CAIB 1 Chapter 3 Slides PDF

 Three Big Things Students have three minutes to write down three of the biggest or most important concepts (we did this last week!). After studying this past week, have these three big things changed? Remember the Forgetting Curve! Insurance Graphic Organizer What are the three...

 Three Big Things Students have three minutes to write down three of the biggest or most important concepts (we did this last week!). After studying this past week, have these three big things changed? Remember the Forgetting Curve! Insurance Graphic Organizer What are the three Insuring Agreements for Personal Property and explain each. (9 points) The following slides contain the information needed to answer this question.  Coverage C - Personal Property Three Insuring Agreements for personal property 1) On Premises Coverage Extended to “uninsured personal property of others,” WHILE a part of dwelling (occupied by insureds) ○ Payment regardless of if insured is responsible (or not) for loss Exception: ○ Roomers/boarders property (Tenants Package Form)  Coverage C - Personal Property Three Insuring Agreements for personal property 2) Off Premises Coverage Homeowners forms cover personal property that belongs to insured when temporarily away from insured’s premises (globally) ONLY personal property TEMPORARILY removed is insured ○ If normally kept at another location owned by insured, it isn’t covered ○ Ex. insured owns summer cottage, then has to have separate coverage ○ Ex. Personal property in a warehouse is insured ONLY against theft  Coverage C - Personal Property Three Insuring Agreements for personal property 3) Property of Students: living temporarily away from home Excluded: Motorized vehicle/their equipment Ex. autos, all-terrain vehicles, snowmobiles, golf carts, motorcycles Camper units, truck caps, trailers, their equipment (separate coverage) Aircraft or equipment (exclusion all types aircraft while refurbished/refinished on insured’s premises) ○ No coverage for any of above equipment Equipment: Tape decks/compact disc players, television sets, recording/transmitting equipment (must be operable: connected to electrical system of auto/aircraft) ○ DOESN’T INCLUDE: spare auto parts (spare tires, wheels, spark plugs/oil filters  What are the three Insuring Agreements for Personal Property and explain each. (9 points) Answer  Chapter 3: Other Habitation Section 1 - Other Habitational Insurance Forms Mobile home Insurance (IBC 1157) Mobile home (Concrete blocks/heavy timbers) Construction Methods: different from conventional houses. ○ Three conditions: 1. Factory built, 2. On own chassis, 3. Easily moveable On-site: on concrete/cement block foundation/on piers of concrete blocks/heavy timbers Constructing Mobile Homes: ○ Weight of home (selling features: light = easy transport) ○ Efficient utilization of space (furnishings/equipment built into home)  Major Causes of Loss 1) Fire New construction standards More likely to suffer total fire loss vs. conventional houses 2) Windstorm Space between ground/underside is covered with plywood metal skirt (reduces windstorm losses) Improves stability in windstorm: some insurers require tie downs equipped in/on units (straps over unit/both sides of foundation) If motorhome supported (timbers/concrete piers) tie downs secured to ground Modern units: tie downs incorporated into unit construction Rate credit may be given when unit is skirted/secured by approved tie down  Major Causes of Loss Cont’d 3) Hail Metal siding (most units) may become pitted (hail storm) Storm may not cause openings, but can affect appearance Some policies contain DENT CLAUSE: ○ Excludes payment unless exterior siding is torn/punctured by storm 4) Transportation Not common to other dwellings Collision/upset of transportation may result in total loss to mobile home “All Risk” mobile homeowners form (similar to all risk for regular dwellings)  Designing A Coverage Form IBC’s Mobile Homeowners Form (IBC 1157) insures conventional dwellings 1) Coverage A - Mobile Home Building a) Description of Dwelling Amended Description details special features of mobile homes Covers ○ Appliances, furniture/equipment forming permanent part of building ○ Permanently attached carports/garages ○ Awnings/skirting/porches/tie downs  Designing A Coverage Form Cont’d IBC’s Mobile Homeowners Form (IBC 1157) insures conventional dwellings 1) Coverage A - Mobile Home Building b) Emergency Removal Expense Included During loss (up to) 5% insurance amount (on dwelling) can be used to pay for (reasonable) expenses/removal from site Expenses paid by policy: ○ 1) Expenses for disconnecting water/power services ○ 2) Towing/transport Coverage insurance amount is within insurance limits ○ Ex. If removing home fails, amount pays for emergency removal expenses/loss to home limited to insurance amount (Coverage A - Mobile Home Building) ○ Deductible DOES NOT apply  Designing A Coverage Form Cont’d Designing a Coverage Form IBC’s Mobile Homeowners Form (IBC 1157) insures conventional dwellings 2) Coverage C - Personal Property Coverage (Coverage A - Mobile Home Building) on appliances, furniture, equipment forming permanent part of building ○ Insurance limit insures all items defined as “personal property”  Designing A Coverage Form Cont’d IBC’s Mobile Homeowners Form (IBC 1157) insures conventional dwellings 3) Exclusions Loss/Damage from moving (except emergency removal expenses) ○ No coverage: loss/damage when being moved Ex. If building is moved (site-site) for insured to be closer to work, separate transport coverage must be purchased Loss to conversion, embezzlement/secretion by person possessing building ○ No coverage if homeowner loses ownership from dishonest acts of person who possesses building Ex. contractor hired to move home then steals home  Designing A Coverage Form Cont’d IBC’s Mobile Homeowners Form (IBC 1157) insures conventional dwellings 4) Basis of Settlement - Actual Cash Value Losses to mobile home/detached private structures = settled on ACV basis Insurers believe: ○ Materials/construction methods for mobile homes make them less durable than regular homes (shorter life span/rapid rate of depreciation) Claims for personal property: ○ Covers on replacement cost basis (unless otherwise stated) All other ways: ○ Mobile Homeowners Form (IBC 1157) mirrors homeowner forms to insure other dwellings/related property  One-Minute Review Students have two minutes to write a One-Minute Review (1-3 sentences) of the most important thing you learned about today, in the chat window. Remember the Forgetting Curve!  Eligible for Homeowners Forms Mobile Homes can be eligible for coverage under homeowners forms Not mobile homes: ○ Insured as regular dwellings on homeowners forms Regular rates/premiums ○ Double wide mobile homes ○ Modular homes ○ Sectional homes ○ Full basement, all-electric heat, or gas/gun-fired oil furnace in basement  Tenants Package Forms (IBC 1161/1163) Parties occupying residential premises they don’t own: Living in apartment(s) Renting a dwelling/any portion of (Part of remuneration) receive use of a dwelling ○ Priests, large estate’s staff, employees working in remote locations Owners of business occupying private living quarters in mercantile/commercial building owned by business ○ Building must be under “commercial property insurance policy” Tenants have same exposures to property losses as homeowners Except loss to dwelling Many homeowners forms = duplicated in tenants package forms  Tenants Package Forms (IBC 1161/1163) IBC: Two tenants forms 1) Tenants Basic Form (IBC 1161) Coverage on Named Perils Basis Coverage = same as personal property on Homeowners Basic Form (IBC 1151) Accidental breakage of glass that forms part of building is REMOVED 2) Tenants Comprehensive Form (IBC 1163) Perils = same as Homeowners Comprehensive Form (IBC 1155)  Summary of Coverages (By Tenants Package Forms) a) Coverage A - Dwelling Building (building owner insures) b) Coverage B - Detached private Structures (building owner insures) c) Coverage C - Personal Property (tenant selects limit)= d) Coverage D - Add’l Living Expense - 20% of Coverage C (Personal Property) ○ Homeowners Form: coverage under Insuring Agreement = equal to 20% of dwelling building amount No coverage: tenants package forms for building Limit: based on insurance amount for personal property  Coverage Also Provided For (Personal Property) i) Improvements/betterments by/acquired at expense of tenant ○ Usually betterments covered by insurance amount for dwelling ○ Tenant isn’t owner of building SO insurer says will cover under limits of insured for personal property ii) Up to $500 for damage (excluding fire) to part of building insured occupies ○ Damage from attempted/theft ○ Damage from interior of building (vandalism/malicious acts) Tenants comprehensive Form (IBC 11634) covers: ○ Vehicle impact damage insureds cause to their part of dwelling  Condo Unit Owners Insurance (IBC 1167) Special Acts (all provinces) deal with establishment/regulation of Condo Corporations ○ Acts have a defn of condominium, outlines corporate structure Role/legal responsibilities of directors/officers ○ Ownership of building: in name of Condo Corporation Enacts own by-laws to govern/direct actions Formalized in the declarations Owners of Condos have interest in: ○ Parking area(s), Landscaping, Recreational areas ○ Owners have right to use elements but DON’T own them  The Condominium Act Condo Corporation must buy a single amount of insurance in its own name to cover: 1. Value of Building (originally constructed) like value of units owned by members ○ Members determine total insurance amount on building ○ Value of units vary due to differences (size/cost) Members must agree on determination formula to find proportion of insurance applied to each unit ○ Coverages to be bought, applicable deductibles, other considerations are on Declarations page and by-laws of corporation 2. Value of common elements ○ Residential Condominium Corporation Broad Form (IBC 4022) is used by most  Insuring Owner’s Interest The slides for “Insuring Owner’s Interest: 1) Personal Property, 2) Other Essential Coverages” have been moved to the CAIB 1 Chapter 3 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!  Basis of Payment 1) Personal Property - Replacement Cost ○ Loss payment for personal property is on replacement cost basis Unless stated otherwise 2) Unit Add’l Protection/Unit Improvements - Replacement Cost ○ Covers replacement cost basis (without depreciation deduction)  Seasonal Dwelling Insurance Premises owned/used by insured seasonally may be insured separately/added to habitational policy Seasonal Residence Form (IBC 1173) To insured seasonal dwellings/outbuildings/personal property owned by insured Covers under Named Perils Basis Perils insured = same as Homeowners Basic Form (IBC 1151) ○ No Coverage: transportation peril ○ Coverages on Coverage Summary Page Burglary/Robbery (Not broad theft coverages) Vandalism/Malicious Acts Glass Breakage ○ Add’l premium when added to policy  Seasonal Dwelling Insurance Cont’d Seasonal Residence Form (IBC 1173) Common Exclusions ○ No Coverage for property/losses: Property loss from temperature change Freezer food Outdoor trees/plants/shrubs  Seasonal Dwelling Insurance Cont’d Seasonal Residence Form (IBC 1173) Seasonal Dwelling Eligible for Homeowners Basic Form Coverage (IBC 1151) ○ Some insurers cover under Homeowners Basic Form (IBC 1151) if eligibility requirements are fulfilled: Principal residence = insured with same insurer Building is a year-round residence/occupied 1/60 days in the year Building isn’t rented to others Primary heating through thermostat-controlled furnace or electricity Building is accessible by maintained roadway year round SOMETIMES (add’l premium) insurers endorse to include collapse from snow  Dwellings in Course of Construction IBC Homeowners forms are limited: DOESN’T INSURE: Theft of materials from construction site Glass breakage (vandalism/malicious acts) Water escape/rupture/freezing Dwelling Under Construction - All Risk coverage form guidelines: Limited coverage (one-two family dwellings) Dwelling must be owner-occupied on completion of construction Coverage must be purchased no later than foundation completion Insurance amount bought no less than estimated completed value Coverage limit: one year Premium: Based on value of project to completion: Usually no refund on portion of premium  Rented Dwellings/Revenue Properties Insurers reserve best coverage forms for owner-occupied dwellings ○ Owned by insured BUT occupied by others ○ Usually has restricted coverage Policies insuring rented dwellings/other revenue properties usually exclude: ○ Vandalism/malicious acts ○ Sewer Back-Up ○ Theft Dwelling Building/Personal Property settlement usually restricted to ACV Usually insurers won’t give coverage unless: ○ Also provide insurance for owner’s principal residence  Section 2 - Common Habitational Endorsement Forms What Endorsements Do When attached to (habitational) policies: ○ 1) Covers excluded property/perils ○ 2) Increase property limits (subject to Special Limits) ○ 3) Broaden coverages ○ 4) Decrease deductible PAST: Endorsements eliminated/reduced deductible, NOW: deductible (if applicable) is on Coverage Summary page 5) Remove Coverage ○ Classes of insured property may be the same, but endorsements may differ: Ex. Exclusions, limitations, conditions, deductibles ○ IBC developed endorsement forms for use with habitational policies (often modified by insurers):  Fine Arts Endorsement (IBC 1113) Purpose Insures “fine arts” objects Traditional DEFN Fine Arts includes: ○ Paintings ○ Pictures ○ Bona fide works of art: rare, historical value, artistic merit: Valuable rugs Marbles/bronzes Rare books Manuscripts Rare glass  Fine Arts Endorsement (IBC 1113) Cont’d Background IBC’s habitational forms cover fine arts BUT still a need for broad coverages/equitable settlement basis Coverages “All Risks” includes ○ Marring/scratching ○ All smoke sources ○ Earthquake ○ Theft: tenant/members of tenant’s household/employees of tenant ○ Flood/sewer back-up, seepage, other water  Fine Arts Endorsement (IBC 1113) Cont’d Two Coverage Sections 1) Section A Insures objects that generally remain on insured’s premises/other location(s) on endorsement Covered: ○ If object(s) insured at multiple locations, losses incurred during transport between locations IS COVERED Up to 10% of total insurance can pay for losses at other location ○ Ex. Gallery/local show No Coverage: ○ Objects at a fairground/national/international exhibitions  Fine Arts Endorsement (IBC 1113) Cont’d Two Coverage Sections 2) Section B Portable objects (away from premises for long periods for exhibition/display/ use/safekeeping/restoration) usually insured here No Coverage: ○ Objects at fairground/national/international expositions Coverage: ○ All transport losses in coverage territory that insured/insurer agreed upon is provided by endorsement  Fine Arts Endorsement (IBC 1113) Cont’d Two Coverage Sections 2) Section B Valued Coverage Optional ○ Often impossible to replace original works of art Repair/replacement usually impossible ○ Provides insured option to insure fine arts on valued basis ○ Valued Policy: Insured/insurer agree (when policy is issued) to value of property If a loss, agreed value is paid ○ All objects don’t have to be insured on valued basis When insured on valued basis, “V” is beside objects with special basis Recognizes: Some objects are worth more than sum of materials to make  Fine Arts Endorsement (IBC 1113) Cont’d Two Coverage Sections 2) Section B Exclusions ○ a) Breakage ○ b) Birds, vermin, rodents, insects ○ Process or Work being done: losses may occur (restoration of fine arts objects is tricky) Special Conditions/Provisions ○ a) Newly Acquired Articles Up to 25% of insurance amount for newly acquired articles Immediate coverage: objects bought from gallery/auction/other Coverage limit: 30 days  Fine Arts Endorsement (IBC 1113) Cont’d Two Coverage Sections 2) Section B Special Conditions/Provisions ○ b) Packing/Unpacking Proper packing may eliminate/reduce damage from transit Fine arts objects must be un/packed by competent packers ○ c) Reinstatement Even if there is a loss, insurance amount provided isn’t reduced by amount of loss Insurer has to be advised in 30 days of acquired objects so can replace what is lost/damaged ○ d) Statutory/Additional Conditions Apply  Fine Arts Endorsement (IBC 1113) Cont’d Two Coverage Sections 2) Section B Underwriting Considerations ○ a) ALL objects described separately with specific amount ○ b) Breakage exclusion may be deleted for add’l premium ○ c) Insurer may need an independent appraisal on object Often when value of object is high Industry Use ○ Not all insurers use this endorsement  Term and Definition Students have two minutes to create a “flashcard” and write it in the chat window. Write the term and the definition. It can also be a concept. No concept is too simple! Remember the Forgetting Curve!  Personal Articles Endorsement (IBC 1114) Purpose Covers some high-valued personal property anywhere in the world Examples ○ Cameras, projectors, films, accessories ○ Firearms ○ Furs ○ Jewellery, precious stones, watches, musical instruments (non-professional) ○ Silverware ○ Stamps/coins  Personal Articles Endorsement (IBC 1114) Cont’d Background IBC’s habitational forms have Special Limits of Insurance for most personal property objects (previous slide) Advantages ○ Increased insurance limits ○ Broadens coverages Used to reduce/eliminate deductible under policies  Personal Articles Endorsement (IBC 1114) Cont’d Coverages “All Risks” is broadened: ○ Loss/damage to sporting equipment from USE ○ Chipping/marring/scratching/breaking ○ Accidental loss/damage while work is being done on it ○ Snowslide/earthquake/landslide/earth movement ○ Theft: tenant, members of tenant’s household, tenant’s employees ○ Flood/sewer backup, seepage, other water Comprehensive Homeowners Form (IBC 1155) provides: ○ Mysterious Disappearance Coverage applicable to jewellery Includes stones falling out of settings  Personal Articles Endorsement (IBC 1114) Cont’d Valued Coverage Optional Under this policy: ○ Insured/insurer agree (when policy issued) to value of property. ○ If there is a loss, amount is paid. Not all objects (or any) have to be insured on valued basis Exclusions (No coverage) Any musical instrument played for money (fee) UNLESS insurer has allowed this ○ (written consent)  Personal Articles Endorsement (IBC 1114) Cont’d Special Conditions/Provisions 1) Stamp/Coin Collections Stamp/coins represent total value of collection Blanket Basis: ○ i) Partial Losses: Max payable for one article is $250 If insufficient, items with higher values can be scheduled (this endorsement) ○ ii) Total Losses: Insured expected to insure 100% of total value of collection If total loss: Amount of Insurance Purchased/Cash market Value at Time of Loss = %  Personal Articles Endorsement (IBC 1114) Cont’d Special Conditions/Provisions 2) Newly Acquired Articles Up to $5,000 add’l coverage for newly acquired articles of type that is insured (by endorsement) ○ Ex. Wouldn’t apply to insure newly acquired camera equipment if cameras weren’t already insured If scheduled basis: insured for 30 days 3) Reinstatement In case of loss, insurance amount isn’t reduced by loss amount Coverage on scheduled basis: ○ Must advise insurer in 30 days of objects acquired to replace what was lost/damaged  Personal Articles Endorsement (IBC 1114) Cont’d Special Conditions/Provisions 4) Statutory/Add’l Policy Conditions Apply Underwriting Considerations ○ 1) Scheduled Basis: each article is described separately with amount ○ 2) Coverage for items for personal/private purposes ONLY Coverage for property used professionally/for remuneration, full details must be submitted (to insurer) Eligible for this endorsement coverage: part-time musicians/photographers ○ 3) Current valuation: Usually on individual items (jewellery/furs) above specified value Bill of sale/recent appraisal = usually enough to meet this  Personal Articles Endorsement (IBC 1114) Cont’d Special Conditions/Provisions 4) Statutory/Add’l Policy Conditions Apply Underwriting Considerations ○ 4) Insurer may need independent appraisal (Or re-appraisal on high-value items) ○ If coverage isn’t on valued basis, insureds obtaining appraisal(s) have less difficulty establishing value after object’s loss  Personal Articles Endorsement (IBC 1114) Cont’d Special Conditions/Provisions 4) Statutory/Add’l Policy Conditions Apply 5) Broker’s binding authority limited ○ Insurers can limit coverage on some types of personal property (jewellery/furs) Common limit: $10,000 ○ When all insured items exceed a total, insurer might require future additions to be authorized ○ Ex. Some insurers don’t allow coverage limits exceeding $30,000 ○ Industry Use Not all insurers who sell personal articles coverage use this Forms created by insurers borrow from this endorsement  Increased Cost Demolition or Construction (For Dwelling) (IBC 1180) Purpose Background Coverages/Limitations Industry Use Specials Conditions/Provisions  Miscellaneous Property Endorsement Form 1) Residence Glass Endorsement 2) Sewer Back-Up Endorsement 3) Earthquake Endorsement 4) Vandalism/Malicious Acts Extension Endorsement  Miscellaneous Property Endorsement Form Cont’d 5) Watercraft a) Property Insured b) Insured Perils c) Loss/Damage Not Insured i) Accumulative damage (cause by whatever) ii) Wear/Tear/gradual deterioration/latent defect/mechanical breakdown/corrosion/rust/dampness of atmosphere/freezing/extremes of temp. iii) Any work on insured property (except resultant damage from fire/explosion)  Miscellaneous Property Endorsement Form Cont’d 5) Watercraft c) Loss/Damage Not Insured Cont’d ○ iv) Dishonesty of those insured that property is entrusted to Excluding carriers for hire) ○ v) While insured property is: Rented/leased Insures watercraft used ONLY for pleasure Rented/leased boats puts insurer at higher exposure (add’l premium) ○ Used to carry passengers for compensation (exposure) Insures ONLY watercraft used for pleasure purposes ○ Operated in a race/speed test Applies to all races/speed tests involving watercraft  Miscellaneous Property Endorsement Form Cont’d 5) Watercraft d) Loss of Use ○ Sometimes limited coverage ($20/day subject to $200 limit during policy period) to rent substitute motor/boat when insured watercraft is damaged e) Additional Acquisition Cause (Varies between insurers) f) Territorial Limits ○ Restricted mostly to CDA/Continental USA g) Amount of Insurance ○ Insureds HAVE TO PURCHASE insurance equivalent to 100% of value of property covered - if not, insureds assume part of loss  Miscellaneous Property Endorsement Form Cont’d 5) Watercraft h) Basis of Settlement (normally ACV or replacement cost) i) Minimum Retained Premium (annual premium) ○ Premium is based on the fact that there is generally greater exposure to loss is in summer months ○ Most policies have a clause limiting premium amount to be refunded if coverage is cancelled (during policy term) ○ Ex. One policy requires MIN retained premium equivalent to 75% of annual premium j) Deductible (applies to coverages)  Miscellaneous Property Endorsement Form Cont’d 6) Travel Trailer Floater (Endorsement) Covers owned trailers/contents (all IBC habitational forms) Covers (usually) “All Risks” ○ Restricted to losses occurring in CDA/Continental USA Floater limits insurance amounts to % of insurance bought to cover contents ○ Jewellery, semi/precious stones, watches, fur garments, garments trimmed with fur ○ Subject to limit - ONE article(s) ○ Ex. 25% of coverage on contents subject to $500 limit on ONE article(s) If you buy this, it is not necessary to buy add’l physical damage coverages (usually on separate auto policy) Deductible specifications are on Coverage Summary Page  Miscellaneous Property Endorsement Form Cont’d Other Endorsement Forms Special endorsements for other property types: ○ Motorized vehicles (golf carts, all terrain vehicles, snowmobiles) ○ Horses/livestock ○ Bicycles ○ Business Property ○ Sports equipment (sportswear) Broker’s detailed survey of every client’s loss exposures: ○ ID exposures ○ Analyze recommended coverage form (check for gaps in coverage) ○ If gaps: check endorsements to eliminate gaps If no form, insurers often remove restrictions/add specially prepared  Recall and Write Students have three minutes to summarize this chapter in 3 sentences or write a question about it, in the chat window. Remember the Forgetting Curve!