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Chapter 12

Chapter 12 BU353.docx

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Heather Graham

BU353 Chapter 12 – Homeowners Insurance Week 7 Homeowners Insurance -Second largest line of personal insurance for property-liability insurers, behind auto insurance -Largest 5 writers of homeowners insurance in Canada: Intact, TD Insurance, Aviva Canada, Wawanesa Mutual, and Co-operators Types of Policies -Multiple-line, multiple-peril policies -Provide coverage for first-party property, third-party liability, voluntary medical payments and voluntary payment for property damage of others -Specified perils policy – if the policy lists the perils that are covered -All risk/all perils policy – the policy covers all perils except those that are specifically excluded -Standardized to a large extent -Eight common personal property policy forms available for homeowners, tenants, and condominium owners Description of Major Coverages -Insurance policies for homeowners have two sections of coverage: -Section I for Property coverages -Section II for Liability coverages -Within each section there are 4 parts -The first four parts provide reimbursement for property damage and loss of use of property -The next four provide reimbursements for liability losses, voluntary medical payments, voluntary payment for property damage, and voluntary compensation for residence employees -The amount of dwelling coverage (A) chosen by the policyholder determines the amount of coverage for other detached private structures (B), personal property (C), and additional living expenses (D) Section I: Property Coverage -Covers the policyholder’s main residence, attached structures, permanently installed outdoor equipment, such as fences, and outdoor swimming pools -Detached private structures coverage – covers structures not attached to the main residence, such as detached garages and garden sheds – the amount of coverage for this is limited to 10% -Personal property coverage – covers items that are owned or used by the insurer regardless of whether they are lost or damaged at the insured’s premises or away from home -Special limits of insurance apply to many items that could potentially be very valuable, such as furs, jewellery, bicycles, and stamp collections -There are two groups of special limits: -Those that apply to all types of losses -Those that apply to theft only -Personal articles endorsement – additional coverage for items not insured or with sub-limits BU353 Chapter 12 – Homeowners Insurance Week 7 purchased through an endorsement -Personal articles insurance, is used to insure property such as jewellery, cameras, firearms, musical instruments, and stamp collections -Coverage provided is anywhere in the world on an all-risk basis and without a deductible -Additional living expense coverage – provides reimbursement for the additional expenses incurred if the dwelling cannot be used because it is damaged by an insured peril or because civil authorities prevent its use as a direct result of damage to neighbouring premises by an insured peril or collapse of building -Extensions of coverage – losses covered include debris removal that is required as a result of an insured loss, property removed, fire department charges, and lock replacement Excluded Perils -Homeowners policies exclude coverage for a number of perils -Ex. Intentional acts, normal wear and tear, pollution, war, and nuclear incidents -An exclusion that has received attention in the past few years is mold damage -Most homeowner policies exclude damage from mold Property Loss Settlement -Property losses under homeowners insurance are covered above a per occurrence deductible -Deductibles are commonly $500 - $1,000 Dwellings and Other Structures -Replacement cost – the insurer will pay the cost to repair or replace the building with materials of similar kind and quality -Guaranteed replacement cost – if the insured purchases this option then the insurer will pay the cost of repairs even if it exceeds the amount of insurance for coverage A, provided that certain conditions are met -Actual cash value – replacement cost less depreciation Personal Property -All three of the homeowners forms give the insured the option to have replacement cost coverage for personal property Section II: Liability Coverage -Personal liability coverage – pays for compensatory damages and defense costs for unintentional bodily injury and property damage to third parties that arise from accidents at the residence or that result from actions of the insured away from the residence -The policy covers the legal liability of the persons named on the policy, as well as his or her spouse, the relatives of either, and any person under 21 in their care, while living in the same household -Students attending school but not living at home are also covered -Coverage for voluntary medical payments – pays the medical expenses of non-residents who are injured while on the premises -Voluntary payment for damage to property – covers unintentional direct damage caused by the insured to property of others even though there is no legal liability to do so -Voluntary compensation for residence e
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