chapter 6:habitual forms

Overview of Personal Property Insurance Policies

Focus on habitational forms of insurance.
Discussion of three homeowners forms:
- Basic Form
- Broad Form
- Comprehensive Form
Purpose: to insure stable family dwellings occupied year-round by owners or homes under construction to be occupied by owners in the future.

Common Characteristics of Homeowners Forms

Clear Language and Standard Format
- Section One: Property Coverages
- Section Two: Liability Coverages
- Uniform definitions across all forms:
- Persons Insured: Named insured and dependents:
  - Named insured: any person named on the policy.
  - Dependents:
  - Legal spouses or common law spouses (living together for at least three years or one year with a child).
  - Relatives permanently residing with the named insured.
  - Persons aged 21 or younger in the care of the insured (excluding borders and roommates).
  - Students attending school, supported by the named insured/spouse.
  - Definitions:
  - Dwelling: A private residence.
  - Premises: Land within the lot lines of the address noted on the policy.

Losses Insured

Section One: Property Coverages

Coverage A: Dwelling Building
Coverage B: Detached Private Structures
Coverage C: Personal Property
Coverage D: Additional Living Expenses

Section Two: Liability Coverage

Coverage E: Personal Liability
Coverage F: Voluntary Medical Payments (no deductible)
Coverage G: Voluntary Payment for Property Damage (no deductible)
Coverage H: Voluntary Compensation for Residents' Employees (no deductible)

Extensions of Coverage (included with homeowners forms)

Coverage when moving to another home in Canada: up to 30 days.
Debris Removal: Additional 5% of Coverage A limit for removal after an insured loss.
Property Removal: Expanded to 30 days (from 7 days) for covered losses.
Credit/Debit Card Forgery and Counterfeit Money: Coverage up to $1,000.
Inflation Protection: Limits automatically adjusted for inflation for mid-term losses.
Tear Out Clause: Coverage for repairs needed to reach a broken water pipe (excludes swimming pools/public water mains).
Change in Temperature: Covers indirect damage to personal property inside a dwelling due to insured perils.
Freezer Food Spoilage: Coverage for spoilage up to $2,000 from power failure.
Lock Replacement: Up to $500 for replacing locks if stolen keys are reported to police.
Fire Department Charges: Bills from a different city covered up to $1,000.
Arson Conviction Reward: Rewards up to $1,000 for information that leads to conviction (no deductible).

Basis of Claim Payment

Payment for building damage + property damage - deductible.
Deductible applied once to total loss.
For dwelling/detached structures: Replacement cost or actual cash value for non-replacement options.
To qualify for guaranteed replacement cost, the insured must meet certain criteria.
Note on Bylaw Costs: Excluded; owners must comply with current codes when rebuilding.
Personal property insured on a replacement cost basis, except for specific exclusions:
- Fine art, antiques, memorabilia: insured on actual cash value.
- Poorly maintained, non-original purpose property: insured for actual cash value.
- Property not replaced within 180 days: insured for actual cash value.

Details of Property Coverages (Section One)

Coverage A: Dwelling Building

Insures main dwelling and attached structures.
Includes:
- Permanently attached outdoor equipment and fixtures (temporary removal covered up to 10% of dwelling limit).
- Materials and supplies for construction on premises (excludes new home construction).
- Outdoor swimming pools and attached equipment.
- Outdoor plants: covered for 5% of dwelling limit (max $500 per plant).
Insured perils: fire, lightning, explosion, impact, riot, vandalism (excludes windstorm and hail).

Coverage B: Detached Private Structures

Insures structures separated from main building.
Coverage limit: 10% of Coverage A limit.

Coverage C: Personal Property

Covers personal property on premises or temporarily off premises.
On-Premises Coverage: Usual property found in homes; property of others in custody covered.
Off-Premises Coverage: Global coverage for property temporarily away (e.g., vacation).
Student Property: Covered if temporarily away for school.

Exclusions for Personal Property

Motorized vehicles (excluding domestic types like lawnmowers).
Aircraft and equipment.
Campers, trailers, and their equipment.

Special Limits of Insurance

Business Property: Limited to $2,000.
Student’s Property: Max $2,500.
Garden Tractors and Accessories: $5,000.
Watercraft and Accessories: $1,000.
Money/Bullion: $200.
Securities: $2,000.
Computer Software: $2,500.
Spare Car Parts: $1,000.

Stolen or Lost Property Payments

Jewelry, Watches, Furs: $2,000.
Card Collections: $1,000.
Manuscripts, Stamps: $1,000.
Bicycles/Equipment: $500.
Coins/Coin Collections: $200.

Coverage D: Additional Living Expenses

Covers necessary additional living expenses due to relocation after an insured event.
Examples: lodging, meals, moving fees, kennel time for pets.
Covers fair rental value lost due to damage from an insured peril (e.g., evacuation due to fire).

Homeowners Forms Explained

Homeowners Basic Form

Type: Named perils policy (covers specific perils listed).
Coverages (13 total):
1. Fire or Lightning: Includes lightning damage to electrical devices.
2. Explosion: Includes cover for domestic boilers, excluding water hammer.
3. Smoke: Covers malfunctioning furnace or cooking appliance smoke.
4. Windstorm and Hail: Covers exterior and interior damage caused by a hole created by wind.
5. Impact by Vehicle: Covers damage from vehicle collisions.
6. Falling Object: Damage to structures only (not personal property).
7. Theft & Damage During Theft: Excludes pets, scams, unoccupied buildings.
8. Riot: Coverage for damages during riots.
9. Vandalism/Malicious Acts: Excludes damage caused by insured.
10. Water Damage: Covers sudden, accidental water escape (excludes vacated or frozen buildings).
11. Glass Breakage: Covers accidents but excludes vacant buildings.
12. Transportation: Covers personal property in transit.
13. Electricity: Covers power surges.
Exclusions: Business use, illegal property, vacant dwellings, intentional damage.

Homeowners Broad Form

Similar to Basic Form but covers buildings for "all risks."
Named perils coverage combined with broad building coverage.

Homeowners Comprehensive Form

Covers property for all risks except specified exclusions.
Key Exclusions:
- Water damage.
- Snow, landslide, or earth movement.
- Wear and tear, mechanical breakdown.
- Sporting equipment during use.
- Property under repair.
- Losses caused by birds or vermin.
Advantages: Inherent broad coverage for unspecified risks resulting in damage.

Homeowners Forms Underwriting

Coverage based on replacement cost value determined by evaluation guide.
Coverage A Limit: equivalent to the replacement value of the dwelling.
Coverage B: 10% of Coverage A.
Coverage C: 70-90% of Coverage A.
Coverage D: additional 20% of Coverage A.
Coverage E (Personal Liability): starts at $1 million.
Options for endorsements to cover additional items (jewelry, personal computers, etc.).

Habitational Forms Beyond Homeowners

Condo Owners Insurance

Covers individual units in a condominium with distinct responsibilities for the strata corporation.
Key Coverages:
- Loss Assessment: Up to $5,000 for assessments against inadequate strata policies.
- Unit Additional Protection: Covers unit when strata’s insurance is insufficient.
- Unit Improvements: Coverage for upgrades to the unit, up to 25% of Coverage C limit.

Tenant's Insurance

Covers personal property and additional living expenses for renters.
Note: No building coverage as tenants lack insurable interest in the building.

Rented Dwelling Insurance

For owners of rental properties; typically on an actual cash value basis.

Mobile Home Insurance

Coverage includes permanent fixtures and emergency removal expenses.
Note: No coverage while in transit.

Seasonal Dwellings

Coverage can be added to the primary policy for seasonal properties.