Study 1 Flashcards
(40 cards)
What is property insurance?
First-party insurance that indemnifies the owner or user of property for its loss, or the loss of its income-producing ability, when the loss or damage is caused by a covered peril.
What is a peril in property insurance?
An event that causes a loss covered by the policy (e.g., fire, windstorm, theft).
Define insurable interest.
A stake in the subject matter of insurance such that the insured would suffer a financial loss if the insured event occurs.
What is the principle of indemnity?
A principle ensuring the insured is restored to their financial position before the loss without profit.
Define uberrimae fidei.
The principle of utmost good faith requiring both parties to disclose all material facts.
What is a deductible?
The specified amount the insured must pay before the insurance company pays the remaining amount of a covered loss.
What are statutory conditions?
Mandatory conditions required by common law to be included in fire insurance policies, establishing rights and obligations of both parties.
What is a contract under common law?
An agreement between legally capable parties with consideration, lawful purpose and legal intention.
Who is covered under a habitational property policy?
Named insured, their spouse, relatives in the same household, and dependent students temporarily away for school.
Give an example of an excluded peril under a basic fire policy.
War, nuclear incident, or loss from vacancy over 30 days without insurer’s consent.
What is the purpose of the mortgage clause in property insurance?
To define the rights and obligations of the mortgagee and insurer, protecting the mortgagee’s interest.
What is debris removal coverage?
An extension under fire policy that includes cost of debris removal, typically up to 5% of the insured amount.
What is the difference between personal-lines and commercial-lines insurance?
Personal-lines cover residential property, while commercial-lines cover business property like buildings and stock.
Define flashpoint.
The lowest temperature at which a liquid gives off enough vapor to ignite.
What does the exclusion for application of heat mean?
Excludes coverage for items damaged by applied heat unless fire results and causes further damage.
What is extended coverage in property insurance?
Endorsement adding perils such as windstorm, riot, smoke, and hail to the basic fire policy.
List two additional perils commonly added to basic fire policy.
Water damage, glass breakage.
What is a multi-peril policy?
A property insurance policy that combines several coverages including theft and inland marine in one package so as to simplify management.
How long does removal coverage apply under the basic fire policy?
Seven days from the date property is removed or until policy expiry, whichever is earlier.
Who issues the insurance policy?
The insurer.
What does ‘first-party insurance’ mean in property insurance?
It provides coverage directly to the insured for losses to their own property, unlike third-party liability insurance.
Why must the insured have insurable interest at the time of loss?
To prevent moral hazard and ensure that only those who suffer economic loss can claim insurance.
What role does property insurance play in the Canadian economy?
It facilitates lending, encourages investment, and provides financial stability after losses.
Explain the principle of indemnity using an example.
If a TV worth $1,000 is destroyed in a fire, indemnity ensures the insured receives compensation equal to its actual value—not more.
