but temporarily away from premises, anywhere in the world. I.e. when you travel, your luggage & its contents.
- Stored in a warehouse or storage facility for a period of 30 days but not beyond the policy expiry date or if terminated.
- Items kept in a safe box.
- While residing in a nursing home or healthcare facility - Up to $10,000 in all for owner, parents or dependents
- While in transit to and at another location within Canada which is to be occupied by owner as principal dwelling - 30 consecutive days starting date of removal from principal dwelling but not policy expiry date or if terminated.
This coverage does not increase amounts of insurance.
Contents - Student
This is defined as any property of a student temporarily living away from home while they are attending school.
In many homes, there are children. As they grow up & move away for school, their possessions often need to go with them.
Contents - Special Limits A
Section 7.5.2.4.6
- Garden Tractors including attachments and accessories - $5,000
- Business Property on premises - $2,000
- Securities - $2,000
- Spare Automobile Parts - $1,000
- Watercraft, their furnishing, equipment, accesories and motors - $1,000 can be increased by endorsement
- Utility Trailers - $1,000
- Animals including birds and fish only is caused by Specified Peril other than impact by aircraft or land vehicle - $500
- Money, buillion, or cash cards - $200
Special Limits were created for two reasons;
One, some items need to be individually specified as property items;
Two, those items on a package policy where there is no limit if the loss is caused by a specified peril (other than theft).
Special Limits B
Section 7.5.2.4.6.2
Specified property where a theft has occurred. The amount of coverage is a total amount, not an amount per item.
What it covers:
* $2,000 for watches, jewellery, gems, fur garments or garments trimmed with fur.
* $2,000 for collectible cards, memoribilia.
* $1,000 for manuscripts and philantelic property (e..g stamps).
* $500 for bicycle or e-bicycle, its equipment and accessories.
* $200 for numismatic property including medals(e.g. coin collection).
Can purchase increased limits for specified items.
Coverage D: Loss of Use of Your Dwelling
Section 7.5.2.5
- Additional Living Expenses
- Fair Rental Value
- Prohibited Access by Civil Authorities
Coverage D: Additional Living Expenses
As a result of an insured peril:
1. Damaged or unfit to occupy:
-Additional costs incurred during the time living away while the home is repaired.
2.Payment is made for;
-Irregardless of the time it takes to repair, the claim is limited to the dollar amount available on the policy.
-Taxi fares, meals, accommodations, etc. over and above your average living daily costs.
(i.e. an average daily living cost could be $200/day. If it now costs $600/day, the insured gets $400/day)
Coverage D: Fair Rental Value
Only for time required to repair/replace part of the dwelling or additional building. Payment is specific to rental value.
1. Damaged or unfit to occupy:
-Rental income lost while the home is repaired.
2.Payment is made for;
Payment is limited to within the available amount shown on the policy.
Co-insurance Clause
Commercial Property Insurance
Section 10.3.5 Page 356
A clause in certain property insurance policies which applies a penalty for partial losses if owners of property fail to insure a minimum percentage of the value of such property as specified by the insurer.
Total loss payout = Policy limit purchased
Partial loss paid = Co-insurance Formula
Named Perils Form (IBC 4036)
Commercial Property Insurance
Section 10.3.7.1
Basic form for limited coverage for a risk.
Provides coverage for:
* Fire
* Lightning, including loss or damage to electrical devices
* Explosion (limited)
* Impact by aircraft, spacecraft, or land vehicles
* Riot, vandalism, or malicious acts
* Smoke due to sudden, unusual, and faulty operation of any stationary furnace
* Leakage from fire protective equipment
* Windstorm or hail
Comparable to Specified Perils policy in habitational insurance.
Broad Form (IBC 4037)
Commercial Property Insurance
Section 10.3.7.2
Insures against all risks of physical loss or damage, subject to policy limits and exclusions.
Broad Form (IBC 4037)
Examples of Excluded Property
Commercial Property Insurance
Section 10.3.7.2 Page 360
- Sewers, drains, and watermains located beyond the outside bearing walls
- Street clocks and exterior signs
- Animals, birds and fish
- Money, platinum, cash cards, evidence of debt or title
- Automobiles, watercraft, aircraft (but not unlicensed automobiles or unlicensed trailers) used on the insured premises while on the insured’s business
- Property in custody of sales representatives outside the premises, unless an amount is shown on the declarations page for the sales representative
- Any pressure vessel having a working pressure greater than 103 kilopascals
- Any boiler, including its connecting pipe and equipment, containing steam or water under steam pressure
Broad Form (IBC 4037)
Examples of Excluded Perils
Commercial Property Insurance
Section 10.3.7.2 Page 360
- Earthquake
- Flood
- Seepage or leakage
- Backup or overflow of water from sewers, sumps, septic tanksm and drains
- The entrance of rain, sleet or snow through doors, windows, skylights or other openings
- Centrifugal force, mechanical, or electrical breakdown
- Failure to control temperature or humidity
- Trade losses
- Pollution or contamination
Common Clauses
Commercial Property Insurance
Section 10.3.7.3
- Debris Removal Clause
- Reinstatement Clause
- Subrogation Clause
- Breach of Condition
- Property Protection Systems
- Premium Adjustments
- Basis of Valuation
- Property of Others
- Locked Vehicle Warranty
- Many others
Included in the policy wording and are followed by the definitions and the policy conditions or Statutory Conditions
Package Policy
Commercial Property Insurance
Section 10.7 Page 370
Package policy coverages are not standardized, but they generall include:
* Property insurance
* Business interruption insurance
* Liability insurance
* Criminal insurance
Surety Bonds
Commercial Property Insurance
Section 10.6 Page 367
Seven characteristics of surety bond:
1. There are 3 parties to the contract - principal, obligee, surety
2. No losses are expected.
3. The principal is liable to the surety.
4. Bond premium (service fee to underwrite the risk).
5. Bond limit or penalty - the surety will pay to the obligee if the principal defaults.
6. A surety is of indeterminate length and non-cancellable.
7. It is a written contract and excecuted under seal of the surety and principal.
Oral contract are not binding on the surety.
Debris Removal
Chapter 7 Property Insurance
Section 7.5.2.7
For loss or damage by an insured peril.
5% additional is available for debris removal (Coverage A for homeowner, Coverage C for Condo owner)
Extensions of Coverage: All Risk Coverage
Property Removed
Chapter 7 Property Insurance
Section 7.5.2.7
Under the comprehensive policy form, the policy provides coverage for property removed up to 30 days, or until the policy expires.
(This extends the basic fire policy limits from 7 days to 30 days.)
Extensions of Coverage: All Risk Coverage
Fire Department Expenses
Chapter 7 Property Insurance
Section 7.5.2.7
If the fire department charges for a legitimate call (i.e. a fire), up to $1,000 is provided, with no deductible.
Extensions of Coverage: All Risk Coverage
Freezer Food
Chapter 7 Property Insurance
Section 7.5.2.7
Up to $2,000 for loss or damage to food due to a power failure, with no deductible.
Extensions of Coverage: All Risk Coverage
Lock Replacement
Chapter 7 Property Insurance
Section 7.5.2.7
For example, if you had your home keys stolen, up to $500 is provided to replace the home locks, with no deductible.
Extensions of Coverage: All Risk Coverage
Extensions of Coverage: All Risk Coverage
Credit or Debit Cards, Forgery and Counterfeit Money
Chapter 7 Property Insurance
Section 7.5.2.7
Theft or other types of losses attributed to forgery and receipt of counterfeit money are covered up to $2,000, without a deductible.
Inflation Protection
Chapter 7 Property Insurance
Section 7.5.2.7
In personal lines insurance, the application process determines the value of the property, and those values are often system generated.
However, the cost of materials is vulnerable to inflation. This extension is in the contract so that, for policies that automatically renew, the limit of insurance remains current (i.e. against inflationary changes).
Extensions of Coverage: All Risk Coverage
What Is A Comprehensive (or All Risk) Policy?
A Comprehensive, or All Risk policy, provides coverage against all risk of direct physical loss or damage, subject to policy conditions and exclusions.
Business
Chapter 7: Property Insurance
Section 7.5.2.8.1
Do not insure buildings or structures, in whole or in part, for business or farming purposes. (Unless consented to by the insurer!)
Exclusion
Antennae
Chapter 7: Property Insurance
Section 7.5.2.8.1
Damage to outdoor radio or TV antennae, including satellite receivers, or their attachements, caused by windstorm or hail, ice, snow, sleet, or collapse.
Exclusion
Vacancy
Chapter 7: Property Insurance
Section 7.5.2.8.1
Occurring after your dwelling has, to your knowledge, has been vacant for more than 30 consecutive days.
What is vacant?
This can get into grey areas, however, the key is; the intent by the insured to return to the dwelling.
If the insured goes on a ski trip, there is intent to return. i.e. Not Vacant.
If the insured leaves the country, buys a new house & lands a job in that other country, the intent to return is not likely. i.e. Vacant.
Exclusion
Damage To Other Property
Chapter 7: Property Insurance
Section 7.5.2.8.1
To personal property undergoing any process or while being worked on, where the damage results from that process or work, the resulting damage to other property is insured. The policy does not provide coverage for faulty workmanship.
For example, if a table is being refinished and while working on that table it is destroyed. The table would not be covered.
Exclusion
Water Damage
Chapter 7: Property Insurance
Section 7.5.2.8.1
Caused by continuous seepage or leakage of water (i.e. a tap keeps running and overflows).
Caused by backup or escape of water by a sewer, sub-pump, or septic tank.
Exclusion
Mold
Chapter 7: Property Insurance
Section 7.5.2.8.1
Caused by rust or corrosion, wet or dry rot, fungi or spores.
Exclusion
Fuel Oil
Chapter 7: Property Insurance
Section 7.5.2.8.1
Resulting from the release, discharge, or dispersal of fuel oil.
For example, many houses in rural areas need fuel oil for heating. If there is a release, the owner is liable for the cleanup. This liability is unlimited (i.e. it can go on for years without limit to what can be charged)
Exclusion
Secondary Dwelling
Section 7.7
This is a separate dwelling. It may be rented for investment purposes.
On the application, it is to be listed as Location 2 to the primary dwelling policy.
This property must be listed on the Declarations page.
It carries its own property limits, but liability coverage is extended from Section II of the primary policy.
Coverage is on a Specified Perils Coverage basis. Payments are paid on,
- Building ACV or RC.
- Contents ACV.
Seasonal Dwelling
Section 7.7
This is a property owned by the insured for use on an intermittent or seasonal basis, i.e. a cottage.
The seasonal residence is not their primary and they do not spend most of the year living there. Like the Secondary, it is added to the Primary Policy as Location 2.
As with the Secondary, this property must be listed on the Declarations page.
It carries its own property limits, but liability coverage is extended from Section II of the primary policy.
The Basis of Claim payment for building and contents is;
ACV only.
Coverages for Secondary & Seasonal Dwellings
Section 7.7.1.3
Named Perils Policy
Vandalism is included in the Secondary but is not in the Seasonal.
Coverage A: Dwelling and attached structures. Does not unclude trees or shrubs.Detached structures at Seasonal Dwelling are included under Coverage A.
Extensions do not increase limit of Coverage A - only extends to be covered.
Coverage B:Up to 10% of Coverage A limit for optional extensions, including outbuildings (Coverage B), fixures temporarily removed or fair rental value.
It is a pool of funds divided equally amongst all properties.
Coverage C:Only personal property of insured, not tenant. Upt to 10% of Coverage C for optional extensions of coverage:
* Uninsured property of others
* Personal property temporarily removed
* Additional living expenses (Coverage D)
Extensions that do not increase limit are:
* Debris removal
* Property removed (30 days_
* Fire departments ($1,000, no deductible)
Additional Conditions
Statutory Conditions
Section 7.9.2
- Notice to Authorities.
- No Benefit to Bailee.
- Pair & Set.
- Parts.
- Sue and Labour.
- Basis of settlement.
- Subrogation.
Persons On Premises
Section 8.4.3
People may enter one’s property by invitation, such as guests, work, or delivery, or they may be uninvited. There is a difference in the standard duty of care expected of the owner in these situations.
There are three situations for this;
- Trespassing
- Visitors (in Ontario)
- Children
Persons Outside Premises
Section 8.4.3
Neighbours or passers-by.
Domestic Animals
Section 8.4.3
Animal bites or attacks.
Children
Section 8.4.3
Children are often responsible for their own actions, unless parental supervision was proven to be a reasonable expectation.
Children are attracted to …
Landlord
Section 8.4.3
This gets tricky. Most landlords are exempt from liability, however, it all depends on the lease agreement and how a landlord sets up their rental unit to be used.
As always, there are exceptions (See Section 8.4.3.5).
General Damages
Section 8.5.3 Page 221
Subject to interpretation and are for such items as pain and suffering, loss of limbs, damage to reputation, or mental anguish. The amount the court believes is necessary to compensate the aggreved party fairly.
Special Damages
Section 8.5.3 Page 221
Quanitfiable and can be accurately measured.
Specific to medical, rehabiliation, and other like damages.
E.g. Doctor’s bill
Nominal Damages
Section 8.5.3 Page 221
Personal injuries such as libel and slander.
Punitive or Exemplary Damages
Section 8.5.3 Page 221
These are damages intended to punish a defendent for their actions and serve to deter others from similar behavious in the future. Payments for these damages are borne by the insured themselves.
Coverage E: Personal Liability
Section 8.7.1
To insure the legal liability of insureds anywhere in the world.
Accidental injury or damage caused by insureds is included.
The base limit is set at $1,000,000. (higher limits can be purchased)
Covers:
* Legal liability of insureds in their role as private citizens while anywhere in the world.
* Injury or damage arising out of the ownership, use, or occupancy of all listed premises by this Section.
