Chapter 2 – Habitational Insurance

3 Forms of Homeowners Policies

• Homeowners Basic Form (IBC 1151)

• Homeowners Broad Form (IBC 1153)

• Homeowners Comprehensive Form (IBC 1155)

All developed by the Insurance Bureau of Canada

Common characteristics between homeowners forms

Clear language approach - in 1979, all forms were modified to remove jargon for ease of understanding

Form/Structure - Section 1: Property, Section 2: Liability

Uniform definitions - Insured (spouse, live in relatives of either, dependents, student living away), Dwelling (what is described on coverage summary page), Premises (land contained within lot lines)

Insure same exposures

• Property

  • A: Dwelling building

  • B: Detached private structures

  • C: Personal property

  • D: Additional living expenses

• Liability

  • E: Personal liability

  • F: Voluntary medical payments

  • G: Voluntary property damage

  • H: Voluntary compensation for resident employees

Coverage A - Dwelling building

The dwelling and attached structures

Permanently installed outdoor equipment on premises

Outdoor swimming pool and attached equipment

Materials and supplies on/or adjacent to premises intended for use on dwelling (insures against theft only after dwelling is built and ready to be occupied)

Also includes:

• Fixtures temporarily removed

• Outdoor trees, shrubs, plants (up to 5% of dwelling building coverage)

IBC coverage limited to: Fire, lightning, explosion, impact by aircraft/land vehicle, riot, vandalism

Coverage B - Detach private structures

Any structures separated by clear space

10% of coverage A

Coverage C - Personal property

Typically 90-100% of coverage A

On premises coverage - contents of dwelling and personal property usual to home use

Off premises coverage - contents when away from premises anywhere in the world

Property of students - property of students living away for school

Property excluded

• Motorized vehicle/equipment (except lawnmowers, gardening equipment, etc.)

• Camper units, truck caps, trailers, or their equipment

• Aircraft or their equipment

• Equipment above means - audio, visual, recording, or transmitting equipment powered by the electrical system of a motor vehicle or aircraft

Special Limits of Insurance

Limits regardless of cause

• Business prop - 2,000

• Securities - 2,000

• Property of students living away - 2,500

• Money or bullion - 200

• Garden tractor, attachments, equipment - 5,000

• Watercraft - 1,000

• Computer software - 2,500

• Spare auto parts - 1,000

Limits only when stolen

• Jewellery, watches, gems, fur - 2,000

• Numismatic property - 200

• Manuscripts, stamps - 1,000

• Collectible cards - 1,000

• Bicycles - 500

Coverage D - Additional living expenses

20% of coverage A

Includes

• Additional living expenses beyond normal expenses following a loss

• Fair rental value - only for reasonable time as required by repairs, and payments that seize during repairs are deducted from payments (water bill, electricity)

• Civil authority - access to insured’s home is prevented by authorities, peril which caused the order to be given is an insured peril

Also includes coverage for up to two weeks following a mass evacuation order by civil authority and must have been a direct result of a sudden and accidental event originating in Canada or the US

• Excludes evacuation due to - flood, earthquake, war, nuclear incident, radioactive contamination

Standard extensions for all forms

Debris removal

Property removed for up to 30 days following loss

Property while moving to another home

Fire department expenses

Change of temperature damages (physical damage to building from insured peril, property was already in dwelling at the time of loss)

Freezer food up to 2,000 (due to power failure, mechanical breakdown)

Lock replacement - 500 limit (keys stolen and reported to authorities)

Tear out

Arson conviction reward - 1,000 reward for all info leading to conviction

Credit, debit, forgery, counterfeit - 1,000 limit

Inflation protection - insurer will increase coverage by amounts of inflation since the later of

• Policy inception

• Latest renewal

• Latest limit change

Basis of claims settlements for all forms

Dwelling and detached private structures

Paid on RC if

• Repairs are made on same location

• For the same use

• Use of materials of similar quality

• Completed within reasonable time

Guaranteed RC

Full RC even if over limit if:

• Insurance amount is more than rebuild cost

• Insured did not reduce coverage

• Insurer was notified within 90 days of major upgrades

Personal Property

RC for all, but ACV for:

• Antiques, fine arts

• Items with value tied to age

• Items in poor condition or no longer used

• Outdated or stored items

Special rules:

• Electronic media only covered for cost to reproduce duplicates, no payment for cost to assemble the media again

• Records, books, drawings - limited to new blanks + transcription cost

Section 2 coverages

E: Personal Liability - 1 million

F: Voluntary medical payments - 1,000 per person

G: Voluntary property damage - 500 per occurrence

H: Voluntary payments to residence employee - as per schedule

Single limit property policy

One single limit for coverage A-D

Can be beneficial in large losses as the only time you would not receive complete indemnity is when total insurance is not enough to pay loss - a remote possibility when guides are followed

Coverage of Homeowners Basic Form

• Fire or lightning

• Explosion

• Smoke

• Falling object

• Impact by aircraft or land vehicle

• Riot

• Vandalism or malicious act

• Water damage

• Windstorm or hail

• Glass breakage

• Transportation

• Theft, damage caused by theft

• Electricity

Peril 1 - Fire or Lightning

Damage from fire or lightning

Includes damage to electronics or appliances caused by lightning

Peril 2 - Explosion

Explosions of water heaters or domestic boilers used for heating purpose

Peril 3 - Smoke

Damage from sudden, unusual, and faulty operation of heating/cooking unit on premises

Damage from fireplaces or slow, usual operations

Peril 4 - Falling Object

Damage from object that hits the exterior of the building first

Damage to property inside must be damages after object hits exterior

Peril 5 - Impact by Aircraft or Land Vehicle

Damage from vehicle not owned/operated by insured or employees

Damage caused by animals not covered

Peril 6 - Riot

All damage to insured property resulting from riot

Peril 7 - Vandalism or Malicious Act

Covers willful damage or defacement of property

Excludes damage when

• Dwelling under construction or vacant

• Caused by insured or household members

• Caused by theft or attempted theft (covered by peril 12 - theft)

Peril 8 - Water (Coverages)

Sudden and accidental escape from:

• Watermain

• Plumbing, heating, sprinkler, AC system, domestic water container (bath)

• Domestic water container outside (hot tub, pool)

• Water entering through damage caused by insured peril

Peril 8 - Water (Exclusions)

Excluded if damage caused by:

• Freezing during heating season when away for 4+ days unless someone checked daily and water shut off

• Freezing in unheated parts of dwelling

• Repeated or continuous leakage/seepage

• Sewer, sump, septic backup

• Ground water or rising water table

• Surface water

• Shoreline ice build up or waterborne debris

• Damage to the water or water container itself

• Damage while under construction or vacant

Peril 9 - Windstorm or Hail

Damage to building and personal property only if storm creates an opening in the building

Also covers coincidental rain damage if that condition is met

Excludes:

• Outdoor antennae

• Damage due to weight/pressure melting of ice/snow

• Loss to buildings near lakes or oceans due to wind driven water or ice

• Loss from waves or floods caused by wind

Peril 10 - Glass Breakage

Covers accidental breakage including

• Exterior and interior windows, building glass, glass tiles, building blocks

• Glass in storm windows and doora

• Causes like shifting, settling, temperature changes

Excludes:

• During construction or vacancy

• Breakage of personal items

Peril 11 - Transportation

Covers loss or damages caused by collision, upset, overturn, derailment, stranding or striking of any auto/trailer/common carrier transporting insured property

Applies to:

• Personal property temporarily removed from premises

• Building fixtures temporarily removed

Excludes:

• Property in a vacation or home trailer owned by insured

• Watercraft and their furnishings/equipment

Peril 12 - Theft and damage from attempted theft

Excludes:

• Loss at another dwelling you own but aren’t currently living in

• Part of the dwelling that is rented to others and caused by the tenant, or their members

• Materials on the property being used in the construction of the dwelling

• To animals or fish

• Resulting from change in ownership even if there is trickery or fraud

Peril 13 - Electricity

Damage to electrical devices caused by power surges

Standard exclusions of Basic Homeowners form

Property not insured

• Buildings used in business or farming purposes

• Property at any sort of exhibition where there could be lack of supervision

• Loss to any property acquired illegally

Losses not insured

• Occurring after 30 consecutive days of vacancy

• Caused by intentional acts of the insured or anyone they direct

• Personal property while undergoing heat application

• Caused by the release of fuel oil

Homeowners Broad Form

All risks on dwelling and detached private structures

Named perils on personal property

Homeowners Comprehensive Form

All risks on everything

Examples of coverage

• Loss caused by smoke from fireplace

• Collapse of roof from snowfall load

• Impact from vehicle driven by insured

• Any other loss not excluded

Homeowners Comprehensive Form Exclusions 1

Property excluded

• Commercial/farming buildings

• Property on display

• Illegally acquired property

• Evidence of debt or title

Loss or damage not insured

• Sporting equipment where loss is due to use

• Animals unless caused by specified peril other than impact by aircraft

• Any property lawfully seized unless to prevent spread of fire

• Scratching, abrasion, chipping, breakage of any fragile or brittle object (unless caused by specified peril, vehicle, theft, attempted theft)

Homeowners Comprehensive Form Exclusions 2

Loss or damage excluded

• To outdoor antennae caused by windstorm/hail, weight of ice, snow, sleet, collapse

• Wear and tear, deterioration, defect or mechanical breakdown

• The cost of making good by faulty workmanship

• Setting, expansion, contraction, moving, bulging

• Occurring after vacant for more than 30 days

• Nuclear incident

• War/invasion

• Criminal act by someone on the policy or under their direction

• Personal property undergoing work

• Water damage

• Caused by birds, vermin, rodents, insects except loss to glass

• Caused by smoke of industrial operations or agricultural smudging

• Caused by snow slide, earthquake, landslide or any earth movement

• From part of the dwelling rented to others caused by theft of tenant or their members

• Caused by vandalism or malicious act if dwelling is under construction or vacancy

• Theft from dwelling under construction or theft of materials used in construction during construction

• Caused by rust, corrosion, wet or dry rot or mould

• Resulting from dispersal, discharge of fuel oil

• Resulting from change of ownership of property even if due to trickery or fraud

Homeowners Comprehensive Form Special Policies and Endorsements

Additional coverage available for purchase

• Watercraft

• Personal computer

• Coin and stamp collections

• Jewelry and furs

• Antiques

• Fine arts

• Cameras

• Silverware

• TV antennae, satellites

• Musical instruments

• Bicycles

• Sporting equipment