Study 4 - Anatomy of a Property Policy: Overview Flashcards
(40 cards)
What are the three main sections of most personal property policies?
- Declarations or Coverage Summary
- Policy Wordings
- Endorsements or Floaters added to the policy
Define package policy.
Any insurance policy that covers two or more lines or types of insurance in the same policy. Also known as a multi-peril policy.
Define non-package policy.
An example is the Residential Basic Form, for those who prefer policies simpler or more modest than the
popular packages of property and liability insurance.
Define subscription policy.
A single policy covering a risk that is divided among a number of insurers; the policy is issued by the “lead” company (usually the one with the largest percentage) and signed by all participating companies.
Define multi-limit policy.
Also known as a multi-limit policy: A policy in which an amount of insurance is shown for the dwelling and a separate amount is shown for the personal property.
Define single-limit policy.
Shows one amount of coverage encompassing both the building and personal property.
What are the 3 key IBC Homeowners forms?
Homeowners Basic Form
Homeowners Broad Form
Homeowners Comprehensive Form
How do the 3 main IBC Homeowners Forms differ?
They differ in property perils;
Homeowners Basic Form:
What do the 3 main IBC Homeowners Forms have in common?
- Include personal liability insurance.
- The general organization of their coverage.
- The way minimum amounts of insurance are deteremined for each coverage.
- How the premium for them is calculated.
Which 3 clauses are common to most property policies?
- Deductible Clause
- Coinsurance
- Special Limits of Insurance
What are additional interests?
Parties not listed as named insured but who would be financially prejudiced by the loss or destruction of insured property. Such parties may include the following: loss payees, leaseholders, mortgagees.
Explain rateable contribution.
Rateable contribution applies when more than one policy cover the same interest at the time of loss. The deductibles are aministered based on one contract or two or more contracts.
What are the steps to reading a policy?
Step 1. Review the definitions clause.
Step 2. Review the property that is covered.
Step 3. Review the perils that are and are not insured against.
Step 4. Review the basis of claim settlement, duties after a loss, and the Statutory Conditions.
What is included in the first section Declarations or Coverage Summary?
Encompasses information found on the application for insurance outlining coverage amounts, location of the property, name of the insured, and property insured.
Usually appears first in the policy, showing details that apply to the other forms. Commonly also bears the words “This policy contains a clause which may limit the amount payable” stamped or printed across its face.
What is included in the Policy Wordings?
- Preamble describing the general agreements between the insured and insurer
- Definitions of terms found in the policy
- Coverages
- Extensions of coverage
- Exclusions
- Basis of Claim Settlement
- Additional Conditions
- Statutory Conditions
What is included in the wording for Floaters and Endorsements?
Additional insurance provided for items that may be limited in coverage, not covered, or excluded from coverage in the policy contract.
Define adverse selection.
Occurs when those with higher risks may purchase insurance in greater amounts than those with lower risks. Much of insurance law and practice is designed to control adverse selection. Insurers protect themselves from adverse selection by attempting to measure risk and either charging more for the higher risks or refusing to cover them at all.
Why is the deductible clause important?
Small frequent claims are expensive for insurers. To avoid this expense and to reduce premiums for their insureds, insurers introduce a deductible clause.
What ways may deductibles be applied?
Separate items: if the total amount of insurance is subdivided into more than one item, the deductible may apply separately to the amount recoverable under each item.
Occurrence basis: The deductible may apply to an occurrence. That is, the deductible may be subtracted from the total amount of loss or damage arising from a single event insured under all items of the policy.
Loss Paid In Full if Over Deductible: The policy may provide that no loss be paid below a specified amount but a loss greater than this amount will be paid in full.
Explain the Coinsurance Clause.
A coinsurance clause in a fire insurance policy obliges the insured to maintain a specified minimum amount of insurance in relation to the value of the property insured, or else share with the insurer any partial loss-becoming, in effect, a coinsurer of the loss. Generally, property policies require the insured to an amount of insurance equal to at least 80% of the actual cash value of the property insured.
Explain Special Limits of Insurance.
They are used to limit the insurer\s exposure to certain types of personal property that would otherwise be covered under the blanket limit for personal property. The special limits help prevent skewing of the blanket limit by a few high-valued articles. These items can usually be covered under different policy forms.
What are the two groups of Special Limits:
Covered for loss caused by any insured peril:
- Business property
- Securities
- Property of a student temporarily living away from home
- Money, including cash cards, or bullion
- Garden-type tractors, including attachments and accessories
- Watercraft, their furnishings, equipment, accessories, and motors
- Computer software
- Spare automotive parts
Covered for loss caused only by theft:
- Jewellery, watches, gems, fur garments, and fur-trimmed garments
- Numismatic property (coin collections)
- Manuscripts, stamps, and philatelic property (stamp collections)
- Collectible cards
- Bicycles, their equipment, and accessories.
Explain loss payee.
- Generic term for someone other than the named insured to whom the proceeds of insurance will be paid.
- Most lenders insist on evidence of fire insurance. Rather the issue separate policies to cover the respective interests, it is simpler to issue a single policy in the name of the borrower and include the lender’s interest.
- Any cheque issued by the insured t settle a claim will be drawn jointly in the names of the insured and the loss payee. The parties themselves will determine the disposition of the proceeds to reduce or discharge the loan.
- Only the named insured may instruct the insurer to show loss payable to the lender.
What is a chattel mortgage?
A type of mortgage that conveys an interest in property other than land and buildings as security for a debt.
