Fundamentals Chapter 6.pptx

 The Muddiest Point Students take two minutes to write down the most confusing concept for you right now. What do you find difficult to understand? Remember the Forgetting Curve!  CHAPTER 6 - PERSONAL PROPERTY (HABITATIONAL INSURANCE) $3 billion is spent annually to insure habitatio...

 The Muddiest Point Students take two minutes to write down the most confusing concept for you right now. What do you find difficult to understand? Remember the Forgetting Curve!  CHAPTER 6 - PERSONAL PROPERTY (HABITATIONAL INSURANCE) $3 billion is spent annually to insure habitational property HOMEOWNERS FORMS IBC Homeowners Forms - Mid 1960s Three forms ○ Homeowners Basic Form (IBC 1151) ○ Homeowners Broad Form (IBC 1153) ○ Homeowners Comprehensive Form (IBC 1155) ○ INSURANCE COMPANIES usually make changes to these forms Eligibility for Coverage ○ Homeowners forms are to insure single family dwellings that people live in year-round ○ Also for dwellings in course of construction when insured intends to occupy the dwelling when it is complete  COMMON CHARACTERISTICS 1. Clear Language Approach 1979 Homeowners Forms were changed to move a lot of the jargon and legal phrases so that it was easier to read and understand 2. Common Format or Structure Brokers can easily locate answers to questions no matter what form is being used 3. Policy Definitions Uniform WHO IS INSURED ○ a) Person named on the policy Persons insured AKA THE INSURED, OR YOU, OR YOUR under Section I - Property Coverages “The person named as Insured on Coverage Summary page AND those living in the same household  COMMON CHARACTERISTICS 3. Policy Definitions Uniform WHO IS INSURED b) Spouse/partner of named insured ○ Insurance policies are usually issued in ONE NAME ONLY, and the spouse is allowed to make a claim, BUT before making payment, insurer must have evidence that the person is married to the Named Insured ○ Marriages recognized in law involve a religious or civil ceremony PARTNER of Named Insured in Common Law will be covered only if they can PROVE THEY ARE: ○ A person living with Named Insured in a conjugal relationship outside marriage CONTINUOUSLY for THREE YEARS OR ○ The natural OR adoptive parent of a child, living with Named Insured, for ONE YEAR  COMMON CHARACTERISTICS 3. Policy Definitions Uniform WHO IS INSURED COMMON-LAW RELATIONSHIP GAPS ○ If it is apparent that the definition of spouse doesn’t include the Name Insured’s common law partner THEN broker should put proper coverage in place ○ Could mean adding the partner’s name to the existing policy or they get their own policy  COMMON CHARACTERISTICS 3. Policy Definitions Uniform WHO IS INSURED ○ c) Relatives of EITHER spouse/partner Children, parents, grandparents, other family members living with insureds ○ d) Persons under 21 in the care of Named Insured Foster children, exchange students Borders ARE NOT IN THE CARE OF INSUREDS, and are not insureds under the policy Tenant’s insurance  COMMON CHARACTERISTICS 3. Policy Definitions Uniform WHO IS INSURED ○ e) Students attending school, college, university Students over 21 BUT MUST BE in full time education AND dependent on insureds ○ ALL PERSONS INSURED must live in the same household AS Named Insured, or BE students living away from home for attending school, college OR university  COMMON CHARACTERISTICS 3. Policy Definitions Uniform WHO IS INSURED DEFINITION OF INSURED EXTENDED ○ INCLUDES a student enrolled in, actually attends a school, college, university, AND who is dependent on Named Insured OR his/her spouse for support AND maintenance even if temporarily living away from the principal residence on the Coverage Summary Page i) Dwelling ○ DEFINITION - the building described on Coverage Summary Page occupied by YOU as a private residence ○ Homeowners Forms - insured owner-occupied dwellings ONLY and must be used for habitational (NOT BUSINESS) purposes ii) Premises ○ DEFINITION - land contained within lot lines that the dwelling is situated on  COMMON CHARACTERISTICS 4. Each Homeowners Form has two coverage sections SECTION I - PROPERTY COVERAGES Standard coverage codes on all homeowners forms ○ Coverage A - Dwelling Building ○ Coverage B - Detached private structures ○ Coverage C - Personal property ○ Coverage D - Additional living expense SECTION II - Liability Coverage Liability coverage → automatically included in Homeowners forms and is the same Standard Coverage Codes for liability coverages ○ Coverage E - Personal Liability ○ Coverage F - Voluntary Medical Payments ○ Coverage G - Voluntary payment for damage to property ○ Coverage H - Voluntary compensation for residence employees  COMMON CHARACTERISTICS 5. Extensions of Coverage i) Debris Removal If amount for loss, including debris removal, is more than the insurance amount, an additional 5% of the amount is available to cover debris removal expense ii) Property Removed Coverage for property that is moved to protect it from loss or damage → insured for 30 days or until policy expiry (soonest) iii) Moving to another home Coverage (automatically) extended to insure property in transit to AND at another location that is occupied by insured as their principal residence Coverage → restricted to Canada, for 30 consecutive days OR until policy expiry or termination (soonest)  COMMON CHARACTERISTICS iv) Fire department expenses Up to $1,000 for fire department charges No deductible v) Change of temperature A change of temperature due to physical damage to dwelling or equipment from an insured peril ○ Vandals → broke window → plants died → coverage if extension is purchased Covers WHEN IT CAN BE SHOWN THAT ○ There is actual physical damage to building OR equipment from insured peril No coverage for food loss if a freezer’s power cord was disconnected ○ Property claimed was in the dwelling at time of loss  COMMON CHARACTERISTICS 5. Extensions of Coverage vi) Freezer food Homeowners Forms → up to $2,000 for food in freezers on insured’s premises when ○ Power failure Accidental interruption of electrical power Coverage is EXCLUDED for food spoilage due to: Operation of circuit breakers/fuses Accidental/intentional disconnection of power supply in building ○ Mechanical breakdown Insurer will pay reasonable expenses by insured TO SAVE and preserve food while freezer is repaired Freezer motor stops working No deductible  COMMON CHARACTERISTICS vii) Lock replacement Up to $500 to replace/re-key locks on dwelling Available when insured’s keys are stolen AND is reported to authorities No deductible viii) Tear out Covers repairs of walls, ceilings, parts of building that have to be torn apart before water damage can be repaired NOT COVERED tearing out and replacing parts of buildings from swimming pools OR public watermains  COMMON CHARACTERISTICS 5. Extensions of Coverage ix) Arson conviction reward Insurer pays up to $1,000 for info that leads to conviction of arson connected to a fire loss to insured property Amount is additional to limits the policy provides No deductible  COMMON CHARACTERISTICS 5. Extensions of Coverage x) Credit or debit cards, forgery, counterfeit money Theft of credit and debit cards → financial loss Theft/losses from forgery and receipt of counterfeit money → INSURED Coverage limit to $1,000 during policy period No deductible xi) Inflation protection IF THERE IS A LOSS, insurer (automatically) increases amounts of insurance by amounts attributable to inflation  COMMON CHARACTERISTICS 6. Basis of Claim Payment i) Deductible Applies to all property losses AND if loss involves multiple property, only one deductible is applied ii) Dwelling Building and Detached Private Structures ○ Insurer AGREES TO PAY cost of repair/replacement (LEAST) without deduction for depreciation AND MUST Be completed in a reasonable amount of time On same location For same occupancy From materials of similar quality ○ Payment made on ACV when loss./damage isn’t repaired/replaced  COMMON CHARACTERISTICS NOTE: Most insurers provide Section A Coverage on a GUARANTEED REPLACEMENT COST basis, and so insurer agrees to pay FULL cost of repair/replacement even if it’s more than insurance amount purchased for dwelling building SUBJECT TO individual underwriting requirements IF SETTLING on replacement cost OR guaranteed replacement cost… insurer WON’T PAY increased costs of repair/replacement from operation of law regulating the zoning, demolition, repair, construction of buildings and related services LOSS TO DWELLING or building, insured is ENTITLED TO the same type of structure as was immediately before loss BUT by-laws, building codes may require buildings be rebuilt or be repaired with higher quality materials  COMMON CHARACTERISTICS 6. Basis of Claim Payment iii) Personal Property Electronic media, books of account ○ Special basis of settlement Settlement on a replacement cost basis for ALL OTHER PERSONAL PROPERTY EXCEPT ○ Articles not replaceable due to inherent nature (antiques, fine arts, paintings) ○ Articles whose age/history contributes to value (memorabilia, collectors items) ○ Property not maintained in good/workable condition ○ Property not used for original purpose, such as clothing not in fashion anymore, or electrical appliances replaced, but not discarded THESE ITEMS WILL SETTLE using an ACV basis  COMMON CHARACTERISTICS 6. Basis of Claim Payment Insureds can choose to settle claims on ACV basis if they don’t want to repair or replace the property, BUT if insureds change their mind, the insurer AGREES TO PAY the difference between the ACV and the replacement cost ○ Decision must be made within 180 days after loss date  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!  HOMEOWNERS FORMS SECTION 1 - PROPERTY COVERAGES COVERAGE A - DWELLING BUILDING Amount of insurance on the Coverage Summary page for Coverage A - Dwelling Building includes value of a) The dwelling and attached structures ○ Limit of insurance includes not only the dwelling but also attached structures such as a garage, greenhouse sundeck b) Permanently installed outdoor equipment on premises ○ Insurance limit includes value of permanently installed outdoor equipment: children’s swings, slides, monkey bars, lawn sprinkler system, c) Outdoor swimming pool and attached equipment on premises  HOMEOWNERS FORMS SECTION 1 - PROPERTY COVERAGES COVERAGE A - DWELLING BUILDING Amount of insurance on the Coverage Summary page for Coverage A - Dwelling Building includes value of d) Materials/supplies on or adjacent to premises for use in construction, alteration, repair of your dwelling OR private structures on premises → insure against theft ONLY WHEN dwelling is completed and ready for occupation ○ COVERS building materials and supplies only if they are on or adjacent to premises, only if they are to be used on insured's premises ○ WHEN homeowners forms insure a dwelling that is being constructed, there is NO COVERAGE for theft of construction materials during this time  LIMIT OF INSURANCE for Dwelling Building Building fixtures AND fittings temporarily removed ○ Moved for repair or seasonal storage ○ Window shutters/doors damaged by storms Insured can apply UP TO 10% of DWELLING BUILDING limit to building fittings/fixtures TEMPORARILY REMOVED from premises for repair/seasonal storage ○ Only temporary, not if stored away for years Outdoor trees, shrubs, plants ○ Insured can apply up to 5% of dwelling building limit to outdoor trees, shrubs, plants ON PREMISES  LIMIT OF INSURANCE for Dwelling Building Outdoor trees, shrubs, plants ○ Coverage by ALL IBC Homeowners Forms is LIMITED TO Fire, lightning, explosion, impact by aircraft OR land vehicles, riot, vandalism OR malicious acts ○ NO COVERAGE Windstorm/hail Trees, plants, shrubs grown for resale Lawns MAX LIMIT $500 for any ONE tree, plant, shrub → includes debris removal  COVERAGE B - DETACHED PRIVATE STRUCTURES Homeowners Forms → coverage for detached private structures on insured’s premises Any structure/building separated from dwelling BY A CLEAR SPACE  COVERAGE C - PERSONAL PROPERTY Three different Insuring Agreements for personal property i) On Premises Coverage DEFINITION PERSONAL PROPERTY Contents of insured(s) dwelling Other personal property owned, worn, used by insureds WHILE ON premises → usual to ownership OR maintenance of a dwelling Definition includes all dwelling contents, clothing, personal items, other property owned/used on premises CAN EXTEND coverage To uninsured personal property of others while it’s in a part of the dwelling occupied by insured EXCEPTION Roomers/boarders ARE NOT COVERED Tenants Package Form  COVERAGE C - PERSONAL PROPERTY ii) Off Premises Coverage COVERS personal property belonging to insured when temporarily away from insured’s premises WORLDWIDE ○ ONLY PERSONAL PROPERTY TEMPORARILY removed is insured ○ If property is normally kept at another location, IT IS NOT COVERED (summer cottage)  COVERAGE C - PERSONAL PROPERTY Three different Insuring Agreements for personal property iii) Property of Students Property of students temporarily living away from home while attending school, college, university PROPERTY EXCLUDED Motorized vehicles or equipment ○ INCLUDES automobiles, all-terrain vehicles, golf carts ○ EXCEPTION - motorized vehicles to maintain the premises like motorized lawnmowers, snowblowers, motorized wheelchairs or scooters with more than two wheels AND designed to carry a person with a disability AND watercraft Camper units, truck caps, trailers, other equipment ○ Need separate coverage  COVERAGE C - PERSONAL PROPERTY Aircraft or equipment ○ All types of aircraft - refurbished, refinished aircraft on insured’s premises NO COVERAGE for equipment for radar detectors DEFINITION OF EQUIPMENT - In the homeowners form ○ Audio, visual, recording, transmitting equipment powered by electrical system of a motor vehicle OR aircraft NO COVERAGE FOR tape decks, compact disc players, TV sets, recording and transmitting equipment When requires connection to electrical system of auto or aircraft in order to operate ○ NOT EQUIPMENT Spare automobile parts like fan belts, hub caps, wheels  SPECIAL LIMITS OF INSURANCE - two categories On specific personal property items Solution → provide every insured with MIN amounts of coverage for special items and if people have higher value items, then they should increase their coverage i) Specified property items, regardless of cause of loss Special Limits for the following items ○ Business property - up to $2,000 (in all) Total amount available for ALL books, tools, instruments connected to business, professional, occupation Coverage only while items are on insured’s premises  SPECIAL LIMITS OF INSURANCE - two categories i) Specified property items, regardless of cause of loss Special Limits for the following items ○ *Some insurers require items with business use to be covered under a commercial property insurance policy BUT due to home based businesses, other insurers allow coverage under the Homeowners Form Securities - up to $2,000 (in all) ○ Stocks, bonds, other securities ○ Should encourage insureds to use a safety deposit box at a financial institution  SPECIAL LIMITS OF INSURANCE - two categories Personal property - used by ANY student insured by policy AND who is temporarily living away from home - up to $2,000 (in all) Amount may be insufficient if items insured are household furnishings, personal computers, sporting equipment Money including cash cards or bullion - up to $200 (in all) Storing these items in your home is not encouraged The low amount $200 - encourages people to look to keeping items in a financial institution Garden type tractors, INCL. attachments, accessories - up to $5,000 (in all)  SPECIAL LIMITS OF INSURANCE - two categories Watercraft - up to $1,000 (in all) ○ Includes watercraft, furnishings, equipment, accessories, motors Computer software up to $2,500 (in all) ○ Example - computer games, home management, personal financial programs Spare auto parts - up to $1,000 (in all) ○ Example - fan belts, hub caps, wheels, spark plugs, starters  SPECIAL LIMITS OF INSURANCE - two categories ii) Special Limits of Insurance that apply to specified property items that have been stolen EXAMPLES ○ Jewellery, watches, gems, fur garments, garments trimmed with fur - up to $2,000 (in all) ○ Numismatic property (like coin collections) - up to $200 (in all) ○ Manuscripts, stamps, philatelic property (like stamp collections) - up to $1,000 (in all) ○ Collectible cards (like sports personality cards) - up to $1,000 (in all) ○ Each bicycle, ites equipment and accessories - up to $500 (in all) Limits apply to TOTAL VALUES of the classes Insurance limits applies to losses from theft NO LIMITATION when loss is due to an insured peril Additional insurance can be bought for items if necessary  COVERAGE D - ADDITIONAL LIVING EXPENSE 1. Additional living expense ○ COVERS When dwelling is damaged by insured peril When damage is enough to make dwelling unfit for occupancy OR requires that insureds move out/away until repairs are made ○ BASIS OF CLAIM PAYMENT Pays “additional living expense” only - limited to costs “over and above” what it would usually cost insureds to live had loss not occurred  COVERAGE D - ADDITIONAL LIVING EXPENSE 1. Additional living expense ○ BASIS OF CLAIM PAYMENT Example - will cost more to eat at a hotel than at home INCLUDES Cost to put a pet in a kennel Taxi fare to take kids to/from school Cost to move personal items to new temporary location FOOD EXAMPLE Butlers are staying at a hotel, and have spent $1800/month on food. It normally costs Butlers $600/month Amount payable is $1800-$600 = $1200  COVERAGE D - ADDITIONAL LIVING EXPENSE Payment is LIMITED TO expenses necessarily incurred so insureds can maintain their normal standard of living Cannot improve their standard of living (currently live in an 800 sq ft condo, cannot rent a 1600 sq ft condo. Payment made ONLY FOR ○ Reasonable time needed to repair/rebuild dwelling ○ If insured chooses to permanently relocate - the reasonable time needed to settle elsewhere  COVERAGE D - ADDITIONAL LIVING EXPENSE 2. Fair rental value People renting a part of their dwelling/detached private structure (Ex. garage) will lose rental income ○ Insured under Homeowners Forms - the reasonable time needed to repair/rebuild dwelling OR detached private structure Access Prohibited By Civil Authority ○ Riot in the area may result in denied access to a dwelling and insured may incur additional living expenses AND may lose rent for the days the tenants cannot access the dwelling Peril that caused the order to be given IS a peril insured by the insured’s policy ○ Peril must be insured  HOMEOWNERS FORMS - COVERAGES ANALYSIS IBC Homeowners Forms Homeowners Basic Form (IBC 1151) Homeowners Broad Form (IBC 1153) Homeowners Comprehensive Form (IBC 1155) Names of the these forms may differ between insurers 1. Homeowners Basic Form (IBC 1151) COVERS - loss/damage from the following 13 perils Peril 1. Fire or lightning ○ Residential fires → almost half of ALL fires ○ Covers lightning INCLUDING damage to electrical devices OR appliances  HOMEOWNERS FORMS - COVERAGES ANALYSIS Peril 2. Explosion DOES NOT INCLUDE WATER HAMMER ○ DEFINITION WATER HAMMER Force created by water or steam when flow is restricted by air trapped in pipes and may force pipes to pull apart or explode Structural/other damage to dwelling and personal property caused by explosions NOT INSURED Broad coverage - COVERS: explosions of hot water heaters, domestic boilers for heating purposes  HOMEOWNERS FORMS - COVERAGES ANALYSIS 1. Homeowners Basic Form (IBC 1151) ○ Peril 3. Smoke Smoke due to sudden, unusual, faulty operation of ANY heating or cooking unit in/on premises BUT NOT smoke from fireplace ○ Peril 4. Falling Object A falling object that strikes the exterior of THE BUILDING There is a storm and a tree branch falls into the patio furniture. Claim is DENIED because the branch did not hit the exterior of the building first  HOMEOWNERS FORMS - COVERAGES ANALYSIS 1. Homeowners Basic Form (IBC 1151) ○ Peril 5. Impact by Aircraft OR land vehicle This is important for people living near an airport. Peril DOES NOT INCLUDE impact by vehicle owned/operated by you OR your employees. NO COVERAGE when there is damage by an insured OR any employee of insured Animals ARE NOT INSURED due to impact by land vehicles  HOMEOWNERS FORMS - COVERAGES ANALYSIS Peril 6. Riot Peril 7. Vandalism or Malicious Acts ○ DOES NOT COVER LOSS/DAMAGE: a. Occurring while building is under construction OR vacant EVEN IF permission for construction or vacancy is provided by insurer b. Caused by an insured c. Caused by theft OR attempted theft Coverage is provided under Peril 12: Theft  HOMEOWNERS FORMS - COVERAGES ANALYSIS 1. Homeowners Basic Form (IBC 1151) Peril 8. Water Damage Sources of water damage COVERED ○ Sudden/accidental escape of water from water main Basements, personal property in basements Sudden/accidental escape of water OR steam from within plumbing, heating, sprinkler OR air conditional system OR domestic water container (located inside insured’s dwelling) EXAMPLE: water escape from a water line that has ruptured  HOMEOWNERS FORMS - COVERAGES ANALYSIS 1. Homeowners Basic Form (IBC 1151) Peril 8. Water Damage DEFINITION DOMESTIC WATER CONTAINER Device or apparatus (personal use) on premises for containing, heating, chilling, dispensing water Sudden/accidental escape of water from domestic water container OUTSIDE dwelling HOWEVER damage ISN'T COVERED WHEN escape of water is due to freezing ○ Sources of losses: Hot tub or swimming pool Water that enters dwelling through opening created suddenly/accidentally by Insured Peril other than Water Damage EXAMPLE: damage to interior of dwelling insured when it is shown that opening is created in roof from a wind or hail storm  HOMEOWNERS FORMS - COVERAGES ANALYSIS 1. Homeowners Basic Form (IBC 1151) Peril 8. Water Damage WATER LOSSES EXCLUDED NO COVERAGE loss/damage from freezing during usual heating season: within heated portion of dwelling IF you are away from your premises for more than 4 consecutive days (OR from within unheated portion of dwelling) NO COVERAGE if away for more than 4 consecutive days UNLESS CAN SHOW THAT ○ Arrangements for a competent person to enter dwelling daily to ensure heating was maintained ○ Water supply → shut off AND all pipes and domestic water containers → drained NO REQUIREMENT on insured to inform insurer they’ll be away for more than 4 consecutive days ONLY NEED TO ESTABLISH that one of the two above items were done  HOMEOWNERS FORMS - COVERAGES ANALYSIS 1. Homeowners Basic Form (IBC 1151) Peril 8. Water Damage WATER LOSSES EXCLUDED CAUSED BY continuous OR repeated seepage OR leakage of water Helps to Avoid paying for losses that insureds can generally detect AND prevent with proper maintenance  HOMEOWNERS FORMS - COVERAGES ANALYSIS EXAMPLE - WATER LOSSES Leaking water lines, leaking water from houses connected to household appliances, CAUSED BY backing up/escape of water from sewer/sump/septic tank ○ Sewer back-up is SOMETIMES automatically covered, SOMETIMES is an optional coverage CAUSED BY ground water OR rising water table ○ DEFINITION GROUNDWATER - water in soil under surface of ground NOT LIMITED TO water in wells AND underground streams, AND percolating waters CAUSED BY surface waters UNLESS due to sudden/accidental escape of water from water main OR domestic water container outside dwelling DEFINITION SURFACE WATER - water on surface of ground where water doesn’t usually accumulate in ordinary watercourses, lakes, ponds NO COVERAGE for water collecting after a heavy rain and enters basement walls  HOMEOWNERS FORMS - COVERAGES ANALYSIS CAUSED BY shoreline ice build-up OR water-borne ice OR other objects (driven by wind or not) To a water main To the system OR domestic water container that water escaped from Occurring while building is under construction OR vacant EVEN IF insurer had provided permission for construction OR vacancy ○ Even if insurer gives permission, there is still no coverage  HOMEOWNERS FORMS - COVERAGES ANALYSIS 1. Homeowners Basic Form (IBC 1151) Peril 9. Windstorm or Hail Peril DOESN’T INCLUDE loss/damage to personal property in a building OR to interior of building due to windstorm, hail, coincidental rain damage UNLESS storm first makes an opening in the building Peril DOES NOT INCLUDE DAMAGE ○ a) to outdoor radio/TV antennae (satellite receivers) and attachments Light construction of these items makes them susceptible to losses ○ b) from weight or pressure or melting ice or snow, waves, floods (wind driven or not) ○ c) from waves or floods (wind driven or not)  HOMEOWNERS FORMS - COVERAGES ANALYSIS 1. Homeowners Basic Form (IBC 1151) Peril 9. Windstorm or Hail Peril INCLUDES loss to buildings and personal property from windstorm, hail, coincidental rain damage COVERS damage to dwelling interior and personal property inside when insured can show the storm FIRST CREATED the opening in the building  HOMEOWNERS FORMS - COVERAGES ANALYSIS Peril 10. Glass Breakage Glass forming part of dwelling OR private structions on premises INCLUDING glass in storm windows/doors IS INSURED against accidental breakage Peril DOES NOT INCLUDE ○ Loss/damage while building is under construction OR vacant EVEN IF permission for construction OR vacancy is provided COVERS accidental breakage to class that is a part of the dwelling or detached private structure  HOMEOWNERS FORMS - COVERAGES ANALYSIS Peril 10. Glass Breakage INCLUDES exterior building glass, glass in interior doors, glass tiles EXTENDS to storm windows/doors INCLUDES loss due to ○ Shifting of ground or other earth movement ○ Accident NO COVERAGE for accidental breakage of personal property items MADE OF GLASS ○ Lamps, glass ornaments, dishes  HOMEOWNERS FORMS - COVERAGES ANALYSIS 1. Homeowners Basic Form (IBC 1151) Peril 11. Transportation Loss/damage from collision, upset, overturn, derailment, standing OR sinking of ANY auto or attached trailer that insured property is being carried ALSO conveyance of a common carrier PERIL MEANS LOSS/DAMAGE TO ○ Personal property temporarily removed from insured’s premises ○ Those who take personal property on business trips or holidays  HOMEOWNERS FORMS - COVERAGES ANALYSIS 1. Homeowners Basic Form (IBC 1151) Peril 11. Transportation NO COVERAGE FOR: ○ Property in vacation home or home trailer owned by insured, any property held therein regardless if temporary or not ○ Watercraft, their furnishings, equipment OR motors ○ Building fixtures/fittings temporarily removed for purposes of repair OR seasonal storage EXAMPLES: storm doors/windows, building shutters, kitchen counters, cupboards, furnaces COVERAGE ONLY WHEN items are temporarily removed for purpose of repair OR seasonal storage OR are being returned after repair or storage  HOMEOWNERS FORMS - COVERAGES ANALYSIS 1. Homeowners Basic Form (IBC 1151) Peril 12. Theft, Including Damage From Attempted Theft INSURED PERIL: THEFT ○ Broadest crime coverage and includes ALL MEANS of taking property without owner’s consent ○ Covers damage to building and personal property during commission of theft → damage can exceed value of stolen property INSURED PERIL: DAMAGE FROM ATTEMPTED THEFT ○ Damage from an unsuccessful theft attempt → covers cost to replace broken locks, damage to chests or trunks, cupboards, drawers (attempt to access the contents)  HOMEOWNERS FORMS - COVERAGES ANALYSIS 1. Homeowners Basic Form (IBC 1151) Peril 12. Theft, Including Damage From Attempted Theft THEFT LOSSES EXCLUDED - NO COVERAGE TO LOSS/DAMAGE: ○ a) Happens at other dwelling that you own, rent, occupy EXCEPT if you are temporarily living there Insurer should exclude coverage from locations it doesn’t want to insure Won’t cover personal property at a cottage or ski condo that is owned, rented, occupied by insured over varying periods Will cover personal property that insureds bring along when temporarily living at the other locations  HOMEOWNERS FORMS - COVERAGES ANALYSIS THEFT LOSSES EXCLUDED - NO COVERAGE TO LOSS/DAMAGE: b) From part of dwelling rented to others caused by theft OR attempted theft by tenant, tenant’s employee OR member of tenant’s household ○ Puts onus on insured to pre-qualify people they rent their dwelling to c) To property in/from a dwelling under construction OR of materials AND supplies for use in construction until dwelling is completed AND ready for occupation ○ NO COVERAGE for theft of materials/supplies to be used for the project d) To animals, birds, fish ○ Animals/birds can wander away, never return ○ Run away e) Resulting from change in ownership of property THAT IS AGREED TO, even if change is from trickery or fraud  HOMEOWNERS FORMS - COVERAGES ANALYSIS 1. Homeowners Basic Form (IBC 1151) Peril 13. Electricity Sudden/accidental damage from artificially generated electrical current ○ Sudden increase (power surge) or decrease in power supply, can cause damage to electrical wiring AND circuitry  HOMEOWNERS FORMS - COVERAGES ANALYSIS 1. Homeowners Basic Form (IBC 1151) EXCLUSIONS ○ PROPERTY NOT INSURED Buildings, structures used in whole/part for business OR farming purposes If a dwelling is used for habitational AND business purposes, this increases risk Must provide description of commercial use of dwelling on the Coverage Summary page ○ Property at any fairground, exhibition, exposition for purpose of exhibition EXAMPLES: cards, memorabilia, ceramics, crafts, coins Insurers are worried about the supervision and protection of property at these events, especially overnight or long periods of time  HOMEOWNERS FORMS - COVERAGES ANALYSIS 1. Homeowners Basic Form (IBC 1151) Loss of/damage to ANY property illegally acquired, kept, stored, transported, OR property subject to forfeit People who have stolen property OR guns or weapons contrary to law CANNOT claim loss/damage to it under the policy  HOMEOWNERS FORMS - COVERAGES ANALYSIS 1. Homeowners Basic Form (IBC 1151) DEFINITION VACANT - Circumstances, regardless of presence of furnishings, all occupants have moved out with NO INTENTION OF RETURNING AND no new occupant has taken up residence OR if a newly constructed house, NO occupant has taken up residence  HOMEOWNERS FORMS - COVERAGES ANALYSIS 1. Homeowners Basic Form (IBC 1151) EXCLUSIONS LOSSES NOT INSURED - NOR DOES POLICY INSURE LOSS/DAMAGE ○ Occurring after dwelling has (to your knowledge) been vacant for more than 30 consecutive days If dwelling is vacant for more than 30 consecutive days, coverage stops Coverage that stops as soon as the premise becomes vacant: Vandalism/malicious acts, water damage, glass breakage Resulting from intentional OR criminal act OR failure to act BY ○ a) Any person insured by the policy ○ b) Any other person at direction of any person insured by policy Insureds who burn down their own dwelling cannot make a claim under it (crime)  HOMEOWNERS FORMS - COVERAGES ANALYSIS 1. Homeowners Basic Form (IBC 1151) EXCLUSIONS To personal property WHILE UNDERGOING a process that requires the application of heat, BUT resulting damage to other property IS INSURED ○ Removes coverage for losses that the insured could have controlled Caused by OR resulting from release, discharge OR dispersal of fuel oil NOT COVERED - damage to property from an oil spill - Brokers should take note of clients whose homes are heated by oil furnaces  HOMEOWNERS FORMS - COVERAGES ANALYSIS 2. Homeowners Broad Form (IBC 1152) COVERS dwelling building and detached private structure on ALL RISKS basis Named Perils coverage → provided for personal property and is GENERALLY equal to coverage from the Homeowners Basic Form (IBC 1151)  HOMEOWNERS FORMS - COVERAGES ANALYSIS 3. Homeowners Comprehensive Form (IBC 1155) ○ Broadest habitational coverage ○ All property owned by insured is COVERED on “All Risks” basis All losses are insured unless they are specifically excluded “Insures against all risks of direct physical loss/damage SUBJECT TO policy conditions AND exclusions  HOMEOWNERS FORMS - COVERAGES ANALYSIS 3. Homeowners Comprehensive Form (IBC 1155) ○ LOSS OR DAMAGE NOT INSURED Impossible to list everything that is covered, so instead this coverage identifies perils EXCLUDED NO COVERAGE - Loss/damage to sporting equipment where loss/damage is DUE TO USE Golf clubs, skis that were broken while being used COVERS IF skies were damaged in a fire or other perils insured NO COVERAGE - TO personal property undergoing ANY process WHILE being worked on where damage is due to process or work, BUT resulting damage to other property is insured  HOMEOWNERS FORMS - COVERAGES ANALYSIS 3. Homeowners Comprehensive Form (IBC 1155) LOSS OR DAMAGE NOT INSURED ○ NO COVERAGE - on wear and tear, deterioration, defect OR mechanical breakdown Wear and tear/deterioration - Inevitable and will arise naturally out of ordinary and reasonable use or ownership EXAMPLES - frayed carpets, worn upholstery, sagging chesterfields ○ Defect or mechanical breakdown A matter of warranty rather than insurance Settling, expansion, contraction, moving, bulging, buckling, cracking EXCEPT resultant damage to building glass ○ DOES NOT COVER losses that result from natural and expected movement of ground (cracks in foundation walls, etc)  HOMEOWNERS FORMS - COVERAGES ANALYSIS Birds, vermin, raccoons, rodents or insects, except loss or damage to building glass ○ No standard definition of vermin (skunks may or may not be defined as vermin) Exclusion DOES NOT APPLY TO DAMAGE TO BUILDING GLASS Snowslide, earthquake, landslide, other earth movement → if these result in fire or explosion, COVERAGE is only for resulting loss or damage ○ Many insurers are changing their policies to eliminate ALL coverage for resultant earthquake damage Water Damage Exclusions ○ Exclusions from Homeowners Basic Form (IBC 1151) is the same as here  UNDERWRITING HOMEOWNERS FORMS Coverage is on a replacement cost basis for dwelling building, detached private structures, AND personal property Section I - Property Coverages → determining insurance amount Step 1 - broker estimates replacement cost of dwelling building with the valuation guide ○ THEN all other Section I coverages are calculated as a percentage of the above amount ○ After building value is estimated, the approach below determines other values used by insurers Coverage A - Dwelling Building Example: Replacement Cost is $200,000 Coverage B - Detached Private Structures Usual amount for detached private structures is equal to 10% of limit Amount is in ADDITION to insurance limit under Coverage A: insurance amount would be $200,000 x 10%  UNDERWRITING HOMEOWNERS FORMS Step 1 - broker estimates replacement cost of dwelling building with the valuation guide After building value is estimated, the approach below determines other values used by insurers ○ Coverage C - Personal Property Insurers require insurance amount for personal property to be between 70-90% of insurance purchased for Coverage A Amount is in ADDITION to insurance limit for Coverage A A 90% insurance requirement → $200,000 x 90% ○ Coverage D - Additional Living Expenses Usual insurance limit is 20% of Coverage A → $200,000 x 20% NOTE: Homeowners Forms are usually sold as a package and insureds won’t allow deletions (EX: even if the insured doesn’t have any detached private structures)  UNDERWRITING HOMEOWNERS FORMS Step 1 - broker estimates replacement cost of dwelling building with the valuation guide After building value is estimated, the approach below determines other values used by insurers ○ Coverage E - Personal Liability - $1 million ○ Coverage F - Voluntary Medical Payments - $1,000 per person ○ Coverage G - Voluntary Payment for Damage to Property - $500 per occurrence ○ Coverage H - Voluntary Compensation for Residence Employees - as per Schedule  UNDERWRITING HOMEOWNERS FORMS Step 1 - broker estimates replacement cost of dwelling building with the valuation guide After building value is estimated, the approach below determines other values used by insurers ○ SINGLE LIMIT POLICIES Limits of insurance under Coverage A - D in Section I - Property Coverages are COMBINED INTO ONE insurance limit Advantage to insureds When policies have separate limits, it is possible the limits may be insufficient for one or more of the coverages For Single Limit Policies, the only time insured wouldn’t be completely covered is when the TOTAL insurance amount is insufficient to cover the loss  UNDERWRITING HOMEOWNERS FORMS Step 1 - broker estimates replacement cost of dwelling building with the valuation guide SPECIAL POLICIES AND ENDORSEMENTS ○ Additional property items that coverage must be ADDED in order to be covered Watercraft, personal computer, coin and stamp collections, jewellery, furs, antiques, fine arts, cameras, silverware, goldware, pewterware, TV antenna, satellite dish, musical instruments  OTHER HABITATIONAL FORMS 1. Mobile Home Insurance IBC’s Mobile Home Forms are similar to the Homeowners forms with the following changes ○ a) Description of dwelling amended The description is amended to recognize the special features of mobile homes Appliances, furniture, equipment forming a permanent part of the building Awnings, skirting, porches, tie-down equipment  OTHER HABITATIONAL FORMS 1. Mobile Home Insurance IBC’s Mobile Home Forms are similar to the Homeowners forms with the following changes ○ b) Emergency removal expense included If there is a threat of loss from an insured peril, UP TO 5% of insurance amount on dwelling can be used to pay for reasonable expenses incurred in removal from site ○ EXPENSES PAID Expenses when disconnecting water/power supplies Towing OR transportation costs NO COVERAGE for loss/damage due to moving  OTHER HABITATIONAL FORMS 2. Condominium Unit Owners Insurance DEFINITION OF CONDOMINIUM: System of separate ownership of individual units in (a) multiple unit building OWNERSHIP OF CONDO BUILDING ○ In the name of the Condo Corporation (when established) and enacts its own bylaws to govern/direct actions ○ Their responsibility to insure value of building and all common areas ○ Parties may own one or more units ○ Owners are responsible for insuring the contents of their units: Condo Unit Owners Package Form (IBC 1165) ○ Interest in common elements Parking area, walkways, landscaping, recreational areas.  OTHER HABITATIONAL FORMS 3. Other Essential Coverages Condo Unit Owners Package Form → doesn’t insure building values BUT owners have a financial interest in the building Condo Unit Owners SHOULD PURCHASE: ○ i) Unit Improvements and Betterments Coverage ○ Value of original carpeting, wall paneling, other fixtures → covered by insurance from the Corporation’s building policy ○ Improvements made by unit owner usually increase value of unit ○ These increases ARE NOT RECOVERABLE under the Condo Corporation’s building policy ○ BASIC LIMIT $1,000 for unit improvements/betterments made OR acquired by insured  OTHER HABITATIONAL FORMS Any building, structure, swimming pool on premises Materials AND supplies on premises for use in improvements and betterments ○ Limit an be increased → some insureds may do this at no extra charge Usually, insurance amount is shown as a percentage of limit provided for Coverage C - Personal Property DEFINITION PREMISES ○ Your unit AND garages, out-buildings private approaches reserved for your use OR occupancy only  OTHER HABITATIONAL FORMS 3. Other Essential Coverages Condo Unit Owners SHOULD PURCHASE: ○ ii) Loss Assessment ○ If coverage on the Corporation's policy isn’t enough to cover a loss to collectively owned property THEN SPECIAL ASSESSMENT may be levied against unit owners (they are members of the corporation) DUE TO: a) Under insurance b) Large deductible  OTHER HABITATIONAL FORMS 3. Other Essential Coverages Condo Unit Owners SHOULD PURCHASE: ○ ii) Loss Assessment ○ If coverage on the Corporation's policy isn’t enough to cover a loss to collectively owned property THEN SPECIAL ASSESSMENT may be levied against unit owners (they are members of the corporation) DUE TO: c) Application of a co-insurance penalty EXAMPLE, Corporation receives 75% of their loss, and can levy an assessment on each unit owner to recover the 25% shortfall EXAMPLE, if there is a $50,000 shortfall, a unit owner with 10% ownership would be subject to a $5,000 assessment d) Cause of loss ISN’T AN INSURED PERIL OR it is excluded e) Breach of policy conditions Limits equal to a % of insurance amount under Section C - Personal Property (often will see an amount equivalent to 250%)  OTHER HABITATIONAL FORMS Coverage responds ONLY WHEN assessment is due to a loss insured by owner’s policy → insureds should purchase the broadest coverage ○ Standard $5,000 limit (may be increase at not additional cost) ○ Limits equal to insurance amount under Section C - Personal Property  OTHER HABITATIONAL FORMS 3. Other Essential Coverages Condo Unit Owners SHOULD PURCHASE: ○ iii) Unit Additional Protection Insurance limit that the Condo Corporation buys includes value of original carpeting, wall paneling, AND other fixtures in each unit IF THERE IS A LOSS to a unit that the Corporation has NO or INSUFFICIENT or INEFFECTIVE insurance, the Condominium Act DOES NOT PERMIT a general assessment against ALL unit owners Unit Additional Protection would cover the insured’s unit in this example BASIS OF CLAIM PAYMENT ○ PERSONAL PROPERTY Payment is on a replacement cost basis ○ UNIT IMPROVEMENTS AND BETTERMENT Coverage is on a replacement cost basis Limits/coverages vary  OTHER HABITATIONAL FORMS 4. Tenants Package Forms ○ IBC’s Tenants Package Forms - for people occupying residential premises they don’t own like parties living in apartments OR renting a dwelling or a part of it ○ Personal property coverages from the Homeowners Forms are generally the same in the Tenants Package Form ○ Coverage for Additional Living Expense is included 5. Seasonal Dwelling Insurance ○ Premises owned OR used by insureds seasonally can be added as additional locations  OTHER HABITATIONAL FORMS 6. Rented Dwellings ○ Policies that insure rented dwellings OR other revenue properties USUALLY EXCLUDE Vandalism OR malicious acts AND theft ○ Basis for settlement for DWELLING BUILDING and personal property usually restricted to ACV ○ Most insurers won’t provide coverage UNLESS ALSO PROVIDE insurance for owner’s principal residence  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!  Textbook HOMEOWNERS BASIC FORM -A GUIDE TO YOUR POLICY TEXTBOOK - after Chapter 6, page 1 of 14 HOMEOWNERS BASIC FORM -DEFINITIONS TEXTBOOK after Chapter 6, page 1 of 15 HOMEOWNERS COMPREHENSIVE FORM - A GUIDE TO YOUR POLICY TEXTBOOK After Chapter 6, After Homeowners Basic Form Policy