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Questions and Answers
Which of the following is NOT a mandatory coverage under a fire policy?
Which of the following is NOT a mandatory coverage under a fire policy?
Electrical damage is covered under a standard fire policy if it does not ensue a fire.
Electrical damage is covered under a standard fire policy if it does not ensue a fire.
False
What is the time limit for coverage of property removed to prevent loss under fire policies?
What is the time limit for coverage of property removed to prevent loss under fire policies?
7 days
Properties vacant for more than ______ days are excluded from fire policy coverage.
Properties vacant for more than ______ days are excluded from fire policy coverage.
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Which of the following is a typical exclusion in fire policies concerning property?
Which of the following is a typical exclusion in fire policies concerning property?
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Debris removal coverage is capped at 50% of the loss payable under the policy.
Debris removal coverage is capped at 50% of the loss payable under the policy.
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What type of insurance coverage is available through specialized pools for nuclear risks?
What type of insurance coverage is available through specialized pools for nuclear risks?
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What are the two primary forms used by insurers for commercial property insurance?
What are the two primary forms used by insurers for commercial property insurance?
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Fire coverage is a low priority for business owners.
Fire coverage is a low priority for business owners.
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What is the approximate annual cost of fire losses in Canada?
What is the approximate annual cost of fire losses in Canada?
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The main causes of fire losses include mechanical failures, ______, and misuse of ignition sources.
The main causes of fire losses include mechanical failures, ______, and misuse of ignition sources.
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Which element is NOT listed as mandatory information on the Declarations Page?
Which element is NOT listed as mandatory information on the Declarations Page?
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The Basic Fire Policy is commonly used today for most commercial property insurance.
The Basic Fire Policy is commonly used today for most commercial property insurance.
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What is the start time for the policy period?
What is the start time for the policy period?
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What is excluded from explosion coverage under this policy?
What is excluded from explosion coverage under this policy?
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Pressure testing failures are covered under the policy.
Pressure testing failures are covered under the policy.
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What types of impact losses are covered only by the policy?
What types of impact losses are covered only by the policy?
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Losses caused by _____________ are not considered explosions under this policy.
Losses caused by _____________ are not considered explosions under this policy.
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Which of the following perils is NOT explicitly covered under property insurance?
Which of the following perils is NOT explicitly covered under property insurance?
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Which of the following is NOT covered under riot, vandalism, or malicious acts?
Which of the following is NOT covered under riot, vandalism, or malicious acts?
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Coverage for loss or damage to electrical devices caused by lightning is included in modern policies.
Coverage for loss or damage to electrical devices caused by lightning is included in modern policies.
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Losses resulting directly from riotous acts are covered under the policy.
Losses resulting directly from riotous acts are covered under the policy.
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Losses due to equipment failure and maintenance issues are covered under ___________.
Losses due to equipment failure and maintenance issues are covered under ___________.
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What limitation is placed on explosion coverage in property insurance?
What limitation is placed on explosion coverage in property insurance?
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Coverage for __________ is provided for losses from the explosion of manually portable gas cylinders.
Coverage for __________ is provided for losses from the explosion of manually portable gas cylinders.
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Under explosion coverage, which of the following is specifically excluded?
Under explosion coverage, which of the following is specifically excluded?
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Tenants who own or control excluded equipment may have broader explosion coverage.
Tenants who own or control excluded equipment may have broader explosion coverage.
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What must the insured prove for coverage of direct physical loss?
What must the insured prove for coverage of direct physical loss?
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What type of damage is covered under the interior damage provision?
What type of damage is covered under the interior damage provision?
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Damage caused by tidal waves is covered under the interior damage policy.
Damage caused by tidal waves is covered under the interior damage policy.
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What is the primary function of a Broad Form policy?
What is the primary function of a Broad Form policy?
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Coverage for interior damage requires evidence of an ______ caused by a storm.
Coverage for interior damage requires evidence of an ______ caused by a storm.
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Which of the following conditions must be met for interior damage coverage to apply?
Which of the following conditions must be met for interior damage coverage to apply?
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All risks coverage includes everything without any exclusions.
All risks coverage includes everything without any exclusions.
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What shift does the transition from Named Perils to All Risks represent in the claims process?
What shift does the transition from Named Perils to All Risks represent in the claims process?
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Study Notes
Insurance Coverage Options
- Annual premiums exceed $5 billion for commercial property insurance.
- Accounts for approximately 45% of total property insurance premiums in Canada.
- Insurers primarily use three policy forms: Named Perils Form (IBC 4036-09.06), Broad Form (IBC 4037-00.06), and the traditional Fire Policy.
Essential Coverages for Businesses
- Fire coverage is crucial for business owners with over 50,000 fire incidents annually costing around $1.5 billion in Canada.
- Customization of coverage ensures that insurance meets specific business needs.
Leading Causes of Fire Losses
- Mechanical and electrical failures account for roughly 20% of fire claims.
- Arson and set fires also contribute to about 20% of losses, increasing in frequency.
- Misuse of ignition sources, including improper handling of matches, leads to about 10% of losses.
Declarations Page (IBC 4000-09.06)
- Contains mandatory information: names of parties, policy period, loss payable, coverage summary, rate and premium, subject matter.
- Policy period commences at 12:01 a.m. local time, with specific coverage start issues.
Fire Policy (IFC 10010) Overview
- Historically significant but rarely used today; provides the foundational model for other commercial property coverages.
- Legislation mandates minimum coverages: Fire, Lightning, and Explosion of gases.
Standard Exclusions in Fire Policies
- Damage from electrical currents or application of heat is typically excluded unless fire ensues.
- War-related and nuclear incident damages are standard exclusions.
Extensions of Coverage in Fire Policies
- Removal Clause allows coverage for property removed to prevent loss for up to 7 days.
- Debris removal coverage capped at 25% of the total loss payable.
Exclusions Specific to Fire Policies
- High-risk items (money, precious metals) and vehicles (automobiles, watercraft) are excluded.
- Coverage does not apply to vacant properties unoccupied for over 30 days.
Specialized Coverage for Nuclear Risks
- Nuclear risks can be covered through specialized pools like MAC, particularly for institutions with nuclear exposures.
Practical Application and Review
- Selecting the correct policy form is essential to address specific business risks.
- Regular reviews of policy exclusions and coverage extensions are recommended to adapt to changing business circumstances.
Insuring Agreement
- Coverage includes direct physical loss resulting from insured perils; the insured must prove the connection.
- Notable exclusions remain similar to traditional fire policies, now with added coverage for lightning damage to electrical devices.
Explosion Coverage and Limitations
- Explosion coverage includes broad protection but excludes specific equipment types, especially if owned or controlled by the insured.
- Coverage for tenants may be broader if they do not control the excluded equipment.
Coverage Specifics for Portable Gas Cylinders
- Coverage applies to explosions of manually portable gas cylinders, justified by low potential for loss.
- Losses due to mechanical breakdown not considered explosions within policy.
Impact Coverage Overview
- Coverage includes loss from impacts by aircraft and spacecraft not owned or controlled by the insured.
Riot, Vandalism, or Malicious Acts Coverage
- Riots require involvement of at least three persons and a clear threat to property.
- Coverage excludes losses tied to business interruption, with specific conditions for interior damage.
All Risks Coverage and Broad Form Policy
- All Risks coverage introduced in the mid-1950s remains essential today, especially for commercial property owners.
- Broad Form policy provides extensive coverage, although exclusions remain significant.
Understanding “All Risks” Coverage
- Not truly all-encompassing; exclusions dictate the scope of coverage.
- Insurers bear the burden of proving a loss is excluded to deny coverage, emphasizing the importance of analyzing policy exclusions.
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Description
Explore the key concepts of commercial property insurance policy forms outlined in CAIB 2, Chapter 3. This chapter covers various insurance coverage options and market dynamics impacting premiums. Deepen your understanding of policy forms and their applications in the commercial sector.
