C12 PROPERTY FINAL EXAM 1-10 QUESTIONS &
ANSWERS
Define property insurance. - Answer -Property insurance
Protects the owner or user of property for its loss or loss of income-producing ability
Offers financial protection to an insured and to lending institutions
Covers occurrences or events that are sudden and accidental in nature
Property can include dwellings and detached buildings; personal property; and
commercial buildings, stock, and equipment.
Insurable interest - Answer -—person or company stands to benefit from the continued
existence of the property or be prejudiced by its loss
Policy - Answer -formalizes the agreement, contains terms, clauses, stipulations, and
requirements
Deductible - Answer -the insured's portion of a covered loss
Types and classes of insurance - Answer -Personal lines vs commercial lines
Special types: marine, aviation, builders risk, crop insurance
Specialized coverage: flood, earthquake, and equipment breakdown
Elements of policy - Answer -The name of the insurer, insured, and to whom money is
payable
The premium, the subject matter of insurance, the indemnity
The effective date and expiry date
Types of property covered, types of perils covered, exclusions of coverage
Describe the evolution of property insurance. - Answer -First type of property insurance
was fire insurance
As the needs and wants expanded, additional perils were added to fire policies
Fire policies have become property policies
The basic fire policy is rarely sold today
,Exclusions - Answer -provision in an insurance policy eliminating coverage for certain
risks or limiting coverage
Statutory conditions apply to - Answer -all fire insurance contracts
Multi-peril policies combine - Answer -the policy forms, covering various classes of
business in package policies
Basic Fire Policy - Answer -named perils
- fire
-lighting
-explosion of natural, coal or manufactured gas
exclusions
-electrical devices
- application of heat
-war risk
- nuclear incident
- excluded property
- alterations and additions
- vacancy, unoccupancy or disuse
-volatile substances
-by law
extensions
- removed of insured property
-debris removal
Expansion of Fire Policy into Property Insurance - Answer -Additional Perils: Extended
Coverage (EC)
- Explosion (enhanced coverage)
- Impact by aircraft, spacecraft, or land vehicle
- Riot, vandalism, or malicious acts
- Smoke
- Leakage from fire-protective equipment
- Windstorm or hail
other additional perils
- Falling object
- Glass breakage
- Water damage
- Theft
- Loss in transit
,who and what are covered in property insurance. - Answer -The named insured may be
one or more people or a business
(Commercial policy—the owners of a business are entitled to coverage under the policy)
(Habitational policy—coverage applies named insured, spouse, other relatives,
dependants)
Mortgage clause of the property policy protects mortgagee's interest
Lenders usually insist that there be insurance on the property
The subject matter of the insurance must be described so that there is no uncertainty
Property insurance is concerned with direct loss—the value of the physical property that
is damaged or destroyed
key concepts that are reflected in property policies. - Answer -A policy that limits the
indemnity must be clearly marked
Insurance on a particular item or object responds as first-loss insurance
Property policies contain the location of the property but may respond if location is not
identified in the policy declarations
Warranties restrict coverage specifically regarding the use, condition, or maintenance of
the insured property, such as alarm, jewellery in a vault, backwater valve, woodstove
warranties (Courts do not usually allow warranties to delete fundamental coverages
such as fire, even when violated such as fire insurance)
Automatic reinstatement
After claim is paid, policy limits are restored to the full amount on the declarations page
Payment of claim does not affect refund of premium if the policy on cancellation
Contract terms must be waived in writing and signed by a person authorized for that
purpose by the insurer
Loss must be fortuitous—accidental and not bound to happen in the ordinary course of
events
Insureds must show that an insured peril was the proximate cause of the loss
Concurrent causation—when a covered peril and excluded peril occur simultaneously
and cannot be separated, claim is decided in favour of the insured
Basis of payment clause entitles the insured only to the least of the following: Actual
cash value Interest of the insured Limits specified in the policy Enhanced coverage
changes actual cash value to replacement cost
, What must the insured have in the subject matter before they can be indemnified for a
loss?
a. Utmost good faith
b. Insurable interest
c. Indemnity
d. Agreement - Answer -B.) Insurable interest is an interest that the insured must have
in the subject matter of the insurance purchased so that if the event insured against
occurs, the insured will suffer a pecuniary loss.
In property insurance, what is a deductible?
a. The portion that the insurer pays for a covered loss.
b. It is the amount the insurer will pay in the event of a loss.
c. It is an amount the insured must pay on a claim before the insurance company will
cover
the rest of the claim.
d. The amount that is applied only once during the renewal term in the event of a loss
even though there are several losses. - Answer -C.) A deductible is the amount the
insured must pay on a claim before the insurance company will cover the rest of the
claim.
What is the objective of indemnity?
a. Allow the insured to benefit from the claim
b. Provide the full replacement cost at the time of the loss
c. Return the insured as nearly as possible to the financial position he or she was in
prior to
the loss; no more, no less
d. Allow the insured to obtain a larger settlement with his or her loss - Answer -C.) The
objective of indemnity is to return the insured as nearly as possible to the financial
position he or she was in prior to the loss; no more, no less.
In the basic fire policy, for how many days does the removal of insured property
extension apply to remove property from an insured location to prevent further damage?
a. 7 days or until the policy expires
b. 8 days or until the policy expires
c. 15 days or until the policy expires
d. 30 days or until the policy expires - Answer -A.) It is stated in the extension for
removal of insured property that the insured has seven days to remove their property to
prevent further damage.
Which of the following descriptions is correct as it relates to the statutory conditions in
the common law provinces
a. They apply to oral and written fire insurance contracts.
b. They apply whether included with the fire policy or not.
c. The conditions apply to only accident and sickness policies.
ANSWERS
Define property insurance. - Answer -Property insurance
Protects the owner or user of property for its loss or loss of income-producing ability
Offers financial protection to an insured and to lending institutions
Covers occurrences or events that are sudden and accidental in nature
Property can include dwellings and detached buildings; personal property; and
commercial buildings, stock, and equipment.
Insurable interest - Answer -—person or company stands to benefit from the continued
existence of the property or be prejudiced by its loss
Policy - Answer -formalizes the agreement, contains terms, clauses, stipulations, and
requirements
Deductible - Answer -the insured's portion of a covered loss
Types and classes of insurance - Answer -Personal lines vs commercial lines
Special types: marine, aviation, builders risk, crop insurance
Specialized coverage: flood, earthquake, and equipment breakdown
Elements of policy - Answer -The name of the insurer, insured, and to whom money is
payable
The premium, the subject matter of insurance, the indemnity
The effective date and expiry date
Types of property covered, types of perils covered, exclusions of coverage
Describe the evolution of property insurance. - Answer -First type of property insurance
was fire insurance
As the needs and wants expanded, additional perils were added to fire policies
Fire policies have become property policies
The basic fire policy is rarely sold today
,Exclusions - Answer -provision in an insurance policy eliminating coverage for certain
risks or limiting coverage
Statutory conditions apply to - Answer -all fire insurance contracts
Multi-peril policies combine - Answer -the policy forms, covering various classes of
business in package policies
Basic Fire Policy - Answer -named perils
- fire
-lighting
-explosion of natural, coal or manufactured gas
exclusions
-electrical devices
- application of heat
-war risk
- nuclear incident
- excluded property
- alterations and additions
- vacancy, unoccupancy or disuse
-volatile substances
-by law
extensions
- removed of insured property
-debris removal
Expansion of Fire Policy into Property Insurance - Answer -Additional Perils: Extended
Coverage (EC)
- Explosion (enhanced coverage)
- Impact by aircraft, spacecraft, or land vehicle
- Riot, vandalism, or malicious acts
- Smoke
- Leakage from fire-protective equipment
- Windstorm or hail
other additional perils
- Falling object
- Glass breakage
- Water damage
- Theft
- Loss in transit
,who and what are covered in property insurance. - Answer -The named insured may be
one or more people or a business
(Commercial policy—the owners of a business are entitled to coverage under the policy)
(Habitational policy—coverage applies named insured, spouse, other relatives,
dependants)
Mortgage clause of the property policy protects mortgagee's interest
Lenders usually insist that there be insurance on the property
The subject matter of the insurance must be described so that there is no uncertainty
Property insurance is concerned with direct loss—the value of the physical property that
is damaged or destroyed
key concepts that are reflected in property policies. - Answer -A policy that limits the
indemnity must be clearly marked
Insurance on a particular item or object responds as first-loss insurance
Property policies contain the location of the property but may respond if location is not
identified in the policy declarations
Warranties restrict coverage specifically regarding the use, condition, or maintenance of
the insured property, such as alarm, jewellery in a vault, backwater valve, woodstove
warranties (Courts do not usually allow warranties to delete fundamental coverages
such as fire, even when violated such as fire insurance)
Automatic reinstatement
After claim is paid, policy limits are restored to the full amount on the declarations page
Payment of claim does not affect refund of premium if the policy on cancellation
Contract terms must be waived in writing and signed by a person authorized for that
purpose by the insurer
Loss must be fortuitous—accidental and not bound to happen in the ordinary course of
events
Insureds must show that an insured peril was the proximate cause of the loss
Concurrent causation—when a covered peril and excluded peril occur simultaneously
and cannot be separated, claim is decided in favour of the insured
Basis of payment clause entitles the insured only to the least of the following: Actual
cash value Interest of the insured Limits specified in the policy Enhanced coverage
changes actual cash value to replacement cost
, What must the insured have in the subject matter before they can be indemnified for a
loss?
a. Utmost good faith
b. Insurable interest
c. Indemnity
d. Agreement - Answer -B.) Insurable interest is an interest that the insured must have
in the subject matter of the insurance purchased so that if the event insured against
occurs, the insured will suffer a pecuniary loss.
In property insurance, what is a deductible?
a. The portion that the insurer pays for a covered loss.
b. It is the amount the insurer will pay in the event of a loss.
c. It is an amount the insured must pay on a claim before the insurance company will
cover
the rest of the claim.
d. The amount that is applied only once during the renewal term in the event of a loss
even though there are several losses. - Answer -C.) A deductible is the amount the
insured must pay on a claim before the insurance company will cover the rest of the
claim.
What is the objective of indemnity?
a. Allow the insured to benefit from the claim
b. Provide the full replacement cost at the time of the loss
c. Return the insured as nearly as possible to the financial position he or she was in
prior to
the loss; no more, no less
d. Allow the insured to obtain a larger settlement with his or her loss - Answer -C.) The
objective of indemnity is to return the insured as nearly as possible to the financial
position he or she was in prior to the loss; no more, no less.
In the basic fire policy, for how many days does the removal of insured property
extension apply to remove property from an insured location to prevent further damage?
a. 7 days or until the policy expires
b. 8 days or until the policy expires
c. 15 days or until the policy expires
d. 30 days or until the policy expires - Answer -A.) It is stated in the extension for
removal of insured property that the insured has seven days to remove their property to
prevent further damage.
Which of the following descriptions is correct as it relates to the statutory conditions in
the common law provinces
a. They apply to oral and written fire insurance contracts.
b. They apply whether included with the fire policy or not.
c. The conditions apply to only accident and sickness policies.
