C12 - Ch 01 - Introduction to Property Insurance

  1. What is property insurance?
    • first-party insurance
    • indemnifies owner of property when the loss/dmg is caused by a covered cause of loss, such as fire or explosion
    • the consideration paid by insureds to insurers is called a "premium"
    • a person must have an insurable interest to recover
    • insd loss must be fortuitous
  2. Describe the contract of insurance.
    • insurance is a contract
    • an agreement or promise between 2 or more parties intended to be legally enforceable
    • insurance contract = policy
    • property policies may limit the insured's recovery for a loss (deductible)
  3. Describe the evolution of property insurance.
    • the 1st type of property insurance was fire insurance
    • later, insurers began to enhance the Basic Fire Policy with coverage for additional perils
    • some of the more common additional perils came to be offered together as an extended coverage endorsement that could be added to the Basic Fire Policy
    • over time, insurer's further enhanced their policy wordings for additional perils
    • today insurers will often combine policy forms in  multi-peril policies
  4. Distinguish personal lines insurance and commercial lines insurance.
    • a distinction observed by insurer's but not in legislation
    • PERSONAL LINES, or habitational insurance, covers dwellings, detached structures, and personal property belonging to private individuals such as homeowners, tenants, & condo unit owners
    • COMMERCIAL LINES covers businesses; small family-run to large multi-national businesses
  5. Explain who and what are covered in property insurance.
    • all property policies must identify the named insured and the subject matter of insurance so the intent of the policy is clear
    • the named insd may be 1 or more people OR it may be a business (listed on the Declarations page)
    • on a habitational policy also: 1) named insured spouse; 2) relatives of insd or spouse; 3)any person under 21 under care of insd; 4) student temporarily away from home in school; 5) residence employee
    • provided they reside in the same household as named insd
  6. Prestation
    a duty, a payment, or a service
  7. Flashpoint
    the lowest point at which a liquid gives off sufficient vapours to form an ignitable mixture with the air
  8. In the Basic Fire Policy, for how many days does the Removal of Insured Property extension apply to removal of insured property from insured location?
    7 days from date that removal of property begins or until policy expires, whichever occurs first
  9. The named insured on a property policy can be:
    1 or more people or a business
  10. Utmost good faith
    • ubberimae fidei
    • requires insd to act with a high standard of honesty; and
    • disclose those facts that a reasonable person ought to know are material
  11. List 8 elements on a property insurance policy.
    • Name of insurer
    • Name of insured
    • Name of person(s) to whom insurance $ is payable
    • Amt of premium
    • The subject matter of insurance
    • Indemnity
    • Effective date
    • Expiry date
  12. Describe the purpose of an exclusion.
    • exclusions remove certain losses from policy's coverage
    • never expands coverage, but always restricts it
    • they may be temporary or permanent
    • may relate to specific circumstances or specific types of property
  13. Explain the importance of Statutory Conditions in fire insurance policies
    • in each of the provinces/territories (except QC), a portion of the Insurance Act applies to fire insurance contracts and set out Stat Cond's that apply
    • Stat Cond's bind the insr & insd, establishing certain rights and obligations for both parties
    • Insurance Acts require that Stat Cond's be identified & printed on every fire ins pol
    • if insr fails to do so may be penalty
    • no variation, omission, or addition to any Stat Cond is binding on insd
    • Stat Cond's only govern fire insurance
  14. Describe the benefits of a mortgage clause
    • the mortgagee's interest is protected by the addition of a mortgage clause to the property policy
    • main benefit is the policy will cover the mortgagee even if the insd has breached a condition of the policy and is unable to recover a loss
    • the clause creates a separate contract between insr & mortgagee
    • it remains governed by the perils, exclusions, amounts and limitations
  15. Compare and contrast personal lines and commercial property lines property insurance policies (20 marks)
  16. Model Application Question
    As part of the overall purchasing process, and to secure her mortgage, Jane’s bank, Royalty Trust Inc., requires her to buy insurance for the home. Jane purchases a Homeowner’s form from Good Heart Insurance. Why would Royalty Trust require Jane to purchase home insurance? Explain. (5 marks)
  17. Model Application Question
    Jane takes real pride in being a homeowner. Within the first month after taking possession of her home, Jane paints the entire house and installs new hardwood floors and crown moulding. In addition, Jane invests money in the garden and landscaping. Do Jane’s actions demonstrate insurable interest in her property? Explain. (4 marks)
  18. Model Application Question
    Jane’s home is damaged in a kitchen fire. Jane speaks to her brother, who says that she “lucked out”, as her insurance company will most likely conduct an extensive renovation of not only the areas of her home that were damaged but the entire home. Is this true? Will Jane receive a complete renovation of her home? Explain. (3 marks)
  19. Model Application Question
    The damage to Jane’s house as a result of the fire is estimated at $20,000. The adjuster from Good Heart Insurance states that Jane will be required to pay the first $2000 of the total claim. Can Good Heart Insurance ask this of Jane when she is the policyholder who suffered the loss? Explain why or why not. (5 marks)
  20. Model Application Question
    In the fire, some of Jane’s son’s property is damaged, including clothes, bedding, and other electronics. However, Jane’s son is away at university. Will the insurance company cover the losses to Jane’s son’s belongings? Explain why or why not. (8 marks)
  21. What is required of a person for him or her to recover for loss of damage to property covered by property insurance?
  22. What additional principles distinguish insurance policies from other types of contract?
  23. Why do insurance policies often include deductibles?
  24. What function do exclusions serve in an insurance policy?
  25. How did the Fire and Extended Coverage Policy come to be?
  26. How much freedom do insurers have to design property policies as they choose?
  27. What must be identified in all property insurance policies to make the intent of coverage clear?
  28. Why would a mortgagee be eligible for protection under a property insurance policy?
  29. What is the difference between first- and third-party insurance?
  30. What distinction is made in legislation between personal and commercial property insurance?
  31. How do insurance companies distinguish between personal and commercial property insurance?
  32. What kinds of document do insurers use to provide personal property insurance?
  33. property insurance
  34. insurable interest
  35. Indemnity
  36. Contract (common law)
  37. Contract (Quebec)
  38. Prestation
  39. Uberrimae fidei (utmost good faith)
  40. Peril
  41. Deductible
  42. Fire insurance
  43. Exclusion
  44. Flashpoint
  45. Statutory Conditions
  46. Extended coverage insurance
  47. Multi-peril policy
  48. Mortgage
  49. Mortgagor
  50. Mortgagee
  51. Mortgage clause
  52. Subject matter of insurance
  53. First-party insurance
  54. Third-party insurance
  55. Personal lines
  56. Commercial lines
Card Set
C12 - Ch 01 - Introduction to Property Insurance
C12 Property insurance - Ch 1