Personal habitational practice

All 44 free personal habitational questions

1. Your client's property policy shows a bank as mortgagee, and the loss was made payable to the bank with the insurer's consent. The insurer terminates the policy for non-payment of premium and sends the termination notice to the client alone. Two weeks later the dwelling burns. Under section 147 of the Insurance Act, what is the bank's position?

   • A The insurer could not cancel the policy to the bank's prejudice without giving notice to the bank Correct
   • B Notice to the named insured was enough, because the bank is not a party to the contract
   • C The bank was entitled to twice the notice period given to the named insured
   • D The bank's interest ended automatically when the insured stopped paying the premium

   Section 147 (1) bars an insurer from cancelling or altering the policy to the prejudice of a consented loss payee without notice to that person, and section 147 (2) makes the length and manner of that notice the same as notice of cancellation to the insured, so the bank had to be told separately.

   Insurance Act, s. 147 (1)

2. A property policy issued in Ontario prints a condition that cuts back one of the statutory conditions. Under section 148 (1) of the Insurance Act, what is the effect of that printed wording on the insured?

   • A It does not bind the insured, because no variation, omission or addition to a statutory condition is binding on the insured Correct
   • B It governs the claim, because the insured accepted the policy as issued
   • C It binds both parties once the insurer has filed the wording with the regulator
   • D It makes the entire policy void, because a statutory condition cannot be altered

   Section 148 (1) deems the statutory conditions to be part of every contract in force in Ontario and requires them to be printed in the policy, then states that no variation, omission or addition binds the insured, so the cut-back wording simply fails against the insured while the rest of the policy stands.

   Insurance Act, s. 148 (1)

3. Your client starts renting out the basement of their owner-occupied home, a change material to the risk and squarely within the client's control and knowledge. The client notifies the insurer in writing the same week. The insurer writes back saying the contract can continue if the client pays an additional premium. Under statutory condition 4 of the Insurance Act, by when must the client pay it?

   • A Within fifteen days after the client receives the insurer's notice Correct
   • B Within fifteen days after the tenant moved into the basement
   • C Within thirty days after the client receives the insurer's notice
   • D At the next renewal of the contract

   Statutory condition 4 lets the insurer respond to a notified material change by asking for an additional premium, and the clock it sets is fifteen days from receipt of the insurer's notice, so the period runs from that notice rather than from the change itself.

   Insurance Act, s. 148, Statutory Condition 4 (Material Change)

4. Under statutory condition 6 of the Insurance Act, what must an insured do after a covered loss, in addition to giving written notice of the loss forthwith?

   • A Deliver a proof of loss to the insurer as soon as practicable, verified by a statutory declaration Correct
   • B Telephone the broker within 24 hours and confirm the details of the loss verbally
   • C Obtain two independent repair estimates before the insurer attends the site
   • D File the proof of loss with the court within sixty days after the loss

   Statutory condition 6 (1) sets two separate obligations after a loss: notice in writing forthwith under clause (a), and delivery of a proof of loss verified by a statutory declaration as soon as practicable under clause (b), so a sworn document is required on top of the notice.

   Insurance Act, s. 148, Statutory Condition 6 (1) (Requirements After Loss)

5. A contractor's blowtorch starts a fire that damages your client's insured home. The insurer pays the client's claim under the property contract. Under section 152 of the Insurance Act, what may the insurer do next?

   • A It is subrogated to the client's rights of recovery against the contractor and may bring an action in the client's name Correct
   • B It must wait for the client to sue the contractor first, then claim a share of whatever the client recovers
   • C It has no rights against the contractor, because the client has already been paid under the contract
   • D It may pursue the contractor only if the client signs a formal assignment of the claim after payment

   Section 152 (1) subrogates the insurer to all rights of recovery of the insured against any person upon making a payment or assuming liability for one, and expressly lets the insurer sue in the name of the insured, so no separate step by the client is needed.

   Insurance Act, s. 152 (1)

6. Under a typical habitational wording, the policy is assembled from separate parts. Which statement describes the part that holds the policy conditions, the statutory conditions and the additional conditions?

   • A It is a separate part whose conditions apply to every section of the policy Correct
   • B It is printed inside the property part and governs property claims only
   • C It is printed inside the liability part and governs liability claims only
   • D It is attached to each endorsement and governs the endorsements only

   A habitational policy is built from parts that each do one job, and the conditions part is written to apply to all sections, so a condition on notice or on misrepresentation governs a liability claim as much as a property claim.

7. Under a typical habitational wording, every form in the endorsements part of the policy adds coverage the base policy does not carry. Is that statement correct?

   • A True
   • B False Correct

   The endorsements part says the forms in it may extend or limit coverage, so the same list holds a water endorsement that broadens cover and a vacancy permit or wood stove warranty that cuts it back.

8. Under a typical habitational wording, which event falls inside the defined term water escape?

   • A Sewage backing up through a basement floor drain
   • B A river overflowing its banks and entering the basement
   • C Water seeping through a foundation wall after heavy rain
   • D An accidental overflow of water from a household appliance Correct

   Water escape means the accidental discharge or overflow of water or steam from something it was meant to stay inside, such as a plumbing, heating, sprinkler or air conditioning system, a household appliance, an aquarium, a waterbed, a pool or hot tub, or a watermain.

9. Under a typical habitational wording, what does the defined term ground water describe?

   • A Any water that reaches a basement floor, however it got there
   • B Water standing on ground that does not normally hold any water after a heavy rainfall
   • C Water in the soil below the surface, including wells and percolating water Correct
   • D Water that has backed up through a weeping tile or a sump

   Ground water is defined by where the water already is, namely in the soil below the surface, which is why the wording handles it separately from both flood and sewer backup and why a water endorsement has to name it on its own.

10. A client rents a room in her house to a lodger who is not a relative. Under a typical habitational wording, how does Coverage C treat the lodger's own belongings?

    • A They are insured up to the full amount of insurance on personal property
    • B They are insured, but only against the specified perils named in the form
    • C They are not insured, because Coverage C excludes an unrelated roomer's property Correct
    • D They are insured while the lodger lives in the dwelling and for thirty days after leaving

    Coverage C brings in property of others generally but then removes property of roomers or boarders who are not related to the insured, so the lodger needs a tenant policy of their own.

11. Under a typical habitational wording, an electric bicycle with pedals stays inside Coverage C only within stated limits. What are those limits?

    • A Not more than 250 watts and not exceeding 25 km per hour
    • B Not more than 750 watts and not exceeding 32 km per hour
    • C Not more than 500 watts and not exceeding 32 km per hour Correct
    • D Not more than 500 watts, with no speed limit stated

    The carve-out to the motorized vehicle exclusion sets two thresholds together, power and speed, so a bicycle that breaches either one falls back out of Coverage C and into the exclusion.

12. A kitchen fire makes a client's house unfit to live in for two months. The family rents an apartment, and their grocery and utility spending at the house stops while they are out. Under a typical habitational wording, what does the additional living expenses coverage pay?

    • A The whole of the family's living costs across the two months
    • B The necessary increase in living expenses, moving expenses included Correct
    • C The apartment rent alone, with no other expense taken into account
    • D The rental value the client could have obtained by letting the damaged house

    The coverage responds where an insured peril makes the dwelling unfit for occupancy or forces the household out during repairs, and it pays the necessary increase in living expenses, so costs that stop at home are set against the new costs.

13. Under a typical habitational wording, who counts as a civil authority for the purposes of the evacuation coverage?

    • A A person acting under federal, provincial or territorial authority in an emergency Correct
    • B Any organisation with the legal power to order people out of a building
    • C The condominium corporation or the property manager responsible for the building
    • D A private security firm engaged by the municipality to close off a street

    The wording defines civil authority as any person acting under the authority of the federal government or a provincial or territorial government with respect to the protection of persons and property in an emergency, so the power has to come from one of those governments.

14. Under a typical habitational wording, what does a named perils form insure?

    • A Every cause of loss the policy does not specifically exclude
    • B Any cause of loss the insured can show was sudden and accidental
    • C The perils listed in the form, without any further qualification once the peril is shown
    • D Direct loss caused by the perils it lists, each as described and limited Correct

    A named perils form insures against direct loss or damage caused by the perils it lists, and the phrase as described and limited means each peril carries its own definition and carve-outs, so being on the list is not the end of the question.

15. Under a typical habitational wording, how is the word tenant defined where the vandalism and theft perils exclude damage caused by a tenant?

    • A A person who has signed a written lease for the dwelling
    • B Any person who has the insured's permission to occupy the dwelling or any part of it Correct
    • C Any person who pays the insured something in return for the use of the dwelling or part of it
    • D A person shown as a tenant on the coverage summary page

    The wording gives the exclusions their own definition, which reaches any person with the insured's permission to occupy the dwelling or part of it, so a house guest or a short term rental guest is caught without any lease or payment.

16. Heavy rain overloads the municipal system and sewage backs up through the floor drain into a client's basement. His policy carries a named perils form and no water endorsement. Under a typical habitational wording, does the water escape, rupture and freezing peril respond?

    • A No, because that peril excludes backup, escape or overflow from a sewer, sump or septic system Correct
    • B Yes, because water escaped inside the dwelling rather than outside it
    • C Yes, because the floor drain forms part of the plumbing system
    • D No, but the windstorm peril answers the loss instead, because the heavy rain is what caused it

    The water escape peril carves out backup, escape or overflow of water or sewage from a sewer, sump, septic system or connected eavestrough, and from drains or sewers outside the dwelling, which is the reason a sewer back-up endorsement is sold.

17. A client leaves a bedroom window open on a summer evening. A thunderstorm drives rain in through the open window and soaks the carpet and the bed. The building itself is undamaged. Under a typical habitational wording on a named perils form, does the windstorm or hail peril respond?

    • A Yes, because the wind is the reason the rain got inside the house
    • B No, because interior damage needs the storm to create the opening first Correct
    • C Yes, because coincidental rain damage is part of the windstorm peril
    • D No, because rain damage is outside every habitational form of coverage

    The windstorm or hail peril does not reach personal property or the interior of a building damaged by wind, hail or coincidental rain unless the storm has first created an opening, and a window the client left open is not a storm created opening.

18. Under a typical habitational wording, what does a comprehensive or all risks form insure?

    • A Every loss the property can suffer, with no exceptions
    • B The perils listed in the form, each as described and limited
    • C All risks of direct physical loss or damage from any external cause, subject to the exclusions Correct
    • D All risks of loss to the property, whether the cause is external to it or is inherent in it

    An all risks form insures against all risks of direct physical loss or damage from any external cause subject to the policy's exclusions, so the argument shifts from proving a peril to reading what the form takes out.

19. A contractor fits a bathroom drain badly, the joint fails, and water soaks the ceiling below. Under a typical habitational wording on an all risks form, what does the faulty workmanship exclusion take out of the claim?

    • A The cost of making good the faulty work itself Correct
    • B The whole claim, because a contractor was at fault
    • C Nothing, because the exclusion catches faulty design only
    • D The resulting damage to the ceiling, but not the cost of the defective work

    The exclusion is written as the cost of making good faulty design, material or workmanship, so it removes the price of putting the defective work right and leaves the damage that flowed from it to be dealt with on the rest of the form.

20. A client is upgrading from a named perils form to an all risks form and asks whether that buys protection for the drain in his basement backing up. Under a typical habitational wording, what should the broker tell him?

    • A No, because the all risks form excludes backup from a sewer, drain, sump or weeping tile Correct
    • B Yes, because an all risks form covers everything the named perils form left out
    • C Yes, because a floor drain forms part of the plumbing system under an all risks form
    • D Yes, provided the backup is sudden and accidental rather than gradual

    Backup or escape from a sewer, drain, sump, septic system, weeping tile, eavestrough or downspout is excluded on the all risks form just as it is on the named perils form, so only the sewer back-up endorsement buys that protection.

21. Under a typical habitational wording on an all risks form, how is damage caused by birds, vermin, rodents, raccoons, skunks, moles, mice or insects treated?

    • A It is insured, because the form covers all risks of physical damage
    • B It is excluded, except for resulting damage to building glass Correct
    • C It is excluded, with a narrow exception for damage to electrical wiring
    • D It is insured, but capped by a special limit on that class of property

    The wording excludes damage by these animals and insects and then carves back only resulting damage to building glass, so an infestation is the homeowner's problem while a broken window that follows may not be.

22. A client's dog chews through the hardwood flooring in the hallway. Under a typical habitational wording on an all risks form, that damage is insured because the form covers all risks. Is that statement correct?

    • A True
    • B False Correct

    The form excludes damage caused by a domesticated animal or bird the insured owns or has in their care, so the exclusion reaches a dog being looked after for a friend just as it reaches the family pet.

23. Under a typical habitational wording on an all risks form, what is left insured once the terrorism exclusion has been applied?

    • A Nothing, because the exclusion removes the whole of the loss
    • B Any share of the loss the insured can attribute to an insured peril
    • C Loss caused by a government decision taken to respond to terrorism
    • D Ensuing loss or damage that results directly from fire or explosion Correct

    The exclusion closes with a carve-back saying the insured is still covered for ensuing loss or damage resulting directly from fire or explosion, so that is the one slice of the claim the clause leaves alive.

24. A client is sued for an amount that would take up her whole Coverage E limit, and the insurer defends the action. Under a typical habitational wording, how are the defence costs treated?

    • A They are paid on top of the limit rather than out of it Correct
    • B They come out of the limit, so less is left to pay damages with
    • C They are shared equally between the insurer and the insured
    • D They are paid only once the insured has paid a liability deductible

    The supplementary payments list opens by saying the insurer will pay these amounts in addition to the limit of insurance under Coverage E, so defence spending does not eat into the money available for damages.

25. A client's adult son, who lives with her, reverses the lawn tractor into her parked car. Under a typical habitational wording, does the liability part answer her loss?

    • A Yes, because the son is a separate insured person under the same policy
    • B No, because damage to property owned by anyone in the household is excluded Correct
    • C Yes, because a lawn tractor is one of the machines the liability part names
    • D No, because a lawn tractor is not among the machines the policy names

    Liability insurance answers to third parties, so the wording excludes damage to property owned by the insured or by any person residing in the household other than a residence employee, and the property side of the policy is what deals with the insured's own things.

26. A client's own child is hurt falling down the stairs at home. Under a typical habitational wording, the liability part of the policy responds to that injury. Is that statement correct?

    • A True
    • B False Correct

    The wording excludes bodily injury to the insured or to any person residing in the insured's household other than a residence employee, because liability insurance answers claims by third parties rather than injuries inside the family.

27. Under a typical habitational wording, when does Coverage F, voluntary medical payments, respond?

    • A Only after a court has found the insured to be legally liable for causing the injury
    • B Where the insured unintentionally hurts someone, or someone is hurt on the premises Correct
    • C Only where the injured person has no other medical coverage of any kind
    • D Where the insured admits fault to the injured person in writing first

    Coverage F pays reasonable medical expenses incurred within one year of the accident where the insured unintentionally injures another person or someone is accidentally injured on the premises, so it operates without any finding of legal liability.

28. Under a typical habitational wording, what does a sewer back-up endorsement insure?

    • A Any water that enters the dwelling from outside it during a storm
    • B Sudden and accidental backing up of water or sewage from a drain or sump inside Correct
    • C The failure of a municipal water main in the street immediately outside the property
    • D Water that seeps through the basement wall steadily over a season

    The endorsement insures property under Coverages A, B and C against sudden and accidental backing up or escape of water or sewage within the dwelling or detached structures, and the word within matters because the failure has to happen inside the building.

29. A client asks whether her home policy will answer if the river behind her house comes up into the basement. Which statement describes the general position on home and tenant policies?

    • A Water damage is a basic coverage, while flooding is not typically part of a standard policy Correct
    • B Both water damage and flooding are basic coverages on every home policy
    • C Neither is insured unless the client buys a separate water endorsement
    • D Flooding is covered as standard, and burst pipes are the one loss that needs a separate endorsement

    Public Safety Canada's guidance for householders states that water damage is a basic coverage on home and tenant policies covering incidents such as burst pipes and hot water tank leaks, and that flooding is not typically part of a standard policy.

30. A tenant asks whether the building owner's insurance will replace her furniture if overland flooding gets into her apartment. What is the correct answer?

    • A Yes, because the building owner's policy insures everything kept inside the building
    • B Yes, provided she reports the loss to the owner within a set period
    • C No, because a landlord's insurance does not cover a renter's own belongings Correct
    • D No, because overland flooding cannot be insured by a tenant at all

    A landlord's policy insures the landlord's interest, so a renter who wants protection for personal property against overland flooding has to arrange it under a policy of her own.

31. Home insurance coverage is commonly described as dividing into two broad categories before any level of coverage is chosen. What are those two categories?

    • A Building coverage and contents coverage
    • B Named perils coverage and all risks coverage
    • C Property coverage, liability coverage and additional living expenses
    • D Personal property coverage and personal liability coverage Correct

    The property half covers loss of or damage to the things the client owns and the liability half covers what the client owes somebody else, which is the same line a habitational wording draws between its property section and its liability section.

32. In the common four level description of home coverage, what does the comprehensive level provide?

    • A Building and contents insured for all risks except those specifically excluded Correct
    • B Building and contents insured against only the perils the policy lists
    • C Building insured for all risks and contents insured against listed perils
    • D Building and contents insured for all risks, with flood and earthquake included

    Comprehensive is the top of the four levels, but it is not everything: the exclusions still apply, and flood, earthquake and sewer backup remain optional coverages a client buys on top.

33. In the common four level description of home coverage, what does the basic level, also called named perils, provide?

    • A Cover for the building only, with contents insured separately
    • B Cover only for the perils the policy specifically states Correct
    • C Cover for all risks except those specifically excluded
    • D Cover for properties that fall short of normal insurance standards

    Basic and named perils are the same level under two names, so the insured has to bring the loss inside one of the perils the policy states rather than pointing at the absence of an exclusion.

34. In the standard vocabulary of home insurance, how is a peril described?

    • A A chance event, unexpected and accidental from the policyholder's viewpoint Correct
    • B The damage that property suffers when a loss happens
    • C Any event that the policy happens to name, whether or not it was foreseeable at all
    • D The financial consequence the policyholder bears after a loss

    A peril is the cause of loss rather than the damage, and the requirement that it be unexpected and accidental is the fortuity principle, which is why shingles wearing out or a fence rotting is not an insured peril.

35. A condominium unit owner is protected by two separate policies. Which items does the corporation's policy leave to the unit owner's own policy?

    • A The common property, including hallways, stairs and the roof
    • B The buildings shown on the condominium plan
    • C The owner's contents, unit improvements, and their liability Correct
    • D The corporation's own furniture and equipment

    The two policy structure is what makes a unit owner policy necessary rather than optional, because the corporation's policy stops short of the owner's contents, the improvements made to the unit and the owner's personal liability.

36. A tenant asks why she should buy tenant insurance when she owns no building. What are the two things it is bought for?

    • A Her possessions and the landlord's building itself
    • B Her possessions and her personal liability, which the lease requires Correct
    • C Her possessions and the rent she still owes while the unit is repaired
    • D Her personal liability and the landlord's own loss of rent

    Tenant insurance covers possessions in the apartment and while the tenant is away, and it carries personal liability because a tenant can be answerable for damage to the building and for harm to people who live in or visit it.

37. A client bought her house for $420,000 in a soft market. A contractor estimates $610,000 to rebuild it from the ground up, and the municipal assessment is $480,000. She wants the building insured for what she paid. What should the broker advise?

    • A Insure for $420,000, because that is what the property cost her
    • B Insure for $480,000, because the municipal assessment is the independent figure
    • C Insure for the rebuilding cost, since that is what a rebuild would cost Correct
    • D Insure for the average of the three figures, because no single number is reliable

    The building amount has to match the cost of putting the same house back up from scratch, so it can sit well away from what the market pays for the property and from the figure a tax roll carries.

38. Under a typical habitational wording, what does replacement cost mean?

    • A The price the insured originally paid for the item when it was new
    • B The cost of a brand new item of the best quality available today
    • C The cost at the time of loss of repair or replacement, whichever is the lesser Correct
    • D Whatever it costs to put the insured back where they were, with no upper limit

    Two limits live inside the one definition: the insurer pays the lesser of repair and replacement with property of similar kind and quality, and it will not pay more than the applicable amount of insurance.

39. Two or more items are damaged in one occurrence, or several insured perils act together to cause the loss. Under a typical habitational wording, how is the deductible applied?

    • A One deductible applies, the largest of all those that could apply Correct
    • B Each of the applicable deductibles is applied in turn against the loss amount
    • C The deductibles are added together and taken off the loss
    • D The smallest applicable deductible is the one used

    The wording states that only one deductible will be used and that it will be the largest single deductible of all that apply, so a client with a higher water deductible meets that figure once and not twice.

40. A client insured for less than the co-insurance clause requires suffers a total loss. What effect does the clause have on that claim?

    • A It cuts the payment below the amount of insurance in proportion to the shortfall
    • B None, because on a total loss the indemnity is capped at the amount of insurance Correct
    • C It voids the policy, because the client has breached a condition of the contract
    • D It doubles the deductible that applies to the claim

    Co-insurance is a partial loss mechanic, because a total loss is already capped at the amount of insurance, which is why the advice is to insure to the full value or the full replacement cost.

41. A client's tenants moved out on March 1 with no intention of returning and nobody new has moved in. The client knows the house is empty and no vacancy permit is shown on the coverage summary page. A fire damages the house on March 20, and a second fire damages it on April 20. Under a typical habitational wording, how do the two losses fare?

    • A Both losses are excluded, because coverage ended the day the tenants left
    • B The March loss is insured and the April loss is not, because vacancy passed 30 days Correct
    • C Both are insured, because fire is insured whatever the occupancy of the dwelling
    • D The March loss is excluded and the April loss is insured, once the client tells the insurer

    Three things have to line up for the exclusion to bite: vacancy as the policy defines it, the insured's knowledge of it, and more than 30 consecutive days, and the clause removes only loss occurring after that period.

42. Under a typical habitational wording, what triggers the vacancy exclusion on the property side of the policy?

    • A Any period at all during which nobody sleeps at the dwelling
    • B The dwelling standing unoccupied for more than 12 consecutive months
    • C Loss after the dwelling has knowingly been vacant over 30 consecutive days Correct
    • D The insured failing to tell the broker that the dwelling will stand empty

    The clause is built from a defined term, a state of knowledge and a day count, so all three have to be present before the exclusion removes a loss.

43. Under section 145 of the Insurance Act, how may a property contract be renewed?

    • A Only where the insured signs a fresh written application
    • B By delivery of a renewal receipt identifying the policy by number or date Correct
    • C Only where the insurer issues a completely new policy document
    • D By the broker recording the renewal in the brokerage's own internal records

    The Act allows renewal by a receipt that identifies the policy, so a fresh policy document is not required and the identification can be by number, by date or in some other way.

    Insurance Act, s. 145

44. A client installs a wood burning stove in her living room in October. Under a typical habitational wording, what does the policy ask her to do?

    • A Tell the broker, because installing a wood burning appliance must be reported Correct
    • B Nothing at all, provided the stove is certified and professionally installed
    • C Wait until renewal and mention it on the renewal questionnaire then
    • D Nothing, because heating equipment forms part of the dwelling and is insured automatically

    Installation of a wood burning appliance sits on the list of changes the wording tells the client to report, which makes it a mid-term broker conversation rather than a renewal item.