CAIB 1 Chapter 2 Slides PDF

 What do you remember? Students have three minutes to write 3-4 sentences about what they remember from last class. If you can give an example, that is even better! Remember the Forgetting Curve! Insurance Graphic Organizer Every fire insurance policy must have 3 coverages. What are t...

 What do you remember? Students have three minutes to write 3-4 sentences about what they remember from last class. If you can give an example, that is even better! Remember the Forgetting Curve! Insurance Graphic Organizer Every fire insurance policy must have 3 coverages. What are the three coverages and explain each. (9 points) The following slides contain the information needed to answer this question.  Basic Coverages Legislated Insurance Acts of common law provinces: Every fire insurance policy must have 3 coverages: 1) Fire The Insurance Acts doesn’t define fire BUT courts ruled: fire involves presence of visible flame/glow and requires actual ignition/burning Two different fires: Friendly and Hostile Fire Other Losses are “Fire Losses:” ○ If no combustion/fire damage to insured property, proximate results of fire are paid by policy: Damage due to water/extinguishing agent(s) Parts of building not affected by  Basic Coverages Legislated 1) Fire: Other Losses are “Fire Losses:” Cont’d If no combustion/fire damage to insured property, proximate results of fire are paid by policy: Physical damage (to building) from firefighters ○ Firefights may cut holes in building roof/walls to find seat of fire ○ Fire’s slow lateral progress gives firefighters time to get fire under control Damage from other actions to stop spreading of fire ○ Fire threatens adjoining buildings (firefighters try to save those bldgs) Ex. Hose streams aimed at adjacent buildings to cool temps of external  Basic Coverages Legislated Insurance Acts of common law provinces: Every fire insurance policy must have 3 coverages: 2) Lightning All policies insuring against fire MUST have coverage for direct lightning ○ Ex. damage: chimneys, building roofing/siding, fences, TV antennae, communications towers  Basic Coverages Legislated Insurance Acts of common law provinces: Every fire insurance policy must have 3 coverages: 3) Explosion: Natural, Coal, Manufactured Gas Every fire policy covers: Explosions from ignition of natural/coal/manufactured gas ○ Ex. No coverage: concussion explosions (build-up internal working pressure items: hot water heaters/boilers used for heating) Policy must meet MIN established coverage requirements The Insurance Acts: Allows insurers to sell coverage to improve min  Every fire insurance policy must have 3 coverages. What are the three coverages and explain each. (9 points) Answer  Chapter 2: Habitational Insurance Section 1 - The Development of Habitational Insurance Homeowners Forms Homes are (usually) largest investment people ever make 3 Common Forms: ○ Homeowners Basic Form (IBC 1151) ○ Homeowners Broad Form (IBC 1153) ○ Homeowners Comprehensive Form (IBC 1155)  Chapter 2: Habitational Insurance Forms developed by Insurance Bureau of Canada (IBC) Bureau: voluntary organization, 100 members (insurance groups), Focus: research/develop coverage forms for members to use Insurance companies use IBC wordings as “foundation” for own policies ○ Insurer wanting advantage over insurers may broaden policy coverages, increase limits, remove exclusions: homeowners coverages differ greatly  Eligibility for Coverage Homeowner forms in the past for select/preferred risks ○ Ex. Single family occupied all year by owner (principal) Homeowner forms now: relaxed eligibility requirements: ○ Dwellings → more than one family ○ Insureds → more than one (principal) dwelling ○ Mobile homes (full basement) ○ Dwellings during construction: intention to occupy once complete Only owners occupying/intending to occupy dwelling have coverage Selling Habitational Insurance ○ Brokers never enter the dwelling but brokers making “house calls” = advantage  Common Characteristics Effective selling method for coverages: Discuss similarities before looking at specific coverages 1) Clear Language Approach 1979: Forms were modified: jargon/legal phrases removed (easier for insured) 2) Common Format/Structure Common structure: regardless of form, brokers can quickly find information/answers for client questions. ○ Two coverage sections: Section 1 - Property Coverages Section 2 - Liability Coverages Codes help to ID coverages (same for all homeowner forms)  3) Policy Definitions Uniform a) Insured i) His/her spouse: policy in one name (spouse may make a claim) ○ Relationships - Avoid Coverage Gaps: Establish relationships of parties occupying dwelling with Named Insured: Add Named Insured’s partner to existing policy OR give other party their own policy ii) Relatives (Named Insured or spouse) ○ Children, parents, grandparents, family members living with insureds Broker may to increase coverage limits (for personal property)  3) Policy Definitions Uniform a) Insured iii) Any party in their care (under 21) ○ If not related, but in care of insured and under 21 years Foster children, exchange students ○ Not covered: Boarders/roomers (tenant’s policy) iv) Student enrolled/attends school/college/university, depends on Named Insured/spouse for maintenance ○ Student temporarily living away from principal residence (Cover Summary Page)  3) Policy Definitions Uniform b) Dwelling Homeowners forms: insure owner-occupied dwellings – Dwelling can’t be used for business (habitational only) DEFN Dwelling: – Building on Coverage Summary page wholly/partially occupied by YOU (private residence) c) Premises Some homeowner coverage forms don’t extend above insured’s premises DEFN Premises: – Land within lot lines where dwelling is (situated)  Write a question Students take two minutes to write a question about any of the concepts that we went over so far in class, in the chat window. No question is too simple! Remember the Forgetting Curve!  4) Insure Same Exposures To Loss Section 1 - Property Coverages ○ Coverage A - Dwelling Building ○ Coverage B - Detached Private Structures ○ Coverage C - Personal Property ○ Coverage D - Additional Living Expense Section 2 - Liability Coverage ○ Coverage E - Personal Liability ○ Coverage F - Voluntary Medical Payments ○ Coverage G - Voluntary Payment for Damage to Property ○ Coverage H - Voluntary Compensation for Residence Employees  Coverage A - Dwelling Building 1) Dwellings/Attached Structures Value of structures (garage, greenhouse, sun deck) attached to dwelling ○ Covered (in insurance limit bought for dwelling) 2) Permanently installed outdoor equipment on premises Limit for dwelling building: value of outdoor equipment (permanent) ○ Embedded in concrete ○ Affixed to land ○ Children’s swings, slides, teeter-totter, monkey bars ○ Lawn sprinklers Coverage restriction: insured’s premises ○ Ex. insured shares cost of playground equipment with neighbour has no coverage if equipment is on neighbour’s premises  Coverage A - Dwelling Building 3) Outdoor swimming pool/attached equipment on premises Pool value (above/below ground) and attached equipment: ○ Insured in limit for “dwelling building.” 4) Materials/supplies on/adjacent to premises for construction/alteration/repair of dwelling/private structures on premises Theft covered: when dwelling is complete/ready to be occupied Homeowners forms: used if dwellings = under construction ○ Coverage for materials/supplied used in project, dwelling renovations OR constructing fence/detached private structure (on premises) ○ Dwelling under construction: no coverage of theft during construction Coverage for building materials/supplies located on/adjacent to premises ○ ONLY when used on insured’s premises: Ex. lumber bought for addition to insured’s summer cottage ISN’T COVERED  Coverage A - Dwelling Building 4) Materials/supplies on/adjacent to premises for construction/alteration/repair of dwelling/private structures on premises Cont’d Limit of insurance (dwelling building) ○ Building fixtures/fittings (temporarily removed) Fixtures/fittings removed for repair/seasonal storage Ex. Window shutters/doors with windstorm/hail damage being repaired Ex. Storm doors/windows stored away from premises (not in use) ○ Insured: may apply (up to) 10% of insurance to category ○ Coverage is for TEMPORARY removal only Ex. No coverage: storm doors/windows not used by insured INSTEAD stored away from premises (years)  Coverage A - Dwelling Building 4) Materials/supplies on/adjacent to premises for construction/alteration/repair of dwelling/private structures on premises Cont’d Outdoor Trees, Shrubs, Plants Insured: may apply (up to) 5% of insurance on dwelling to outdoor trees/shrubs/plants ON PREMISES Coverage by homeowner form is limited TO: ○ Fire, Lightning, Explosion, Impact (aircraft/land vehicles) ○ Riot, Vandalism/malicious act NO COVERAGE windstorm/hail losses, trees/plants/shrubs grown for resale AND lawns Max limit ($500) per tree/plant/shrub (including debris removal) Growing trees/plants/shrubs in insured’s dwelling/buildings on premises AT TIME OF LOSS = covered under amount for personal property ○ Items insured for all perils coverage ○ Payment not limited to one item  Coverage B - Detached Private Structures DEFN Detached Private Structure: Structure/building separated from dwelling by CLEAR space. If are connected, then fence/utility line/similar connection ONLY Homeowners forms: Detached private structure Ex. detached garage/greenhouse/fence If structures/buildings are connected (to dwelling by fence/utility line/similar connection ONLY Commercial property on premises IS NOT private detached structures (repair garage) Not covered  Coverage C - Personal Property The slides for “Three Insuring Agreements for personal property” have been moved to the CAIB 1 Chapter 2 Insurance Graphic Organizer (IGO) which can be accessed through your student portal. You can submit your IGO activity to your facilitator or ask questions in class. For an explanation of the slide information and an answer to the activity, please check out the “IGO Answers” videos in your student portal. Please ask questions if you need to!  Categories of Special Limits of Insurance I) Apply to specified property items despite cause of loss (covers) Business Property ($2,000) ○ Total all books, tools, instruments for business/profession/occupation ○ Covers property while on premises ○ No Coverage: Other business property (stocks/bonds/notes/other docs for insured’s business) Stock/equipment of business/kept on insured’s premises Samples/goods for sale: Samples for business/stock items for sale from premises  Categories of Special Limits of Insurance I) Apply to specified property items despite cause of loss (covers) Securities ($2,000) ○ Stocks/bonds/securities ○ Up to $2,000 (total) ○ If docs are on premises: should be in a safety deposit box at financial institution (not safe on premises) DEFN Cash Cards: ○ Cards that store cash value electronically. ○ Payment without personal ID number/no direct access to bank/other account ○ Small limit encourages use of financial institutions for safekeeping  Categories of Special Limits of Insurance I) Apply to specified property items despite cause of loss (covers) Property of students temporarily away from home ($2,500) Money/bullion ($200) - Money, cash cards ○ Small limit → makes parties think about using financial institutions Garden-type tractors (attachments/accessories) ($5,000) Watercraft ($1,000 limit = total) ○ watercraft/furnishings/equipment/accessories /motors Computer Software ($2,500) (not hardware) ○ Cost: computer games, home management/personal financial prgms ○ Excludes gathering/assembling data cost Spare auto parts ($1,000)  Categories of Special Limits of Insurance ii) Stolen property items Property affected by limit Jewellery/watches/gems/fur garments, fur-trimmed garments ($2,000 total) Numismatic property (coin collections) ($200 total) Manuscripts/stamps/philatelic property (stamp collections ($1,000 total) Collectible cards (sports cards) ($1,000 total) Bicycle, equipment accessories ($500 total) Limits: for TOTAL values EACH classes Ex. Payment for theft of jewellery/watch/gems/furs limited to $2,000 TOTAL  Categories of Special Limits of Insurance ii) Stolen property items Does not apply to: Losses from specific perils Jewellery ($25,000) insured (full value) if loss by fire/explosion/other peril Parties with this property should buy add’l coverage Off Premises exposure to loss ○ Ex. jewellery/furs usually worn away from premises, s ○ Ex. jewellery is forgotten in a public washroom ○ Ex. Theft of fur coat at restaurant/theatre, ○ MAY BE RECOVERABLE under business’ liability insurance Claims take time: settle/ be disputed  Categories of Special Limits of Insurance ii) Stolen property items IBC homeowners forms used to make changes to forms ○ Brokers must know individual insurers’ policies ○ If do not advise of limits, may result in errors/omissions claim Special Limits of Insurance Summary Form: ○ Used during sales presentation ○ Renewal: check with insured to see if any changes are necessary  Coverage D - Additional Living Expense Three coverages Additional living expense(s) Fair rental value Civil authority  Coverage D - Additional Living Expense 1) Additional Living Expense Applies when Damage to dwelling is by insured peril OR is enough to make dwelling unfit for occupancy/insured must move out during repairs Basis of Claim Payment Pays “Additional living expenses” ONLY ○ Add’l expenses when forced to live away from home (eat at hotel) ○ Kennel for family pet ○ Taxi fare to get to/from school (children) ○ Moving items to new temporary location Insurer obligated pays add’l living expenses ONLY  Coverage D - Additional Living Expense 1) Additional Living Expense Basis of Claim Payment Ex. Before loss: lodging/food for family ($999/month) after loss ($1,400/month) Amount payable ($500/month ($1,400-900 = $500)) Payment limited: expenses so insureds maintain normal/standard living Can’t “improve standard of living” ○ Ex. Own 800 sq ft bungalow, don’t need to rent a 1600 sq ft dwelling Pay ONLY ○ (Reasonable) time to repair/rebuild dwelling ○ If insured wants to permanently relocate: payment for time to settle at new dwelling  Coverage D - Additional Living Expense 1) Additional Living Expense Payment limit: necessary expenses needed to maintain normal/standard living Coverage doesn’t always continue until reoccupation of dwelling/permanent relocation Coverage duration is determined by insurer ○ Reasonable time frame for the circumstances: Ex. Contractor hired doesn’t start/work with (reasonable) speed to repair/rebuild, insurer may limit payment to a “reasonable time frame.” If insured advises they will permanently relocate but do not do so within a “reasonable time frame,” coverage is limited to what insurer decides as fair  Coverage D - Additional Living Expense 2) Fair Rental Value Renting part of dwelling/detached private structure (garage) ○ Loss of rental income if property is unfit for occupancy Two conditions: ○ i) Payment for reasonable time for proper repair/replacement ○ ii) No payment for expenses not continuing while rented of property is is unfit for occupancy Ex. After loss, insured doesn’t have to pay for electricity/water ○ Costs: deducted from payment amount  Coverage D - Additional Living Expense 3) Access Prohibited by Order of Civil Authority Insurer will pay add’l living expense/rental value not more than 2 weeks WHEN: Property access: prohibited by civil authority order ○ Ex. Riot may result in insureds being denied access to dwelling ○ Order usually from civil authority: chief of policy/local gov’t official ○ Extra living expenses/lose rent (tenants denied access) ○ Homeowners forms give payment of these Peril causing order is insured by insured’s policy ○ Ex. Order to evacuate due to earthquake: no coverage for add’l living expense/fair rental value UNLESS earthquake is on policy Covers no more than 2 weeks for living expense for mass evacuation ○ Order (civil authority) due to sudden/accidental event in CDA/USA ○ Ex. Train derails when carrying dangerous chemicals ○ Ex. Poisonous gases escape at nearby industrial plane  Coverage D - Additional Living Expense 3) Access Prohibited by Order of Civil Authority Not included: additional living expenses due to mass evacuation due to: ○ Flood (waves/tides/tidal waves/rising of, breakout out, overflow of, water (natural or man-made)) Ex. Those ordered from their homes due to flooding of Winnipeg’s Red River (May 1007), had to pay for their own living expenses during period of evacuation ○ Earthquake ○ War/invasion/foreign enemy act/hostilities/civil war/rebellion/revolution/insurrection/military power ○ Nuclear incident/explosion (Nuclear Liability Act) ○ Contamination via radioactive material  Coverage D - Additional Living Expense The textbook does not contain a #4. Please continue to #5.  Coverage D - Additional Living Expense 5) Extensions of Coverage Same for All Forms (additional charges) i) Debris Removal: IF amount payable for loss is more than insurance amount, THEN additional 5% of THAT amount can cover debris removal expense ii) Property Removed Removed for protection from loss/damage (30 days OR until policy expiry) iii) Moving to Another Home Property in transit to/at another location to be insured’s principal residence Restricted: Canada, 30 consecutive days/until policy expires/is terminated iv) Fire Department Expenses Not usual for municipalities to charge for firefighting BUT if neighbouring fire dept. is called to work on a serious fire, a bill is created ○ Forms provide up to $1,000, deductible not applied  Coverage D - Additional Living Expense 5) Extensions of Coverage Same for All Forms (additional charges) V) Change of Temperature Damage to personal property: temperature change due to physical damage to dwelling/equipment ○ Ex.Food in spoils because wiring in motor is damaged by fire/lightning ○ Ex. Vandals break building’s glass, house plants froze to death Before coverage is provided, what must be proven? (2) ○ Actual physical damage to building/equipment (from insured peril) Must be physical damage Property was in dwelling at time of loss NOT COVERED: household plants freezing from malfunction of insured’s furnace  Coverage D - Additional Living Expense 5) Extensions of Coverage Same for All Forms (additional charges) vi) Freezer Food Homeowners form (up to $2k): food in freezer on premises when loss/damage due to: Power Failure ○ Accidental interruption of electrical power (on/off) insured’s premises ○ No coverage: power supply is interrupted because of planned outage/not paying electrical services ○ Coverage EXCLUDED for food spoilage from: Circuit breakers/fuse operations Power supply disconnection (accidental or not) in building with freezer Mechanical Breakdown (damage to food freezer from spoiled food) ○ Insurer will pay (reasonable) expenses from insured to save/preserve food during freezer repair (no deductible)  Coverage D - Additional Living Expense 5) Extensions of Coverage Same for All Forms (additional charges) vii) Lock Replacement ALL homeowners forms: up to $500 to replace/re-key locks (principal dwelling) When keys are stolen AND is reported to authorities ○ Insurer will decide to replace lost keys/re-key locks (no deductible) viii) Tear-Out Repair of walls/ceilings/other parts of insured buildings because had to be torn apart for repair to pipes/domestic appliances from water damage No Coverage: ○ Cost: tearing out/replacing parts of building to repair damage from swimming pools/water mains  5) Extensions of Coverage Same for All Forms (additional charges) ix) Arson Conviction Reward (amount in addition to other policy limits) Insurer pays (up to $1,000 total) for info to help convict for arson connected to fire loss to property (no deductible) x) Credit/Debit Cards, Forgery/Counterfeit Money Up to $1,000 during policy period Credit cards (MasterCard, VISA, gas, grocery, department store cards) Covers amount from theft/unauthorized use of cards issued/registered in insured’s name Coverage Conditions Insured’s legal obligation to make payment (in card contract) Insured complied with all conditions of card Debit/automated teller cards ○ Covers amounts from insured’s bank account (debit/automated teller card is stolen)  5) Extensions of Coverage Same for All Forms (additional charges) x) Credit/Debit Cards, Forgery/Counterfeit Money Coverage conditions ○ Card’s access code/PIN must be separate from card: if insured writes number on card/on paper kept in same place as card, NO COVERAGE Forgery ○ Coverage when cheque/bank draft/other negotiable security (stock/bond) is cashed under signature (disguised as insured’s but is not) Counterfeit Money ○ CDN/USA paper currency accepted in good faith, but is counterfeit, insurer pays up to $200 for any ONE transaction during normal business hours ○ Not covered: Loss from using credit/debit/automated teller card by: Those residing in insured’s household Those that card has been entrusted to No deductible  Coverage D - Additional Living Expense 5) Extensions of Coverage Same for All Forms (additional charges) xi) Inflation Protection Insurer automatically increases amount (Section I Homeowners Form) if loss during policy by amounts connected to inflation: ○ a) Policy inception date ○ b) Most recent renewal/anniversary date ○ c) Date of most recent change to insurance amount ○ WHICHEVER IS MOST RECENT No losses during policy period ○ Value increase (inflation) automatically added to renewal/anniversary date ○ Limits (Extensions of Coverage) vary  Coverage D - Additional Living Expense 6) Basis of Claim Payment Same For All Forms Indemnity amount paid = limited to insured’s financial interest in lost/damaged property ○ Amount will not exceed applicable limit for that insurance type i) Dwelling building/detached private structures Loss/damage to insured building, insurer will pay repair/replacement costs (least) without depreciation deduction and MUST BE: ○ Completed in a reasonable time period ○ Same location ○ Same occupancy ○ Similar material quality  Coverage D - Additional Living Expense 6) Basis of Claim Payment Same For All Forms i) Dwelling building/detached private structures Guaranteed Replacement Cost Basis Dwelling building’s coverage Insurer pays total cost of repair/replacement, even if more than insurance was purchased for dwelling building AS LONG AS ○ Insurance amount bought on inception date of policy OR latest renewal date OR increased amount (inflation protection coverage) on date increase took effect WASN’T less than 100% of cost to replace dwelling (determined via valuation guide insurer accepts) ○ Insured hasn’t reduced insurance amount under amount valuation guide has determined ○ Insured notified insurer (within 90 days of start) of work/improvement/ extension/addition made to dwelling  Coverage D - Additional Living Expense 6) Basis of Claim Payment Same For All Forms i) Dwelling building/detached private structures If loss/damage ISN’T repaired/replaced Payment on actual cash value basis Municipal by-laws improve standards of construction Serious loss: municipality might need upgraded materials for repair/replacement Building permit not given unless insured agrees to standard Additional costs to comply with by-laws aren’t covered Endorsement covering add’l cost may be added (chapter 3)  Coverage D - Additional Living Expense 6) Basis of Claim Payment Same For All Forms ii) Personal Property Electronic Media Payment limited to cost of reproducing lost/damaged media from duplicates/originals of previous media generation No payment: cost to gather/assemble info/data for reproduction Records (books of account, drawings/card index systems Payment: cost of blank books/pages/cards/materials PLUS cost of transcribing/copying records  Coverage D - Additional Living Expense 6) Basis of Claim Payment Same For All Forms ii) Personal Property Settlement: Replacement Cost Basis (all other personal property) excluding: ○ Irreplaceable articles (antiques/fine arts/paintings/statuary) ○ Articles’ age/history (value) memorabilia/souvenirs/collectors items ○ Property not properly maintained/workable condition ○ Property not used for original purpose any longer Eliminates items allowed to accumulate: ○ Clothing not in fashion anymore ○ Electrical appliances replaced but not discarded Settled on actual cash value basis  Coverage D - Additional Living Expense Replacement Cost Basis Settlement: Insurer will pay (without depreciation deduction) the LOWER of: ○ Cost to repair property (similar kind/quality of materials) OR ○ Cost to replace property with NEW (similar kind/quality/usefulness) Insured has to repair/replace lost/damaged property as soon as REASONABLY possible. If not, settled on actual cash value basis Insureds can choose to settle on actual cash value basis: ○ When don’t want to repair/replace article(s) ○ If change minds later, insurer will pay difference between actual cash value (of property) and replacement cost (within 180 days after loss date)  Definitions Actual Cash Value ○ The replacement cost of lost/damaged property LESS depreciation ○ Determine depreciation amount: Consider condition of property IMMEDIATELY before damage Consider resale value Consider normal life expectancy  Definitions Parts ○ Loss/damage to one/more parts of property (consists of several parts), settlement is value of lost/damaged part (including installation) Carpeting/tiles/linoleum installed Deductible ○ Applies to all property losses Loss that involves different property types (dwelling and personal property) only one deductible may be applied to total claim ○ Claim about personal property on Special Limit of Insurance applies Limit applies to losses exceeding deductible amount Ex. Insurer pays full $5,000 for claim for garden type tractor ($8,000) subject to $500 deductible. Limit applies to part of loss exceeding deductible ($8,000-$500 = $7500) Insurance Under More Than One Policy IBC’s homeowners forms have Special Limits of Insurance on specific personal property types. Add’l coverage can be purchased (separate policy) BUT ○ homeowners forms can’t cover unless insurance amount by other policy is INSUFFICIENT If there are multiple policies insuring property (not specifically described), policy pays rateable proportion of loss/claim ○ If homeowners form insures 75% of combined insurance bought on unspecified property, will pay ONLY 75% of ANY loss  Section 2 - Liability Coverage Liability coverage is on all homeowners forms (same for each form) Underwriting Homeowners Forms Replacement cost basis for dwelling/detached private structure/personal property (limits must correctly show property’s replacement cost) Determine insurance amount for Section 1 - Property Coverages: Step 1: Determine replacement cost of dwelling ○ Valuation guide (accepted by insurer) lets broker determine cost ○ THEN other Section I coverages are % of that amount  Common Approaches Coverage A- Dwelling Building ○ Dwelling replacement cost is $200,000 Coverage B - Detached Private Structures ○ Insurance amount equal to 10% of limit for dwelling ○ Amount = in addition to limit under Coverage A - Dwelling Building ○ Brokers must ask: number/type/value of detached private structures when taking insurance applications If amount from homeowners form is insufficient to insure full value, add’l insurance may be added  Common Approaches Coverage C - Personal Property Insureds suffering total losses to personal property are usually under-insured ○ Insurers usually require amount purchased to be equivalent to 90-100% of insurance bought for Coverage A - Dwelling Building Must ALSO BUY Coverage A - Dwelling Building Ex. Insurer with 90% insurance provides $180,000 coverage for personal property ($200,000 x 90%)  Common Approaches Coverage D - Additional Living Expense Limit for add’l living expense is usually 20% of Coverage A - Dwelling amount (Ex. Insurer = $40,000 coverage ($200,000 x 20%)) Homeowners forms usually have limits for Section 2 - Liability Coverage ○ Coverage E - Personal Liability ($1 million) ○ Coverage F - Voluntary Medical Payments ($1,000/person) ○ Coverage G - Voluntary Payment for Damage to Property ($500/occurrence) ○ Coverage H - Voluntary Compensation for Residence Employees (as per schedule) Coverages are sold in packages (insurer does not allow deletions) ○ Ex. Insured doesn’t have detached private structures, but insurer won’t delete coverage  Single Limit Policies Insurance limits under Coverages A-D = combined into one limit Advantage: ○ Policies issued with separate limits (Coverages A-D) ○ May be insufficient coverage if serious loss to one (or more) coverages Insured won’t receive complete indemnity when total insurance amount bought was inadequate to cover entire loss ○ Not likely if valuation guide was used  Important Terms So Far Students take two minutes to write down one important term that has been discussed so far in the course, in the chat window. Remember the Forgetting Curve!  Section 2 - Homeowners Form Three Homeowners Forms Coverages Homeowners Basic Form (IBC 1151) Homeowners Broad Form (IBC 1153) Homeowners Comprehensive Form (IBC 1155) Insurers change IBC wordings  Homeowners Basic Form (IBC 1151) Coverages: Homeowners Form Insures 13 Perils Peril 1: Fire/Lightning Residential fires = nearly half of all fires Lightning: damage to electrical devices/appliances Peril 2: Explosion (doesn’t include water hammer) Broad: Explosions from hot water heaters/domestic boilers for heating Water Hammer: force from water/steam when air trapped in pipes restricts flow ○ Extreme pressures make pipes pull apart/explode ○ NOT COVERED: Structural/other damage to dwelling/personal property from explosions  Homeowners Basic Form (IBC 1151) Peril 3: Smoke: sudden/unusual/faulty operation of heating/cooking unit in/on premises (not smoke from fireplace) Loss/damage (smoke damage) from sudden/unusual/faulty operation of heating/cooking unit in/on premises COVERED: Smoke damage from sudden/faulty operation of heating furnace in basement NOT COVERED: smoke damage from fireplace Peril 4: Falling Object: (that strikes building exterior) Coverage: ○ Damage to dwelling/detached private structures by falling objects Payment: ○ Personal property damage from peril when insured can establish falling object was responsible for damage  Homeowners Basic Form (IBC 1151) Peril 5: Impact by Aircraft/Land Vehicle: Coverage for parties living near airport Loss from land vehicle impact: dwellings at dead end street/street corner have higher exposure to loss (wet/icy weather) NO COVERAGE ○ Damage is from insured/employee of insured ○ Impact by vehicle owned/operated by you/employees. ○ Animals aren’t insured Covered: Pets (personal property (unless excluded)) ○ Ex. Injury/death from fire/lightning/explosion: payment for value of animal less deductible Peril 6: Riot All damage from riot is covered  Homeowners Basic Form (IBC 1151) Peril 7: Vandalism/Malicious Acts No Coverage: ○ a) Loss/damage during building construction/vacancy (even if permission for construction/vacancy is given) insurers exclude expected losses Construction sites/vacant buildings are unsupervised for extended periods of time, damage is expected ○ b) You cause it Intentional loss/damage by insured/children/insured person ○ c) Theft/attempted theft (covered by Peril 12) Malicious Act (Wrongful act without legal justification/excuse) ○ Ex. MALICIOUS: Jane has a grudge against Jack and sprinkles baking soda/baby powder on insured’s rugs/furnishings/cupboards Large cleaning cost but policy only pays for property lost/damaged  Definitions DEFN Malicious Act ○ Wrongful act without legal justification/excuse ○ Doesn’t have to end in property destruction DEFN Vandalism ○ Destroying property wilfully/ignorantly DEFN Vacant: ○ Circumstances (regardless of furnishings) where all occupants are moved out/no intention to return/no new occupant is residing OR no occupant has YET taken residence  Homeowners Basic Form (IBC 1151) Peril 8: Water Damage: COVERS: Loss/damage due to: a) Sudden/accidental water escaping from watermain b) Sudden/accidental water/steam escape from plumbing/heating/sprinkler/air conditioning system/domestic water container (inside dwelling) c) Sudden/accidental water escape from domestic water container (outside dwelling) NOT DUE TO FREEZING (freezing is not covered) d) Water entering dwelling through opening from sudden/accidental insured peril (other than water)  Homeowners Basic Form (IBC 1151) Peril 8: Water Damage: NO COVERAGE: a) Due to freezing (during heating season) ○ i) In a heated portion of dwelling (if away from premises more than 4 days in a row) Covered if have arranged for (competent) person to enter and maintain dwelling every day OR Water supply is shut off/all pipes/domestic water containers are drained ○ ii) In unheated portion of dwelling b) Due to continuous/repeated water seepage/leakage c) Due to backing up/escape of water from sewer/sump/septic tank  Homeowners Basic Form (IBC 1151) Peril 8: Water Damage: NO COVERAGE cont’d: d) Due to groundwater/rising water table e) Due to surface waters (unless water escapes from freezing during heating season f) Due to shoreline ice build-up/water-borne ice/other objects ○ (regardless of due to wind or not) g) To watermain h) To system/domestic water container water escaped from i) During building construction/while vacant, even with permission.  Definitions DEFN Ground Water: ○ Water in soil under surface - not limited to water in wells/underground streams/percolating waters DEFN Surface Water: ○ Water on surface of ground; doesn’t accumulate (lakes/ponds) DEFN Watermain: ○ Pipe that forms part of water distribution system ○ Conveys consumable water - not waste water DEFN Domestic Water Container: ○ Device/apparatus (personal use) on premises to contain/heat/chill/dispense water  Homeowners Basic Form (IBC 1151) Peril 8: Water Damage: COVERAGE: Sources of Water Damage: Sudden/accidental water escape from watermain ○ Public watermain breaks resulting in big loss to insured property (basements, personal property within) Sudden/accidental water/steam escape from plumbing/heating/sprinkler/air conditioning system/domestic appliance (inside dwelling) ○ Ex. Water escaping from sink/tub (overflowing) Ex. Water escaping from waterline punctured by nail (renovations) Ex. Automatic sprinkler system going off accidentally in dwelling Ex. Accidental water discharge/overflow from appliances (dishwashers, clothes washers, hot water heaters, water softeners, humidifiers)  Homeowners Basic Form (IBC 1151) Peril 8: Water Damage: COVERAGE: Sources of Water Damage: Sudden/accidental water escape from (domestic) water container outside dwelling. (not covered when due to freezing) Ex. hot tub/swimming pool Water entering through opening created by insured peril (other than water) suddenly/accidentally  Homeowners Basic Form (IBC 1151) Peril 8: Water Damage: NO COVERAGE: Water Losses Excluded FREEZING: Any part of plumbing/heating/sprinkler/air con system/domestic water container UNLESS loss is in in portion of dwelling during usual heating season If away more than 4 consecutive days, BUT arranged for competent person to enter dwelling DAILY check heating ○ Competent person must agree. If person doesn’t fulfill duties, insured only has to show they made the arrangement. ○ Ex. neighbour’s 12 year old child may not be “competent” OR has shut off water supply/drained pipes/appliances ○ Removes majority of exposure to freezing loss Insureds aren’t required to inform insurer they will be away 4+ days  Homeowners Basic Form (IBC 1151) Peril 8: Water Damage: NO COVERAGE: Water Losses Excluded Due to continuous/repeated water seepage/leakage Avoid paying for preventable losses with proper maintenance Ex:Leaking water lines/hoses connected to household appliances (water) Due to backing up/water escape from sewer/sump/septic tank ○ Sewer Back-up ○ Ex. Rainstorms in Regina/Saskatoon/Sask. $40 million in damages in 1 month ○ Sewer back up coverage is in some policies (may be optional coverage) ○ Volume of water outside foundation walls can’t be handled by weeping tile installed, water collects in sump hole (below lowest level of building) Usually water is absorbed into sewer/pumped out of building (sump pump) Water escapes sump when too much water  Homeowners Basic Form (IBC 1151) Peril 8: Water Damage: NO COVERAGE: Water Losses Excluded Due to backing up/water escape from sewer/sump/septic tank Dwelling with no public sewer services, septic tank is installed to collect waste: when too full, contents back up/cause damage Due to ground water/water table rising Due to surface waters UNLESS sudden/accidental water escape from watermain Ex. Damage via water collecting on ground after heavy rain/waters/seeps into dwelling (basement walls/floors/planned openings) EXCLUSION DOES NOT APPLY: When loss is because of a sudden/accidental water escape from watermain  Homeowners Basic Form (IBC 1151) Peril 8: Water Damage: NO COVERAGE: Water Losses Excluded Due to shoreline ice build-up/water-borne ice/other objects (regardless of being wind-driven) To water main To system/appliance (that water escaped from) While building under construction/vacant (regardless of permissions)  Homeowners Basic Form (IBC 1151) Peril 9: Windstorm or Hail EXCLUDED: Loss/damage personal property in building/to interior of building due to windstorm/hail/coincidental rain damage – Unless storm creates opening in building COVERS Loss to buildings/personal property from ○ windstorm/hail/coincidental rain damage Damage to dwelling interior/personal property inside when can show: ○ storm FIRST created opening in building  Homeowners Basic Form (IBC 1151) Peril 9: Windstorm or Hail NO COVERAGE: a) Outdoor radio/tv antennae (satellite receivers)/attachments b) From weight/pressure/melting ice/snow/waves/floods ○ (regardless of whether wind-driven or not) c) From waves/floods ○ (regardless of whether wind-driven or not) Outdoor radio/tv antennae (satellite receivers/attachments): ○ Light construction = easy losses Dwellings/buildings along lake-front/ocean-side exposed to melting ice/snow pushed ashore by water/wind ○ Damage from weight, pressure, melting snow/ice Loss from waves/floods ○ Even if due to wind  Homeowners Basic Form (IBC 1151) Peril 10: Glass Breakage Glass that is part of dwelling/private structure on premises (Incl. storm windows/doors) covered if breakage is accidental COVERS: ○ Accidental breakage to glass that forms part of dwelling/detached private structures (Ex. exterior building glass, interior door glass, glass tiles/building blocks) Extends to: storm windows/door glass: ensuring items still covered when removed for storage/repair ○ Accidental glass breakage from: Ground shifting/earth movement Accidents  Homeowners Basic Form (IBC 1151) Peril 10: Glass Breakage NO COVERAGE If building is under construction/vacant ○ Regardless of permission Accidental breakage of personal property glass items ○ Ex. accidental breakage of lamps, glass, ornaments, dishes, not covered by policy  Homeowners Basic Form (IBC 1151) Peril 11: Transportation Loss/Damage due to collision/upset/overturn/derailment/stranding/sinking of any auto/attached trailer where property is carried Conveyance of common carrier NO COVERAGE: Loss/damage to: a) Property in vacation/home trailer (that you own) b) Watercraft/furnishings/equipment/motors  Homeowners Basic Form (IBC 1151) Peril 11: Transportation COVERS: Loss/Damage to: a) Personal property removed (temporarily) from premises b) Building fixtures/fittings removed (temporarily) from premises for repair/seasonal storage For parties taking personal property on business trips/holidays ○ NO COVERAGE: Property in vacation/home trailer (removed temporarily or not) Watercraft/furnishings/equipment/motors Building fixtures/fittings removed temporarily for repair/seasonal storage ○ Ex. storm doors/windows, building shutters, kitchen counters/cupboards, furnaces, air conditioners ○ Covers when items removed temporarily for repair/seasonal storage/returned after repaired/stored  Homeowners Basic Form (IBC 1151) Peril 11: Transportation Applies to conveyance of common carrier Types of Losses Insured (Covered) Accident where property is transported via automobile/trailer Perils ○ Collision ○ Upset ○ Overturn ○ Derailment ○ Stranding/sinking When property is transported via land, rail, water Extends to loss when transported by common carrier (moving company)  Homeowners Basic Form (IBC 1151) Peril 12: Theft (Damage from attempted theft) NO COVERAGE A. Loss/damage at another dwelling you own/rent/occupy, except when temporarily living at dwelling B. Loss/damage from part of dwelling rented to others from theft/attempt by tenant/tenant’s employee/member of tenant’s household C. Loss/damage to property in/from dwelling under construction OR materials/supplies used in construction until dwelling is complete/ready for inhabitants D. loss/damage to animals/birds/fish E. loss/damage from change in property ownership agreed upon even if change was fraudulent/due to trickery  Homeowners Basic Form (IBC 1151) Peril 12: Theft (Damage from attempted theft) COVERAGE Theft (broadest crime coverage) ○ Any means of taking property without owner’s consent Damage from Attempted Theft ○ Unsuccessful attempts still may result in a lot of damage ○ Insures cost of replacing broken locks/damage to chests/trunks/cupboards/drawers  Homeowners Basic Form (IBC 1151) Peril 12: Theft (Damage from attempted theft) Theft Losses EXCLUDED a) Loss/damage at other dwelling you own/rent/occupy EXCEPT while temporarily living at dwelling ○ Covers: personal property anywhere in world (excluding undesirable locations) ○ Ex. Homeowners form won’t cover theft coverage for items left at another dwelling (cottage/ski condo) owned/rented/occupied by for varying periods ○ Covers: personal property brought to location temporarily living at  Homeowners Basic Form (IBC 1151) Peril 12: Theft (Damage from attempted theft) Theft Losses EXCLUDED b) No coverage: part of dwelling rented (caused by theft/attempt by tenant/tenant’s employee/member of tenant’s household) ○ If part of dwelling is rented to others, theft from that part is excluded Onus on insured to pre-qualify renters ○ Exception: When (above) steal property/damage part of premises they do not occupy Ex. (Above) takes property from furnished basement suite rented to other tenants, insurer pays claim  Homeowners Basic Form (IBC 1151) Peril 12: Theft (Damage from attempted theft) Theft Losses EXCLUDED c) No Coverage: loss/damage to property in/from dwelling under construction OR materials/supplies for construction UNTIL dwelling is complete/ready for occupancy d) No Coverage: loss/damage to animals/birds/fish ○ Animals/birds can wander/fly away/never return ○ Expensive fish excluded because they are a temptation to claim loss under theft coverage e) No Coverage: loss/damage change of property ownership agreed upon, even if was due to fraud/tricks ○ Ex. Insured sells insured property, but cheque is fraudulent NO COVERAGE  Homeowners Basic Form (IBC 1151) Peril 13: Electricity Sudden/accidental damage via artificially generated electrical current ○ Covers: damage from electrical devices via sudden increase/reduction of power (power surges/brownouts) Damages wiring/circuitry  Homeowners Basic Form (IBC 1151) Exclusions (in Homeowners Basic Form (IBC 1151) Property Not Insured Buildings/structures: whole/part for business/farming ○ Using dwelling for habitation and business increases risk ○ Excluded unless insurer consents AND description of commercial use is on Coverage Summary page Property at fairground/exhibition/exposition to exhibit Hobby club members display work/property (cards, memorabilia, antique dolls, ceramics, crafts, guns, stamps, coins) in public place Concern: supervision/protection not be adequate Concern: property is at location overnight/extended periods  Homeowners Basic Form (IBC 1151) Exclusions (in Homeowners Basic Form (IBC 1151) Property Not Insured Loss/damage to illegally acquired/kept/stored/transported property/property subject to forfeiture ○ Stolen property cannot be claimed: Ex. Insureds steal computer/buy one known to be stolen, cannot recover because is stolen ○ Insureds with guns/weapons contrary to law aren’t insured Loss/damage after dwelling is KNOWINGLY vacant 30+ (consecutive) days ○ Insureds moving out believe policy continues but not more than 30 consecutive days ○ Coverages STOPS when premises is “vacant” including: Vandalism/malicious acts Water damage Glass breakage  Homeowners Basic Form (IBC 1151) Exclusions (Homeowners Basic Form (IBC 1151) Property Not Insured Loss/damage: intentional criminal act/failure to act BY ○ a) Party insured by policy ○ b) Other party directed by person insured by policy ○ Ex. Insured’s child encourages friend to burn down insured dwelling Loss/damage (personal property) during process applying heat but results in damage to other property ○ NO COVERAGE: Ex. Insured burns clothing when ironing ○ COVERS: Insured burns clothing (ironing), fire results damages property Loss/damage due to release/discharge/dispersal of fuel oil ○ NO COVERAGE: damage from escaping domestic fuel oil ○ Limitations to clients with oil fuel furnace 2) Homeowners Broad Form (IBC 1153) Combines coverage: Homeowners Basic Form (IBC 1151) AND Comprehensive Homeowners Form (IBC 1155) All Risks Basis ○ Covers: dwelling/detached private structures Named Perils coverage: ○ For property equivalent to coverage under Homeowners Basic Form (IBC 1151)  3) Homeowners Comprehensive Form (IBC 1155) Broadest habitational coverage form Advantages ○ All property insured covered: “ALL RISKS:” Doesn’t cover all losses Insureds think they are covered for everything Should be: Insures against all risks direct physical losses/damages (subject to conditions/exclusions) 3) Homeowners Comprehensive Form (IBC 1155) Losses Covered Examples: ○ Loss/damage to dwelling AND personal property (fireplace smoke) ○ Roof collapse (snow load) ○ Impact (vehicle driven by insured) ○ Any other loss not excluded Property Not Insured ○ 1) Buildings/structures in whole/part for business/farming ○ 2) Property at fairground/exhibition/exposition to exhibit ○ 3) Property illegally acquired/kept/stored/transported/subject to forfeiture ○ 4) Evidence of debt/title  3) Homeowners Comprehensive Form (IBC 1155) Loss/Damage Not Insured 1) Sporting equipment loss/damage ○ Golf clubs/skis broken during use ○ Covered when damaged in accident/fire/insured peril 2) Animals/birds/fish ○ UNLESS by specific peril other than aircraft/land vehicle impact ○ Coverage essentially same as Homeowners Basic Form (IBC 1151) 3) Property lawfully seized/confiscated ○ UNLESS is destroyed to prevent fire spreading  3) Homeowners Comprehensive Form (IBC 1155) Loss/Damage Not Insured 4) Scratching/abrasion/chipping personal property OR breaking fragile/brittle articles UNLESS from Specified Peril, accident to land vehicle/watercraft/aircraft/theft/attempt Scratching/abrasion/chipping ○ Over time or suddenly (accident) ○ Ex: Scratching of sink/bathtub finish ○ Ex: Chipping of diamond/precious gems/stones in jewellery Breaking of fragile/brittle items ○ Ex: Dropping dishes when setting table COVERS: loss/damage due to specified peril, transport accidents, attempted/theft  3) Homeowners Comprehensive Form (IBC 1155) Loss/Damage Not Insured 5) Loss/damage to outdoor radio/TV antennae (including satellite receivers), attachments FROM wind/hail storm, weight of ice, snow/sleet, collapse Wind/hail storm ○ Satellite receivers a big risk Weight of ice/snow/sleet ○ Possible collapse ○ Most systems are made of lightweight materials with supports and that cannot withstand substantial weight increases  3) Homeowners Comprehensive Form (IBC 1155) Loss/Damage Not Insured 6) Wear/tear/deterioration/defect/mechanical breakdown Wear/tear/deterioration ○ Inevitable/natural losses from ordinary/reasonable use/ownership ○ Ex. frayed carpets, worn upholstery, sagging chesterfields Defect/mechanical breakdown ○ Warranty issue, not insurance ○ Ex. dishwashers, garage door openers, kitchen garburators stop working/properly  3) Homeowners Comprehensive Form (IBC 1155) Loss/Damage Not Insured 7) Cost of making faulty material/workmanship: Insurance doesn’t replace faulty/inferior materials with good quality materials ○ (Ex. Faulty lumber (to construct roof on dwelling) = not recoverable) ○ Material = inappropriate quality for use ○ Manufacturer/supplier is responsible Substandard workmanship ○ Ex. Roof collapses (improper rafter support) Exclusion: cost of faulty material or workmanship ○ Not to resultant damage ○ Ex. Cost to replace faulty roofing material/workmanship is excluded ○ Ex. Resultant damage to other parts of dwelling ARE COVERED  3) Homeowners Comprehensive Form (IBC 1155) Loss/Damage Not Insured 8) Setting/expanding/contracting/moving/bulging Eliminates maintenance losses (natural/expected ground movement) ○ Ex. Cracks in basement floors/foundation walls/walls/ceiling plaster Doesn’t apply to building glass breakage ○ Accidental breakage to building glass should be covered 9) Loss/damage to dwelling after it knowingly vacant for 30+ consecutive days 10) Due to nuclear explosion/incident (Nuclear Liability Act) 11) Due to radioactive material contamination 12) Due to war/invasion/act of foreign enemy/hostilities/civil war/rebellion/revolution/insurrection/military power  3) Homeowners Comprehensive Form (IBC 1155) Loss/Damage Not Insured 13) International/criminal act BY: a) Anyone insured by policy b) Others directed by insured 14) Loss/damage to personal property worked on where damage to other property is insured Processes/work: application of heat. Property being worked upon is excluded 15) Water Damage Check Homeowners Basic Form (IBC 1151)  3) Homeowners Comprehensive Form (IBC 1155) Loss/Damage Not Insured 16) From birds/vermin/rodents/insects except loss/damage to building glass Birds: damage building siding/roofing/electrical wiring/insulation Vermin: No definition so exclusion isn’t consistent (skunks not always vermin) Raccoons Rodents/Insects ○ Losses controlled by insured: damage to electrical wiring building insulation/upholstery/food items ○ Doesn’t apply to damage to building glass ○ Ex. glass breakage: bird/raccoon/fox entering/leaving building are insured 17) Due to smoke: agricultural smudging/industrial operations Damage from process/smoke damage from industrial operations (on/off premises) NOT COVERED  3) Homeowners Comprehensive Form (IBC 1155) Loss/Damage Not Insured 18) Due to snowslide/earthquake/landslide/other earth movement. If fire/explosion results, insurer only pays for loss/damage Dwellings on mountain side/bottom = increased risk of earth movement Earthquake (not everyone has same risk) ○ Impossible to price earthquake coverage ○ Can buy add’l coverage COVERAGE: if loss/damage is from fire/explosion Difficult to differentiate damage from earthquake/movement and damage from fire/explosion ○ Insurers amend policies, eliminating coverage for damage due to earthquake  3) Homeowners Comprehensive Form (IBC 1155) Loss/Damage Not Insured 19) From part of dwelling rented to others Due to attempted/theft from tenant/tenant’s employee/member of tenant’s household 20) From vandalism/malicious acts OR glass breakage while under construction/vacant 21) From attempted/theft of property in/from dwelling under construction OR Materials/supplies for construction UNTIL dwelling is ready to be occupied 22) Due to rust/corrosion/wet or dry rot/mould Rust/Corrosion (over time) – Losses: piping for plumbing/heating/air conditioning/other systems/domestic appliances (can be avoided by proper maintenance) Wet or dry rot/mould (conditions within insured’s control)  3) Homeowners Comprehensive Form (IBC 1155) Loss/Damage Not Insured 23) Due to release/discharge/dispersal of fuel oil (P. 2-26) 24) Due to change in property ownership that is agreed upon Regardless of fraud/tricks  Special Policies/Endorsements Most insurers provide coverage for add’l premium(s): ○ Watercraft ○ Personal computer ○ Coin and stamp collections ○ jewelry/furs ○ Antiques ○ Fine arts ○ Cameras ○ Silver/gold/pewterware ○ Musical instruments ○ Bicycles ○ Sporting equipment  Insuring Home Based Business Homeowners forms don’t cover home based businesses sufficiently If business property is added (to homeowners form), single insurance limit on Coverage Summary Page ○ Ex. one insurer $5,000 basic limit, but another $15-$25,000 limit Items insured/applicable limits (usually endorsements) Clauses can vary  Three Big Things Students have three minutes to write down three of the biggest or most important concepts we have gone over so far in class, in the chat window. Remember the Forgetting Curve!