Study 1 - Introduction to Property Insurance

Property Insurance

First-party insurance that indemnifies the owner or user of property for its loss, or the loss of its income producing ability, when the loss or damage is caused by a covered peril, such as fire or explosion.

Insurable Interest

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 an economic loss.

Indemnity

A contract, expressed or implied, to repay in the event of a loss. The insured neither gains nor loses.

Contract

An agreement or promise between 2 or more parties that is intended to be legally enforceable and is constituted by the acceptance by one party of an offer made by another party, to do or to abstain from doing a specific act. The offer and acceptance may either be expressed or inferred through the conduct of the parties.

Contract (Quebec)

An agreement of wills, by which one or several persons obligate themselves to one or several other persons to perform a prestation ( that is a duty, a payment or a service)

Uberrimae Fidei

Of the utmost good faith. The basis of all insurance and reinsurance contracts. Both parties to the contract are bound to exercise. Good faith and to do so by a full disclosure of all information material to the proposed contract.

Peril

The event that caused a loss covered by the policy; for example, fire or windstorm.

Deductible

An agreed specified amount that the insurer must pay on the claim. Before the insurance company, we'll cover the rest of the claim. This amount is agreed upon by both the insurer and the insured.

Fire Insurance

Coverage for losses from fire, lightning and limited explosion, and also the resultant damage caused by the smoke and water. Usually supplemented by extended coverage insurance.

Exclusion

Risks, perils, more properties defined in the policy as not covered.

Flashpoint

The lowest temperature at which the liquid gives off sufficient vapors to form an ignitable mixture with the air.

Statutory Conditions

Special prescribed and standardized conditions that the provincial and territorial insurance acts required to be included in in insurance policies.

Extended Coverage

An endorsement that enlarges the coverage afforded by the primary policy. Coverages such as windstorm, hail, smoke and riot are extended coverages on a fire policy.

Mortgage Clause

A clause in an insurance policy that stipulates the rights and obligations of the insurer and the mortgagee.

First-Party Insurance

Protects the named insured, and others with an insurable interest in or mortgage on the property or who entrusts their property to the insured - against loss or damage to the insured property.

Third - Party Insurance

Liability insurance is purchased by the insured (the first party) from an insurer (the second party) to compensate or indemnify another (the third party) for damage or loss for which the insured is lawfully liable.

Direct Loss (or damage)

Damage to property by direct action of a peril insured against, as distinguished from contingent or indirect damage.

Plain - Language Policy

Policies written in everyday language so that they are easily understood. Technical terms with their technical meanings are used only when required by law, or when substitutions would be misleading.

Warranties

Statement or stipulation or promise in an insurance contract, the breach of which may nullify the contract.

Proximate Cause

A cause that, in a natural and continuous sequence unbroken by any new and independent cause, produces an event and without which the event would not have happened.

Concurrent Causation

A doctrine that holds that if a loss to property is attributable to more than one cause, any one of which is covered by the insurance policy, the loss is payable under the policy.

Actual Cash Value (ACV)

The fair market value of property, taking into account factors that might augment or reduce the value of the property in question. _____________ is usually calculated in one of three ways: (1) cost to repair or replace less depreciation; (2) fair market value; or (3) consideration of all relevant evidence of the value of the damaged property.

Replacement Cost

Insurance coverage that indemnifies for loss or damage to insured property at the current market price rather than the depreciated value. Thus, the rating and premium are based on the current costs to replace the insured property.