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Study 4 Flashcards

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1
Q

What is the SUBJECT in underwriting?

A

The SUBJECT is the PERSON, PEOPLE, or ORGANIZATION applying for insurance.

Example: If you’re filling out the application, congrats—you’re the subject of this underwriter’s deep dive.

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2
Q

What is the OBJECT in underwriting?

A

The OBJECT is the THING BEING INSURED—like property, liability, tech, vehicles, etc.

Example: If it can break, burn, or get hacked, it’s the object. If you want coverage, the underwriter wants details.

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3
Q

What does this section of study focus on?

A

It focuses on PHYSICAL PROPERTY as the object of insurance.

Example: Not your online dating profile—just your house, laptop, or warehouse.

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4
Q

What does COPE stand for in property underwriting?

A

COPE = CONSTRUCTION, OCCUPANCY, PROTECTION, EXPOSURE—the 4 pillars used to assess property risks.

Example: If your house is made of straw, next to a fireworks store, with no fire department nearby, COPE will not be kind.

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5
Q

What is the CONSTRUCTION factor in COPE?

A

It refers to BUILDING MATERIALS, AGE, SIZE, FLOORS, and HEATING SYSTEM.

Example: Wood walls + old furnace = “we’re gonna need a bigger premium.”

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6
Q

What are the 6 CONSTRUCTION TYPES often used by insurers?

A

FRAME, JOISTED MASONRY, NON-COMBUSTIBLE, MASONRY NON-COMBUSTIBLE, MODIFIED FIRE RESISTIVE, and FIRE RESISTIVE.

Example: A wood cabin? Frame. A steel-and-concrete skyscraper? Fire resistive. Your treehouse? …Uninsurable.

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7
Q

What does OCCUPANCY refer to in COPE?

A

It’s the USE OF THE BUILDING—who’s in it and what they’re doing.

Example: A shoe store = low risk. A flamethrower-testing lab = high risk. Co-existing? Even higher risk.

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8
Q

Why is OCCUPANCY important for homes?

A

It helps determine if the home is OWNER-OCCUPIED or RENTED, and if it’s used for WORK AT HOME purposes.

Example: Home office for accounting? Fine. Home office for welding? Underwriter says “let’s talk.”

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9
Q

What is PUBLIC PROTECTION in underwriting?

A

It’s about the FIRE DEPARTMENT’S LOCATION, response time, and access to HYDRANTS.

Example: If your house is 3 hours from help, you’re not just unprotected—you’re toasty.

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10
Q

What is the FUS and what does it do?

A

The FIRE UNDERWRITERS SURVEY (FUS) assigns TOWN GRADES (1–10) for public fire protection.

Example: Grade 3 = good. Grade 9 = “Good luck, we’ll mail you the cheque.”

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11
Q

What is PRIVATE PROTECTION in underwriting?

A

It’s about SPRINKLERS, ALARM SYSTEMS, and FIRE EXTINGUISHERS in the building.

Example: A sprinkler can contain a fire. A fire extinguisher can stop a small blaze. A smoke detector? Just yells.

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12
Q

Why do SPRINKLERS help lower risk?

A

They help CONTAIN FIRES EARLY, limiting damage and speeding up fire department response.

Example: Sprinklers go off, fire gets wet, damage shrinks. Win-win.

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13
Q

What’s the benefit of FIRE ALARMS?

A

They can AUTOMATICALLY ALERT the fire department and help reduce response time.

Example: Fire starts at 3am. Alarm calls help. You sleep, but your building survives.

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14
Q

What’s the benefit of WATER SENSORS in alarms?

A

They help detect leaks early and REDUCE WATER DAMAGE.

Example: Sprinkler goes rogue? Water sensor says “Hey!” before your carpets drown.

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15
Q

What’s EXPOSURE in COPE?

A

EXPOSURE is the RISK FROM NEARBY THREATS like other buildings, businesses, or natural hazards.

Example: Your quiet bakery next to a fireworks factory? Exposure risk baked in.

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16
Q

What NATURAL HAZARDS count as EXPOSURE?

A

FLOODS, FOREST FIRES, or WIND blowing fire or smoke from nearby buildings.

Example: House beside a river? Could become a houseboat. House in a forest? Could become ash.

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17
Q

How does NEIGHBOURING OCCUPANCY affect risk?

A

A HIGH-RISK BUSINESS NEARBY increases the chance your property gets damaged too.

Example: Your shoe store above a welding shop? Say hello to a higher premium.

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18
Q

Why do COMMERCIAL BUILDINGS have more EXPOSURE risk?

A

They’re often CLOSER TO EACH OTHER than homes and can share walls and hazards.

Example: Fire jumps from the deli next door into your pet shop = bad for buns and bunnies.

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19
Q

What does COPE stand for in property underwriting?

A

CONSTRUCTION, OCCUPANCY, PROTECTION, and EXPOSURE – the four pillars of assessing a property’s risk.

Like the Hogwarts houses, each tells a different story.

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20
Q

Why does an UNDERWRITER care about the SIZE of a house?

A

Bigger house = potentially more expensive to fix or replace, and more exposure to nearby properties. Big house, big questions.

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21
Q

What might UNUSUAL CONSTRUCTION materials raise for an underwriter?

A

Eyebrows! Materials like straw bales or old tires can complicate repairs and pricing. Creative, but risky.

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22
Q

Why is HEATING type important in underwriting?

A

Weird fuels (wood, corn pellets) and outdoor furnaces increase FIRE HAZARD. Heating by lava lamp? Yeah, we’re asking more questions.

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23
Q

What’s a concern with OIL-HEATED homes?

A

LEAKING OIL TANKS—especially underground ones—can mean environmental damage and $$$ loss. Big yikes.

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24
Q

Why do underwriters care about the AGE of a dwelling?

A

Older homes = more flammable wood, possible HIGH-RISK WIRING or bad plumbing. History isn’t always a good thing.

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25
What’s wrong with KNOB AND TUBE wiring?
It’s vintage—and not in a good way. It poses FIRE RISKS and doesn’t play nice with modern copper wiring.
26
What’s the issue with 1970s ALUMINUM wiring?
It was cheaper than copper, but can overheat and cause FIRES. Disco wasn’t the only dangerous thing in the '70s.
27
Why might LEAD or GALVANIZED PIPES be a problem?
They corrode, causing WATER DAMAGE. Also, you probably don’t want to drink that.
28
Why are SEWER BACKUP issues a concern in old homes?
Clay drains + tree roots = blockages. Add rain and bad valves? Boom, SEWER SOUP.
29
What is iCLARIFY used for in underwriting?
It's a PROPERTY VALUATION TOOL that uses data to verify size, fire protection grade, and past claims. ## Footnote Example: Like CSI for houses.
30
How does GEOCODING help underwriters?
It gives REAL-TIME PROPERTY DATA using maps and tech to pinpoint risks. High-tech peeking.
31
Why is a house UNDER CONSTRUCTION riskier?
Hazards galore—open wires, hot torches, flammable stuff. It’s a loss waiting to happen.
32
How do homeowners policies treat renovations?
They may EXCLUDE COVERAGE during major renos. The hammer might hit more than the nails.
33
What might an underwriter do during RENOVATIONS?
Charge more, limit coverage, or ask for a CONSTRUCTION POLICY. They don’t like surprises.
34
What are CONCEALED SPACES, and why do they matter?
Hidden nooks (like old closets) can hide FIRE RISKS and delay detection. Sneaky hazards.
35
Why do underwriters care how many PEOPLE live in a house?
More people = more ACTIVITY + RISK. Fires don’t start themselves (usually).
36
Why is OWNER-OCCUPIED lower risk than TENANT-OCCUPIED?
Owners care more. Tenants might treat it like a hotel room on its last night.
37
Why ask how many KITCHENS a house has?
More kitchens = more families = more COOKING FIRE and WATER LEAK chances. Double the kitchens, double the risk.
38
Why do SHORT-TERM LEASES raise red flags?
Less stability = more partying, less care. Underwriters call that YIKES.
39
What is ACCOMMODATION SHARING and why does it worry underwriters?
Renting out your home Airbnb-style may VOID COVERAGE. Strangers, parties, and insurance exclusions, oh my!
40
What does TENANTS LEGAL LIABILITY insurance protect?
It protects tenants against liability for damages to the rented premises caused by insured perils — basically, if tenants burn down the place, this helps cover it.
41
Why do underwriters care if a tenant has TENANTS LEGAL LIABILITY insurance?
Because if tenants cause damage, the insurer can SUBROGATE (chase the tenant for money) and maybe get $$$ back — makes the underwriter feel safer taking the risk.
42
How can frequent OWNER VISITS reduce risk?
More visits = quicker spotting of tenant trouble or building problems — fewer surprises and less chance of costly damage like hidden grow ops.
43
What’s a GROW OP and why is it a huge problem for insurers?
It’s an illegal marijuana-growing setup inside a rented home, with risky electric rewiring and high humidity causing fire hazards, mould, and big $$ damage.
44
Why are GROW OPS so dangerous?
Illegal wiring, lots of electricity use, no circuit breakers, sealed windows, and hydroponic equipment make fires and water damage way more likely.
45
How do courts sometimes treat insurance claims from losses caused by GROW OPS?
Some courts say those losses count as vandalism or malicious mischief (so covered), unless there’s a policy exclusion specifically denying grow op losses.
46
Why should an UNDERWRITER watch legal changes about grow ops?
Because court rulings and policy language keep evolving, affecting whether claims get paid or denied — underwriters must stay on top of this.
47
How do HOME-BASED BUSINESSES affect insurance risks?
They can raise risks with hazardous materials (like solvents) or equipment (kilns), and increase liability due to more people visiting the home.
48
What happens when a home business grows beyond guidelines?
Customers may need to switch to COMMERCIAL-LINES insurance because their risk is no longer “homey” but more business-like.
49
How does poor CONDITION of a dwelling increase risk?
Messy, hoarding, or poorly maintained homes have more fuel for fires and more chances for injury or damage.
50
Why are makeshift plumbing or electrical repairs risky?
They can cause leaks, fires, or other damage, raising the chance of an insurance claim.
51
What’s the danger with VACANT or UNOCCUPIED homes?
More likely targets for vandalism, fire, or unnoticed damage — and losses can be bigger without occupants to intervene.
52
What’s the difference between COMMON and SPECIAL HAZARDS?
Common hazards = usual home stuff like wiring and heating. Special hazards = unusual business equipment or activities raising extra risk.
53
Why is PUBLIC PROTECTION important for underwriting?
Good municipal fire services, hydrants, and water supply reduce the severity and likelihood of loss.
54
What info about fire protection does an underwriter want?
Is the fire department volunteer or professional? How close are fire stations and hydrants?
55
How do SPRINKLERS impact risk?
They reduce fire damage but are still rare in single-family homes, more common in big or multi-unit buildings.
56
Why does underwriters care about FIRE ALARMS?
Proper alarms reduce loss by early detection—central monitoring is better than local alarms.
57
What’s the role of SMART HOME TECHNOLOGY in risk?
It can detect water leaks, shut off water automatically, and alert owners — lowering damage risk and sometimes earning insurance discounts.
58
Why is a DETACHED home safer for neighbors than a semi-detached one?
Detached homes reduce the chance that fire or damage spreads to a neighbor.
59
How does LOCATION affect risk?
Different parts of Canada face specific natural hazards like earthquakes, hail, floods, or blizzards, affecting risk levels.
60
What’s a FLOOD PLAIN and why does it matter?
Areas prone to flooding; homes here face high risk of costly flood damage.
61
Why is SEWER BACKUP a concern?
It can cause huge basement damage; sometimes covered only by endorsements; pumps and valves can reduce this risk.
62
How do insurance companies view SMART WATER DETECTORS?
They may offer discounts because these devices reduce damage by quickly detecting leaks.
63
What does COPE stand for in commercial property underwriting?
Construction, Occupancy, Protection, and Exposure — the big four risk factors to check out before insuring a building.
64
True or False: COPE hazards for a SINGLE-FAMILY dwelling apply exactly the same to COMMERCIAL businesses.
False! Many COPE hazards are similar, but COMMERCIAL businesses often face greater and more complex risks.
65
Why are COMMERCIAL businesses riskier than single-family dwellings?
They’re usually bigger, have more occupants, do riskier activities, and face less predictable exposures from nearby buildings. Basically, bigger playground = bigger trouble.
66
What construction aspects does an UNDERWRITER check for a commercial building?
Building age, location, materials, heat source, power systems, and whether construction meets current codes or is grandfathered.
67
What’s the risk with an OLDER COMMERCIAL building in a less busy area?
Higher chance of BREAK-INS, VANDALISM, and potential electrical or structural issues — sneaky danger hiding behind the fancy storefront.
68
What does it mean if a commercial building is “GRANDFATHERED”?
It’s exempt from new zoning laws but may not meet current safety standards, potentially making repairs costlier or impossible under normal insurance.
69
True or False: Insurance policies usually cover the extra costs of rebuilding a commercial building to meet updated zoning laws.
False! Most policies exclude losses due to law changes, so the underwriter might want an endorsement for extra coverage.
70
How can OPEN SPACES in commercial buildings affect fire risk?
They let fires spread faster and bigger—dividing the building into fire zones helps, but that’s not always practical.
71
Why is the choice of CONSTRUCTION MATERIALS especially important in commercial risks?
Because commercial buildings are often custom-designed and may have been altered—if not done properly, it can increase loss likelihood and amount.
72
What kind of HEAT SOURCES might commercial buildings use that differ from homes?
Boilers, unit heaters, natural gas, electricity, solar panels, or geothermal systems — way fancier than your electric blanket.
73
Why should an underwriter care about a business’s POWER LOSS CONTINGENCY?
No backup generator = no power = no production = lost revenue. Backup generators lower risk and insurance rates.
74
What’s the difference between a “TRUE RETAILER” and a “BAKERY” in underwriting terms?
A true retailer just sells stuff made elsewhere; a bakery bakes on-site and has higher fire risk from ovens.
75
How do HOURS OF OPERATION affect commercial insurance risk?
Longer hours = more risk. Open 24/7 means more chances for accidents, theft, or fire than a business open only 8 hours a day.
76
Why should an underwriter care if a coffee shop has a DRIVE-THROUGH open late at night?
Because risk continues even when customers aren’t inside — employees working late means fire, theft, or vandalism risks still on the clock.
77
What risk does POOR STORAGE pose in a commercial building?
Piled-high boxes can block aisles, hinder firefighters, impair sprinklers, and fuel bigger fires — storage gone wild!
78
True or False: Cleanliness in a commercial kitchen is just about health codes.
False! It’s also about reducing fire risks like grease fires — messy kitchen, messy insurance claim.
79
How does CUSTOMER TRAFFIC influence the risk for commercial businesses?
More customers = higher risk of theft, vandalism, and accidents. Delivery-only businesses face fewer public risks than walk-in stores.
80
What info can underwriters use to find the ratio of deliveries to walk-ins?
Business receipts — because numbers don’t lie (unless the books are cooked, but that’s another problem).
81
Why do seasonal businesses pose special risks for insurance?
Because they may be vacant or unoccupied for long periods, making them easy targets for vandalism or fire without quick fire response.
82
What happens if a building is vacant or unoccupied too long?
Many policies exclude loss or damage if a building is vacant/unoccupied beyond a set time unless a vacancy permit is bought.
83
What is a big safety concern with storage in a bakery?
Trays and pallets can block movement, heat from machines can cause toxic smoke, and dust from cardboard or flour can cause fire or explosion hazards.
84
Why does an underwriter care about “flow” in a business?
Because how goods move and are stored affects safety and risk, like blocking exits or creating fire hazards.
85
What is the “flash point” of a flammable liquid?
The lowest temperature where a liquid gives off enough vapors to ignite — lower flash point means higher fire risk.
86
What are the three main levels of protection an underwriter looks for in commercial property?
Unprotected, semi-protected, or fully protected (e.g., fire stations, hydrants, sprinklers).
87
Why are sprinklers so important in commercial risks?
They provide quick, automatic fire suppression and are the most important private fire protection.
88
What must an underwriter check about a sprinkler system?
Water supply, proper valves, alarms, appropriate sprinkler heads, and coverage area per head.
89
Why can sprinklers be a hazard in computer rooms?
Wet-pipe sprinklers release water that can damage electronics; clean-agent or gas systems are better.
90
Why aren’t water sprinklers good for grease fires?
Water spreads grease, making the fire worse; special suppression systems are needed.
91
What are the two main types of fire alarms underwriters check?
Alarms built into sprinkler systems and automatic smoke/heat detectors.
92
What is a “centrally monitored” fire alarm?
An alarm connected to a central station or fire hall that sounds remotely when triggered.
93
Why does the underwriter ask when the business is occupied?
Because local alarms need people present to respond; unoccupied times increase risk.
94
What’s important about portable fire extinguishers in commercial buildings?
They must be enough in number, properly placed, and use the right extinguishing agent for the fire type.
95
Why does the “human element” matter in fire protection?
Because even the best equipment fails if staff are untrained, careless, or don’t know emergency procedures.
96
What might a big factory have to prepare for fire emergencies?
Formal fire brigades or emergency teams.
97
What might a small office do for fire safety?
Assign safety marshals to ensure safe evacuation and headcounts.
98
What attitude matters most to underwriters in fire safety?
Management’s conscientiousness about fire safety, training, and prevention.
99
How does proximity to other businesses affect fire risk?
Being close to high-risk neighbors (like welding shops) raises the chance of exposure loss.
100
What natural hazards might a cottage country business face?
Forest fires or flooding if located in forested areas or flood plains.
101
What does COPE stand for in property underwriting?
Construction, Occupancy, Protection, and Exposure — the 4 key factors to assess risk.
102
Why is COPE important for underwriters?
It helps decide if a risk is acceptable and what the premium should be.
103
After checking previous losses and property value, what tool helps underwriters assess physical risks?
COPE — Construction, Occupancy, Protection, Exposure.
104
Do underwriters rely solely on the application form answers?
No! They ask extra questions because applications often don’t tell the full story.
105
Is COPE used only for homes?
No, it’s valuable for both homes and commercial buildings.
106
How do commercial risks compare to home risks in COPE analysis?
Commercial risks vary more and need more detailed scrutiny.
107
What must underwriters understand about a commercial risk besides COPE?
They must be comfortable with the type of business and research the specific hazards involved.
108
What’s the goal of using COPE thoroughly in underwriting?
To ensure good business for the insurer and set the right premium.
109
What is ACCOMMODATION SHARING?
When a property owner rents out part of their home to others, like Airbnb. ## Footnote Renting a spare room in your house to vacationers for the summer.
110
What is SUBROGATION?
When an insurer, after paying a claim, takes legal action to recover money from the party responsible for the loss. ## Footnote Your insurer pays for your car repair after an accident, then sues the other driver to get the money back.
111
What is a HAZARD in insurance?
Anything that increases the chance or severity of a loss. ## Footnote Old faulty wiring in a building is a hazard that could cause a fire.
112
What is a COMMON HAZARD?
A hazard that is typical and frequently found in many similar risks. ## Footnote Flammable dust in a bakery is a common hazard for food businesses.
113
What are SPECIAL HAZARDS?
Hazards unique to a specific risk or business that require special attention. ## Footnote Deep-fat fryers in a restaurant require special fire suppression systems.
114
What is an AUTOMATIC SPRINKLER?
A fire protection device that detects heat or fire and sprays water automatically to control or extinguish it. ## Footnote Sprinklers that activate in a warehouse when smoke or heat is detected to stop a fire early.

Underwriting (9 decks)

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