Term
Name the 5 elements of a contract. |
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Definition
A contract is an agreement: |
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Term
List the parts of a policy |
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Definition
the name the insurer the name of the insured the name of the person to whom the insurance money is payable the amount or method of determining premium the subject matter of the insurance the indemnity for which the insurer may become liable the perils insured the date on which the insurance takes effect the date on which the insurance terminates or the method by which the termination date is fixed
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Actual cash value is the cost of replacing the property less any depreciation. Depreciation is determined by factors such as condition, resale value and normal life expectancy. |
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A legal principle which holds that one can only insure in a situation where they stand to lose. You have a financial interest inorder to insure. You can insure your own house but not your neighbours. |
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The interest the insured must have in the subject matter in order to purchase insurance. If a person will gain from property continuing to exist or will be financially hurt by its loss, they are said to have an insurable interest. |
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The principle that the insurer will repay the insured for loss, the insured will be put in same position as before loss and does not profit.
The Basic Fire Policy supports indemnity by paying the insured the least of: |
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Definition
The cost of replacing the property less any depreciation. Depreciation considers condition, resale value, and normal life expectancy of property. |
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The actual cause of loss or damage, an event in a continuous unbroken chain of cause and effect which results in loss. The loss would not have happened without this event. |
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The right of the insurer once it has paid a loss for which a third party is responsible to sue on behalf of the insured. Normal legal principles don't allow the right to sue for somebody else, you can only sue if you are the injured party. Subrogation allows the insurer to sue when they are not the injured party.
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| insured losses must be fortuitous, or chance as far as the insured is concerned, intentional acts causing loss by the insured are not covered |
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Definition
| once the insurer has paid for a loss for which someone other than the policyholder is responsible it assumes the right of the insured to record this loss from the guilty party i.e. you break my window, my insurance pays to repair and then assumes the right to sue you for the cost of the repairs |
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Definition
| the effective cause of loss or damage, there must be an unbroken chain of cause and effect between the occurrence of an insured peril and the damage to the property |
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| a lien or mortgage on personal property, ie furniture, a computer |
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Definition
| a lien or mortgage on real property, ie land and buildings |
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| an exclusion that only applies in certain circumstances, i.e. an exclusion to property in the custody of the insured while the insured is performing work on such property, the exclusion will not apply while awaiting work or pick up only while work is being completed |
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Definition
| The absence of all occupants, none of whom intend to return. The presence of furnishings is not a determining factor. i.e. insured has moved to new home and this one is for sale |
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| All occupants are absent from the property but intend to return. i.e. away on vacation, out for the day |
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| An agreed sum to be deducted from the amount o the loss and assumed by the insured in the event of a claim |
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Definition
A clause in the policy requiring the insured to carry a certain percentage of insurance (usually 80,90 or 100 percent) in relation to the value of the property. If the insured fails then he agrees to self insure a portion of all losses large or small in the same ratio as his failure to insure to the required value. Equation to calculate is: did/should X amount of the loss = amount insurer will pay |
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| Average distribution clause |
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Definition
| A clause used in a property policy to distribute the amount of insurance over several locations of objects in proportion to their value, think prorata distribution |
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Definition
| The interest the insured must have in the subject matter of the insurance, the insured must be in a position to suffer a pecuniary (financial) loss if an insured peril occurs |
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Definition
| The principle that insured shall not receive more than the actual loss suffered, object is to return the insured to the same financial position as before the loss occurred, the insured neither gains nor loses |
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Definition
| A danger of loss due to the nature of the insured, not the property, i.e. the chance of loss is increased due to the insured’s carelessness, incompetence, recklessness, indifference or fraudulent behaviour |
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Definition
| Goods or merchandise the insured manufactures or acquires usual to the business for which the insured is legally liable |
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Term
| Name the 5 Conditions for replacement cost |
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Definition
Replacement must be made promptly Replacement must be on same or adjacent site Payment is limited to replacing, repairing, constructing or reconstructing on same site with new property of like kind and quality for like occupancy Settlement made when work completed All other insurance covering the same perils must have replacement cost provision
Note: when these requirements are not met losses will be settled acv, despite the policy’s replacement cost provision |
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Term
| Explain Automatic reinstatement |
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Definition
| Losses under policy do not reduce the available amount of insurance, the amount of insurance throughout policy period remains unchanged even if claims are paid, if the insured cancels after a loss they are entitled to refund of premium as required by statute ( the payment of even a total loss doesn’t mean the premium is considered used/earned in entirety) |
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Term
| Name the 7 most common additional perils (formerly known as Extended Coverage) |
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Definition
Explosion (beyond basic fire coverage) Impact by aircraft and land vehicles Riot Vandalism or malicious acts Smoke Leakage from fire protective equipment Windstorm or hail
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Term
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Definition
Includes loss or damage resulting from: Freezing of a heating, plumbing, air conditioning system Escape of water from a plumbing, heating, air conditioning system Escape of water from a public watermain
Exclusions are: Freezing in part of building where heat is not maintained during usual heating season Water escape from a sewer, sump, septic tank, eavestrough or downspout Losses that occur while the building is vacant or under construction even if permission has been given
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Definition
Water escape from a sewer, sump, septic tank, eavestrough or downspout This coverage provides the option to purchase coverage for the sewer back-up exclusion under the water escape peril |
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Definition
| Waves, tides, tidal waves, rising and breaking out or overflow of any body of water whether natural or man made |
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Term
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Definition
a form of theft the taking over of property which belongs to another and using it as if it were owned, i.e. leasing a vehicle and taking far away without payment or selling it as though it belonged to you coverage for conversion is usually excluded under theft, not likely to be covered at all
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Term
| define mysterious disappearance |
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Definition
| The disappearance of insured property in an unexplained manner, such as lost. i.e. the insured takes a ring off at a public restroom to wash hands and then leaves behind, when the insured realizes and returns it is gone. Someone could have taken it but there is no direct evidence to support this. |
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Definition
| a fixed rate which is applied to an entire amount of insurance |
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| describe named perils coverage |
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Definition
| a policy from that responds only to loss caused by the perils specifically named in the wording |
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| describe all risks coverage |
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Term
| define constructive total loss |
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Definition
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| a criminal offence, the taking of property without the owners consent with the intention of temporarily or permanently depriving the owner of its use |
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Term
| What is the definition of Fire Insurance? |
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Definition
| The term fire insurance is defined as insurance against loss or damage to property through fire, lightning or explosion due to ignition. |
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Term
| When must an insurer provide proof of loss forms to an insured? |
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Definition
| Proof of loss forms must be provided by the insurer to the insured immediately upon request and not later than 60 days after receiving notice of loss. |
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Term
| When may an insured bring action for the payment of a claim against an insurer? |
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Definition
| The insured may bring action for non payment of a claim 60 days after providing the completed proof of loss forms to the insurer. |
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Term
| What 3 perils must every fire insurance contract cover? |
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Definition
Fire Lightning – no coverage for electrical appliances unless fire ensues Explosion of natural, coal or manufactured gas in a building which is not part of a gas works
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Term
| List 2 exclusions in the Basic Fire Policy. |
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Definition
| Loss due to the following are excluded: 1. goods undergoing any process involving the application of heat2. riot, civil commotion, war, invasion, act of foreign enemey, hostilities (whether war be declared or not) civil war, rebellion, revolution, insurrection or military power |
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Term
| What coverage is extended under the basic fire policy for property removed to another location to prevent loss or damage?How is this coverage improved in the residential basic policy? |
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Definition
| Coverage for property removed to prevent loss or damage is automatically extended at the new location for 7 days or until the policy expiry date, whichever is least. The residential basic policy extends this coverage for 30 days or until policy expiry. |
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Term
| What protection is given to a loss payee added to a policy (no mortgage clause)? |
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Definition
| The insurer cannot cancel or alter the policy to the disadvantage of the loss payee without providing notice. The requirements for notice are the same as for the insured, i.e. insurer must provide 15 days notice by registered mail to cancel. |
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Term
| What are the rules about payment of a claim when more than one policy covers the same interest? |
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Definition
| Each insurer will be responsible for its rateable proportion of the loss. Rateable contribution holds that each insurer will pay an amount which is proportionate to the amount that their policy limit bears in proportion to the total value of the property. For example:Policy A insures for 10 000Policy B insures for 15 000The loss is 20 000 Policy A will pay 10 000/ (total amounts of all insurance 25 000) X amount of loss 20 000 = $8000Policy B will pay 15 000/ (total amounts of all insurance (25 000) X amount of loss 20 000 = $12 000 If one policy specifically describes an item then it will be responsible to pay first and other insurance will pay only after that policy limit exhausted. For example a person insures their general contents on a blanket basis and has a separate policy which is for a specific item of jewellery. The specific policy will pay first to its limit of insurance. |
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Term
| What must an insured have done to be guilty of misrepresentation? |
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Definition
The applicant must have: Falsely described the property to the detriment of the insurer Misrepresented a material circumstance to the insurer Fraudulently omitted to mention a material circumstance
This must result in the insurer issuing a policy they would not have issued or charging an inadequate premium for the risk. |
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Term
| In what situation is the insurer obliged to insure a new interest in replacement to the named insured according to Statutory Condition 3 Change of Interest? |
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Definition
There are 2: Authorized assignment under bankruptcy Change of title by succession, operation of law or death of named insured
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Term
| How is Statutory Condition 4 Material Change different from Statutory Condition 1 Misrepresentation? |
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Definition
| Statutory Condition 1 Misrepresentation concerns material facts omitted or falsely described at the time of application for the policy. Statutory Condition 4 Material Change concerns changes to material fact which occur during the policy term. Insureds are required to notify the insurer of such changes promptly. |
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Term
| What is required for a change to be considered material? |
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Definition
| To be material a change must be substantial and continuing. |
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Term
| What are the requirements when an insurer wishes to cancel a policy according to Statutory Condition 5 Termination? |
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Definition
| The insurer must notify the insured in writing and provide notice. The notice is 5 days if the cancellation letter is hand delivered and 15 days if it is sent by registered mail. |
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Term
| What happens if an insured doesn’t receive the cancellation letter because they have moved? |
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Definition
| There is no requirement that the insured must actually receive the cancellation letter, the insurer is required to send the letter to the last known address as advised by the insured. The insured is expected to advise the insurer of any changes of address. |
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Term
| What are the obligations of the insured after a loss? |
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Definition
The insured must provide: Prompt written notice Full details of the circumstances of the loss Full details about other interested parties, including property interests and other insurers The value of damaged and undamaged property
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Term
| Describe how an insured might be found guilty of fraud. |
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Definition
| An insured could be found guilty of fraud by providing fraudulently or wilfully false information on the proof of loss. A proof of loss must be verified by statutory declaration that the details are true and providing false information can result in the denial of the entire claim, not just the items involving particulars falsely described. Ex. A claim is made for loss of contents which includes a TV, the TV is falsely described and being much larger and of better quality than it really was. This could result in the entire claim, not just the claim for the TV, being denied. |
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Term
| Who may give notice and proof of loss? |
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Definition
The named insured A representative of the named insured (if unavailable) Anyone to whom part of the insurance proceeds are payable to
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Term
| Describe the 3 key requirements set out by Statutory Condition 9 Salvage. |
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Definition
| If property is damaged so severely that repair may be more costly than replacement, the insurer may pay the insured for a total loss and is then eligible to retain the salvage (damaged goods) The insured is obligated after a loss to protect property from further loss or damage, to maximize salvage benefits. This may include removing property to another location to protect it from damage. The insurer will pay the expenses of the insured for removing property to protect it from further loss or damage, ie moving expenses and storage costs. The insurer will only pay prorata an amount which corresponds to the costs for the insured property, will not pay these expenses for uninsured property. |
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Term
| What are the requirements about when a loss is payable? |
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Definition
| Insurers have 60 days from receipt of the completed proof of loss to either pay or deny a claim. |
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Term
| How long does an insured have to take action against and insurer in court? |
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Definition
| If in dispute over the settlement of a claim or advising of the intention to make a claim under a policy an Insured in Ontario has 1 year for a basic fire policy, and 2 years for a multi peril policy. |
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