The Homeowner Policy Chapter 4

Question 1

What is Personal Line Property Insurance ?

Answer 1

Personal lines insurance is insurance for individual and families as opposed to business insurance and commercial insurance. Personal line property insurance excludes automobile insurance.
personal line property insurance has evolved over many years. originally, there was the residential fire insurance policy which provided coverage for losses from fire, lighting, and limited explosion and also the resultant damage caused by smoke and water. then the residential extended coverage endorsement was developed to supplement the fire policy and cover losses from the additional perils of windstorm, hail, explosion, civil commotion, riot and riot attending a strike, aircraft damage, vehicle damage, and smoke damage. later, provision was made for adding theft coverage, which also included burglary, robbery, or holdup, and damage resulting from attempted theft.

for fire insurance covers “hostile” fires those that become uncontrolled or escape their designated place. fire insurance dos not cover “friendly” fires-those that are intentionally set in a designated place.

Question 2

what are the 3 conditions that must be met so that an occurrence is classified as a fire?

Answer 2

1. There must be an actual fire or ignition. A mere heating or fermentation will not be sufficient to render the insurers liable for a resulting loss.
2. There must be something on fire which ought not to have been on fire.
3. There must be something in the nature of a casualty or accident. A fire occasioned by the willful act of a third person without the consent of the insured, however, is considered accidental.

comprehensive home insurance policies provides coverage against all risk of direct physical loss or damage subject to the exclusion and conditions stated in the policies.

Insurance policies also provide personal liability insurance that indemnifies insureds for sums they may be required by law to pay to third as damages for bodily injury or damages to property. A property insurance policy offers a form of financial protection to an insured.

Question 3

What are the 2 distinct sections that divides homeowner policy?

Answer 3

1. property Coverage

2. Liability coverage

Question 4

Coverage A- Dwelling Building

Answer 4

the Dwelling Building itself is generally held to be the building or portion of the building described in the policy declarations occupied as private residence.

Question 5

Coverage B- Detached private structure

Answer 5

This section of the policy covers detached private structure, including defining what is considered to be a detached private structure. these are defined as structure or buildings separated from a dwelling by a clear space, on the premises but not insured as a dwelling building.

Question 6

Coverage C- Personal property

Answer 6

one part of this section describes what is covered on the premises. another part refers to off premises coverage, which is an optional coverage that does not increase the total amount of coverage under personal property and is subject to certain restrictions.

the policy can extend coverage to include the personal property of a student insured under the policy but temporarily living away from home to attend school.

Question 7

What are special Limits of Insurance?

Answer 7

special limits apply to various types of personal property that are portable and attractive to thieves. this includes jewelry, furs, stamps and coin collections, manuscripts, collectible cards, bicycles and other valuable/portable property as limit in the policy.

Special limits also apply to other types of personal property that could involve considerable values such as garden tractors, watercraft, computer software and spare automobile parts. These limits apply to losses caused by all risks

Question 8

Coverage D- Additional Living expenses?

Answer 8

The ALE covers the cost of alternative accommodations and other living expenses for insureds who are unable to return to their home because it is uninhabitable following a loss or who are prohibited from returning to their home by civil authority or because of damage to neighbouring premises. If part of the insured dwelling was rented before a loss and is now unfit for occupancy, ALE covers the loss of rental income (fair rental value)

Question 9

Extensions of coverage ?

Answer 9

1. The cost of removing debris after an insured loss is covered . if this cost would push the total loss above policy limit.
2. Property removed from premises to protect it from loss is covered for a special duration (often 30 day) or until the policy expiry date(whichever is earlier)
3. Property of an insured who is moving residences will be covered for a specified duration from the date the property is moved from the old home to the new one, while in transit, and the at the new location.
4. Charges to have the file department attend the insured premises if a loss occurs are covered. the coverage is not subject to a deductible -an agreed specified amount that the insured must pay on a claim before the insurance company will cover the rest of the claim but the policy has a limit for the amount that will be covered
5. Indirect damage resulting from physical damage to the dwelling by an insured peril causing a change of temperature is covered
6. Loss to or food in the freezer on the insured premises is covered if the loss was caused by an accidental interruption of electricity power supply or the freezers breakdown. This coverage is not subject to a deductible.
7. If the insured keys are stolen and the insured reports the theft to the police, the policy will pay up to a amount to replace the locks or at the insurers option to re-key
   them
8. Tearing apart walls or other parts of the insured building if necessary to repair water damage not related to an outdoor swimming pool or public water main is covered.
9. Information leading to a conviction for arson in connection with a fire loss to insured property may be qualify for an arson conviction reward that slightly increase the amount of insurance and is part of the insurance industry effort to fight fraud
10. Use of an insureds credit card by someone else without the insureds authorization, theft of debit or automated teller cards, forgery of cheques or similar documents or an insureds acceptance of counterfeit currency is covered up a specified limit
11. the insurer will automatically increase the amount of insurance by the amounts attributable to inflation after a loss or an the policy renewal or anniversary date.

Question 10

What are special perils in home owner policy?

Answer 10

The specified perils in comprehensive homeowners policies have two purposes:

1. To restrict what would otherwise be all risks coverage on certain perils or types of property with these explicitly noted in the policy
2. To Provide full coverage for certain type of property, where they would otherwise be subject to a special limit of coverage, with these kinds of property explicit listed in the policy

Question 11

Explain Exclusion under property coverage in the homeowner policy?

Answer 11

1. Generally not insurable- typically risks from causes that would be such a magnitude that individual insurers would not have the ability to cover them and remain in business
2. losses not accidental or extraneous, such as losses due to the nature of the property itself or inherent vice.
3. Losses wholly or partly under the control of the insured Eg: marriage and scratching.
4. Wear and tear losses
5. Losses excluded because of the particular coverage:
   * some property or perils or those that relate to unusually hazards that would affect only a small number of risk is excluded because it would cost too much to insure them. Rather than build the cost of coverage into the premium structure for every risk, it is excluded then, if a particular application wants the coverage, the exclusion may be deleted for a suitable extra premium
   * Some exclusions are expressed because there are other special types of policies designed to cover the excluded items or perils as for example automobile, aircraft, valuable papers and earthquake insurance.

Question 12

What are the property excluded under comprehensive homeowners policies?

Answer 12

1. Building for business or farming
2. property on exhibit
3. property illegally acquired
4. Evidence of debts or title
5. Sporting equipment (where loss or damage is due to its use)
6. Animal, birds or fish
7. Property lawfully seized
8. Outdoor radio and TV

Question 13

loss and damage not insured-exclusions

Answer 13

1. Scratching, abrasion, chipping or breakage, unless caused by a specified perils, an accident to a land vehicle/ watercraft or theft or attempted theft
2. Wear and tear
3. Faulty material or workmanship
4. settling
5. Data or data Problem
6. Vacant building
7. Nuclear Incident
8. Radioactive Contamination
9. war risk
10. Intentional or criminal acts
11. Property being worked on where the damage result from the process or work
12. Water damages
13. Pests
14. Smudging and industrial smoke.
15. Earth |Movement
16. Theft by tenant
17. Vandalism to building under construction
18. Theft from dwelling under construction
19. Natural Events
20. Leakage of fuel oil from residential oil tanks
21. Theft by trickery or fraud
22. Terrorism

Question 14

what are cover under the comprehensive homeowner policy in regards to water damage coverage?

Answer 14

1. The sudden and accidental escape of water from water main
2. The sudden and accidental escape of water or steam from within plumbing, heating, sprinkler,or air conditioning system or from a domestic water container located inside the dwelling
3. the sudden and accidental escape of water from a domestic water container located outside the dwelling
4. Water that enters the dwelling through an opening created suddenly and accidentally by an insured specified peril other than water damage

Question 15

List the named Perils under the homeowner policy?

Answer 15

1. Fire or lightning
2. Explosion
3. Smoke released suddenly from a malfunctioning heating or cooking appliance
4. Falling object
5. Impact by aircraft or land vehicle
6. Riot
7. Vandalism or malicious acts to a building that is normally occupied.
8. Water damage arising from sudden and accidental escape of water from an indoor plumbing, heating, sprinkler or air conditioning system; an indoor or outdoor domestic appliance on the premises or a water main and from water that enters the dwelling through an opening created suddenly and accidentally by an insured peril
9. Glass breakage in windows and doors of of a building that is normally occupied
10. Transportation of personal property while it is temporarily away from the home, including fixtures and fittings being repaired or in seasonal storage
11. Theft, including damage to the building caused by attempted theft
12. Electric current damage to electrical appliances

Question 16

name the 2 Exclusion homeowner basic from?

Answer 16

1. Property Not insured

2. Loss or damages not insured

Question 17

What are the property not insured Exclusion?

Answer 17

1. building for business or farming
2. Property illegally acquired
3. Property on exhibit
4. Evidence of debt or title
5. Data

Question 18

What are the loss or damage not insured Exclusion?

Answer 18

1. Damage from freezing of indoor plumbing
2. Flooding or damage caused by floodwater due to an overflow from body of water
3. Damage from freezing outside the home, melting or moving snow and ice or heaving frost
4. certain type of theft, including theft y tenants or from parts of dwelling rented to tenants, theft from secondary locations if the insured are not residing there, theft of property/ building materials from property
5. Property lawfully seized
6. losses in vacant building
7. Nuclear incidents
8. radioactive contamination
9. War Risk
10. Intentional or criminal acts
11. Application of heat
12. Earth movement but damage from a fire caused by earth movement would be covered
13. Leakage of fuel oil from residential oil tanks
14. Terrorism

Question 19

What is personal liability coverage in homeowner policy?

Answer 19

this is a form of insurance meant to protect individuals and their families against the liability imposed upon them by law arising out of their daily activities that result in bodily injury or property damage to others. they are also covered for liability they assume under a written agreement relating to their dwelling premises

Question 20

What are some of the wording that also provides a 30 day automatic coverage fro a newly acquired principal residence?

Answer 20

1. all premises where the named insured or their spouse maintain a residence
2. Other residential premises specified in the policy but not business property or farms
3. Individual or family cemetery plots or burial vaults
4. Vacant land in Canada that the insured owns or rent, excluding farm land
5. Land in Canada on which a 1,2 or 3 family residence i being built that will be occupied by the insured
6. Premises the insured is using or where the insured is temporarily residing if such premises are not owned.

Question 21

Legal Liability Coverage E

Answer 21

legal liability is imposed by law on individuals or corporations to pay for harm done to others. the policy stares the insurer will pay only compensatory damages for which the insured is legally liable. it also says that the amount of insurance states in the policy is the maximum amount that is available to pay losses in respect of one accident or occurrence.

Question 22

Insureds are covered for claim made against them arising from the following :

Answer 22

1. Personal liability
2. Premises Liability
3. Tenants legal liability
4. Employers liability

Question 23

What are the personal liability that are covered under the homeowner policy?

Answer 23

personal liability is legal liability arising out of the insureds personal actions anywhere in the world:

1. The personal actions of any named insured who does not live on the described premises;
2. The ownership, use or operation of any motorized vehicle, trailer or watercraft, except those for which coverage is shown in this form
3. Damage to property the insured owns, uses, occupies or losses
4. Damage to property in the insureds care, custody or control
5. damage to personal property or fixtures as a result of work done on them by the insured or anyone on his or her behalf
6. Bodily injury to the insured or to any person residing in his or he household other than a residence employee.

Liability policies protect against claims for damages to other peoples property not damage to the insureds own property

Question 24

Premises Liability

Answer 24

Premises liability is legal liability arising out of the insureds ownership, use or occupancy of the defined premises:

1. Damage to property the insured own, uses, occupies or losses
2. Damage to property in the insureds care custody or control
3. damage to personal property or fixtures as a result of work done on them by the insured
4. Bodily injury to the insured or any person residing in his or her household other than a residence employee

Question 25

Tenant legal liability?

Answer 25

Tenants legal liability is legal liability for property damage to premises or their contents that insureds are using, renting or have their custody or control caused by fire, explosion, water, escape or smoke

Question 26

What are Employers Liability?

Answer 26

Employers Liability is legal liability for bodily injury to residence employees arising out of and in the course of their employment by the insured.

Question 27

What are defense, settlement, supplementary payment?

Answer 27

the policy will pay for defending insureds against any claims insured under coverage E alleging bodily injury or property damage and seeking compensatory damages, even if such claims are groundless, false or fraudulent. The insurer reverses the right to investigation, negotiate, and settle any any claims or suites if decides this is appropriate.

Question 28

What else will be pay for in addition to the limit of insurance under the coverage E policy?

Answer 28

1. all expenses the insurer incurs
2. All cost charged against the insured in any suit insured under coverage E
3. Any interest accruing after judgement on that part of the judgment within the amount of insurance of coverage E
4. Premiums for appeal bonds required in any insured lawsuit involving the insured and bonds to release any property that is being held as security, up to the amount of insurance, but the insurer is not obligated to apply for or provide these bonds
5. Expenses that the insured incurs for emergency medical or surgical treatment to others following an insured accident or occurrence
6. reasonable expenses, including loss of earning up to $100 a day, which the insured incurs at the request of the insurer.

Question 29

Voluntary Medical payment Coverage F ?

Answer 29

The policy will pay reasonable medical expenses incurred within one year of the date of the accident, if the insured unintentionally injures another person or if the person is accidentally. Medical expenses include surgical, dental, hospital, nursing, ambulance, and funeral expenses.

Question 30

Voluntary Payment for damage to property Coverage G

Answer 30

This section of the policy will pay for intentional direct damage caused by the insured to property of others even though there is no legal liability to do so. the coverage may also be used to reimburse others for direct property damage caused intentionally by anyone included as an insured under section II of the policy, 12 years of age or under

Question 31

What are the voluntary compensation for residence employees?

Answer 31

1. loss of life, limb, sight or hearing
2. weekly indemnity for disability
3. Medical expenses

Question 32

Name the special limitations under the homeowner policy?

Answer 32

Typical personal liability coverage limitations under a homeowner policy is :

1. Watercraft
2. motorized vehicle
3. Trailers
4. Business and business property

Question 33

there is no coverage for claim arising under the policy for any watercraft or motorized vehicle; name them?

Answer 33

1. Carrying passenger for compensation
2. Business purposes
3. Racing
4. Rental

Question 34

Personal Liability insurance exclusions?

Answer 34

There is no coverage for claims arising from:

1. Invasion, war or civil war, insurrection, rebellion, revolution, terrorists acts, or military or armed force engaged in hostilities, whether was has been declared or not.
2. Bodily injury or property damage which is required to be insured by the nuclear insurance association of Canada or any other group of insures
3. Business pursuits or business use of the insured premise except as otherwise specified in this policy
4. The rendering of or failure to render any professional service
5. liability imposed by any workers compensation statute
6. Bodily injury or property damage caused by any intentional or criminal acts or failure to act by
   * anyone insured by this policy
   * any person at the direction of an insured
7. any type of abuse Eg: sexual, emotional, physical
8. The transmission of communication disease by an insured
9. The ownership, use or operation of any motorized vehicle, trailer or watercraft except as provided in this policy
10. The ownership use or operation of any aircraft or premises used as an airport or landing faculty.

Question 35

What should the homeowner comply with in the event of a claim ?

Answer 35

1. Notice of the accident or occurrence- the insured must give prompt notice, in writing if required and furnish all necessary details, including the date, time, place and circumstances of the accident and name and addressees and witness and potential claimant however under the voluntary payment section the requirement are somewhat different
2. Cooperation :- the insured must help the insurer obtain witnesses, information and evidence about the accident and cooperate in any legal actions. any document concerning the claim received in writing by the insured must be immediately sent to the insurer
3. unauthorized settlement :- coverage E - the insured will bot voluntary make any payment assume any obligation or incur expenses other than for first aid necessary at the time of the accident.
4. Action against insurer :- Coverage E -the insured will not bring suit against the insurer until all the terms of the policy have been met nor until the amount of the insurers obligation to pay has been finally determined either by judgment against the insured or by agreement.
5. Action against Insurer:- Voluntary payments Coverage F and G
6. Insurance under more than one policy:- if there is other insurance that applies to a loss

Question 36

Personal articles Endorsement?

Answer 36

Property of a personal nature is available under the personal articles form:

1. Cameras, projectors, films and equipment
2. Furs
3. Firearms
4. Jewelry and watches
5. Musical instruments
6. silverware
7. Stamp and coin collections

Question 37

What is rating?

Answer 37

Rates are based on each $100 of insurance for one year

Question 38

Fine Arts Endorsement ?

Answer 38

The fine arts Endorsement may insure such items as sculptures, paintings, etchings, picture, tapestries, glassware, porcelain and china, antique furniture and other property of rarity, historical value, or artistic merit. since this property is insured on valued basis, valuations done by qualified experts are mandatory.

Question 39

Increase cost- demolition or construction endorsement?

Answer 39

This endorsement is also known as the BY LAW ENDORSEMENT. it is concerned with the effects of any by law in force at the time of a loss caused by an insured peril that regulates the zoning, demolition, repair or reconstruction of damaged properties. The endorsement provides either of the following extensions coverage if a loss is settled at replacement cost

1. Demolition or construction extension, which covers the additional cost of demolition, construction or repair a loss to comply with any law regulating these operations
2. Sprinkler by law extension, which covers the addition cost of installation or repair of a sprinkler system after a loss to comply with any law requiring one.

Question 40

What is included in the demolition or construction extension by law endorsement?

Answer 40

1. cost of demolition of the undamaged portion of the building or structure
2. Site clearing of the undamaged portions
3. Increase cost of repairs become of the by law requirement.
   This endorsement is subject to a sub-limit a deductible and some restrictions
   *the sprinkler by law extension is seldom used in personal-lines insurance

Question 41

What is sewer backup Endorsement?

Answer 41

Broader water coverage is now being offered by some insurers know as overland water coverage which will add coverage for sudden and accidental entrance of surface water through foundations, basement walls or floors. overland water is fresh water originating from rivers or lakes, or water that suddenly accumulates as a result of heavy rainfall. thus it will cover water damage resulting from excess rainfall and rising river water

Question 42

What is Earthquake Insurance ?

Answer 42

earth movement caused by a tectonic event, landslide snow slide and other earth movements. all such perils are excluded under homeowners policies, whether the coverage is for named perils or risks.
Earthquake endorsement may exclude loss or damage directly caused by tidal waves; damage inside the building caused by windstorm, hail or coincidental rain or snow and earthquakes that occur before the endorsement takes effect or after it expires.

Question 43

Explain Flood Insurance?

Answer 43

food insurance policies cover loss or damage arising from the peril of food.
Flood coverage is available for personal property insurance from some insurers and is likely to become even more accessible in the future; it can generally be added to commercial property policies by endorsement.

Question 44

Although policy wording vary, they commonly contain the following exclusion \what are they?

Answer 44

1. Damage to the boat when it is used for purposes other than private pleasure, such as being rented or charted to others
2. Damage to the boat while it is being refined, renovated or repaired
3. Damage to the boat while it is involved in a race or speed test
4. Use of the boat beyond the area specified in the policy’s geographic restrictions
5. Use of the boat during the lay up warranty
6. Loss caused by wars and strikes
7. Loss caused by capture or seizure of the boat by civil authority
8. Damage caused by freezing

Question 45

What is identity Theft?

Answer 45

is an emerging risk that has frown along with society use of technology for communication and business transactions. Identity theft occurs when one person private identifying information is fraudulently acquired and used by someone else.

A growing number of insurers are offering coverage to protect against the effects of identity theft. it may be automatically included with home, condominium or tenant insurance polices or be an optional coverage available for an additional premium.

Question 46

What are the cost that are covered when an insureds identity is stolen?

Answer 46

1. Legal fees
2. cost of notarizing affidavits or sending certificated mail
3. Earnings lost due to time away from work

Question 47

Homeowner business insurance

Answer 47

Items pertaining to a business not intended to be insured under a personal policy as they should be covered under a commercial policy

Question 48

What are umbrella liability coverage?

Answer 48

Umbrella coverage re written for personal and commercial risks.
the main reason to buy umbrella liability coverage insurance are to obtain higher limits of coverage and broader coverage at a reasonable cost.

Question 49

What can be included in the umbrella Broader coverage ?

Answer 49

1. Broader personal liability including premises, occurrences, sports mishaps, personal injury
2. Watercraft liability
3. non owned aircraft
4. Employers liability
5. Advertising liability

umbrella coverage is usually subject to a self insured retention or net retained limit sometimes between $5000 and $25,000, although it can be as little as $500

Generally, personal umbrellas provide excess coverage over underlying polices, high limits and wide territories limits, usually worldwide.
An umbrella policy drops down when:
1. underlying policy does not provide specific coverage
2. limit of liability on the underlying policy is exhausted

Question 50

the drop down feature is provide if there is no underlying coverage. if there is no drop down feature the insured could be responsible for the first proton of the loss up to whatever limit the umbrella policy states.

Answer 50

the drop down feature is provide if there is no underlying coverage. if there is no drop down feature the insured could be responsible for the first proton of the loss up to whatever limit the umbrella policy states.

Question 51

Explain notice to authorities?

Answer 51

if the insured knows or suspects that loss was caused by a malicious act, burglary, robbery, theft, or attempting theft the the insured must immediately report the loss to the police

Question 52

What is No Benefits to Bailee?

Answer 52

a bailee is a person to whom goods or property are entrusted for a stated purpose.

Question 53

What is pair and set?

Answer 53

this clause prevents the insured from claiming the loss of one item of a matched pair as loss of the pair.

Question 54

What is Parts in homeowner policy?

Answer 54

it preserves the principle of indemnity by preventing the insured from claiming a loss to one or more parts of an items as loss of the whole item

Question 55

What is Sue and labour?

Answer 55

this clause requires that the insured, in the event of a loss do whatever is reasonably necessary to protect or recover the insured property.

Question 56

what are some ways an insured might protect damaged property ?

Answer 56

1. covering up exposed property with a tarp or plastic sheeting to protect it from the elements
2. covering up or barricading broken windows or glass 3. Shutting off building services such as electricity or water
3. Hiring a plumber to repair broken pipes to prevent additional flooding

Question 57

what are the basis of settlement?

Answer 57

this clause reinforce the requirement of insurable interest, which requires the insured to have such a position with the property that, if a loss occurs the insured will suffer financial hardship.

the loss or damage will be determined or estimated by deducting for relevant depreciation, which is the reduction in the value of property through use, aging, deterioration or obsolescence.

Question 58

what is known as Subrogation?

Answer 58

this s the process by which an insurer that has paid a loss can use to recover the amount of the loss from those legally responsible for it.