Habitational

Property
Insurance
Unit 8
Unit Learning Outcomes
After completing this unit, you will be able to:
1. Define what property insurance is
2. Describe how property insurance coverage is provided
3. Describe the various coverages provided under the
standard property forms – property and liability sections
4. Identify what policy forms they will commonly see in the
market for property insurance
5. Describe the various endorsements available on the
market for property insurance
Unit Learning Outcomes
After completing this unit, you will be able to:
6. Explain basis of settlement: Actual Cash Value,
Replacement Cost, and Guaranteed Replacement Cost
Topic 1: What is
Property
Insurance?
Activity
Knowledge dump.
What do you already know about property insurance?
Property Insurance

“ It is designed to provide protection

to those who have a financial
interest in the property, and any
liability exposures that may arise
from occupying the premises.
Property Insurance

Everyone, whether they are renting an apartment,

own a home or live in a condo will have some
exposures to property and liability losses.
Two Sections
Property Coverages Liability Coverages
A - Dwelling building E – Personal liability
B – Detached private F – Voluntary medical
structures payments
C – Personal property or G – Voluntary payments
contents for property damage
D – Additional living H – Voluntary
expenses compensation for
residence employees
Named Perils

“ Named Perils coverage responds to

losses that were caused by perils
which are specifically stated in the
policy wordings. I.e., if something is
not stated in the policy wordings –
coverage will not be provided.
Named Perils

Some coverage is legislated provincially – any policy that

provides coverage for the peril of fire must also include
coverage for:
1. Lightning strikes
2. Explosion caused by natural gas, coal or manufactured gas
Common Named Perils
Fire, lightning
and explosion
Impact by
(by natural, coal
Falling Objects Aircraft or Land Smoke
or
Vehicles
manufactured
gas)
Water Damage
Vandalism and (limited to
Malicious Riot sudden and Glass Breakage
Damage accidental
escape)

Windstorm and
Theft Transportation Electricity
Hail
Named Perils - Exclusions

The Lightning Artificially Radioactive

application of damage to generated contamination
heat electrical electrical
devices, currents
appliances
Named Perils – Fire
Exclusions
Riot
Insurrection
Rebellion, revolution
Civil commotion
Civil war
War
Act of foreign enemy
Military power
Hostilities, whether war declared or not
All Risks

“ It is important to note, that ‘All-risks’

does not mean that all risks are
covered, which is a very common
misconception of this coverage.
All Risks

• Most widely used policy forms

• Superior to named perils

(ILScorp, 2020; The Insurance Institute of Canada, 2013)

All Risks Advantages

Provides coverage for losses not specifically stated in

the policy:
 This is useful in situations where someone may
lose or misplace a wedding ring, for example

(ILScorp, 2020; The Insurance Institute of Canada, 2013)

Limitation of Liability Clauses

The large majority of property policies contain

clauses which will reduce the amounts payable under
the policy.
These are known as Limitation of Liability clauses.
Limitation of Liability Clauses

Example:
Deductible clause – the insured must pay a
deductible. For example, if a homeowner has a $500
deductible on their policy and they have a $5000 loss
– their settlement will be reduced to $4500.
Who is Considered Insured?

Under standard property policies, the term ‘insured’

refers to the policyholder – or the persons who are
insured by the policy. It is important to define who is
considered an ‘insured’.

(ILScorp, 2020; The Insurance Institute of Canada, 2013)

Who is Considered Insured?

Others insured on the

same policy, while
living in the same
household, include:

Persons under
Student away at
Spouse Relatives 21 in care of
school
insured

(The Insurance Brokers Association of Canada, 2011, p. 2-2 & 2-3)

Personal vs. Premises
Liability
No matter if someone owns a home, runs a business,
or rents an apartment – they will all have liability
exposures in the form of personal liability and
premises liability.

(ILScorp, 2020; The Insurance Institute of Canada, 2013)

Premises Liability

“ Premises liability refers to unsafe

conditions that may exist on the
premises of someone’s property that
cause an injury or damage.
Personal Liability

“ Personal Liability refers someone’s

actions that may cause injury to
someone or property damage.
Topic 2:
Standard
Property Forms
Insuring Personal Property
Coverage B –
Coverage C –
Detached
Personal
Private
Property
Structures

Coverage D –
Coverage A –
Additional
Dwelling
Living
Building
Expense
Personal
Property
Coverage A – Dwelling
Building
Point 1: Clearly, the main property insured by the home
insurance policy is the dwelling building itself. That is where
most of the value is.

Point 2: All home insurance policies provide a description of

the things that the insurer agrees to include within the limit of
insurance provided for the dwelling building.

(ILScorp, 2020, p. 155-157)

Coverage A – Dwelling
Building
Point 3: Additional insurance provided under the amount
of insurance provided for dwelling building:
i. Outdoor trees, shrubs and plants
ii. Building fittings and fixtures

Point 4: Broker should identify each of the property items

that are included in the amount of insurance provided for
the dwelling building.
(ILScorp, 2020, p. 155-157)
Coverage B – Detached
Private Structures
Point 1: A detached structure is defined in most
homeowners' policies as a building or structure that is
separated from the dwelling building by a clear space.

Point 2: "When a building or structure is connected to the

dwelling building by a fence, utility line or similar connection
only, they are considered to be detached structures.
(ILScorp, 2020, p. 155-157)
Coverage B – Detached
Private Structures
Point 3: The insurance provided by a homeowners' policy is
only for detached structures that are used for private
purposes i.e., not being rented to others, not being used by
the insured or others to operate a business.

(ILScorp, 2020, p. 155-157)

Coverage C – Personal
Property
By definition, personal property is considered to consist of
moveable property. There are a lot of such items in every
home.

(ILScorp, 2020, p. 155-157)

Coverage C – Personal
Property
Point 1: The contents of the dwelling and other personal
property the insured owns, wears, or uses while on the
premises which is usual to the ownership or maintenance of a
dwelling.
(ILScorp, 2020, p. 155-157)
Coverage C – Personal
Property Exclusion
Personal property does not include
motorized vehicles, trailers, and
aircraft.

Exception: watercraft and motorized yard

vehicles such as lawn mowers, garden
tractors, and snow blowers which are owned
or used by the insured. (ILScorp, 2020, p. 155-157)
Coverage C – Personal
Property
Point 2: Personal property that has been temporarily
removed from the insured's premises while it is anywhere in
the world.

Point 3: Personal property of students who are residing

temporarily away from home for the purpose of attending a
school, college or university.
(ILScorp, 2020, p. 155-157)
Coverage C – Personal
Property
Point 4: Personal property that is stored in a warehouse is
insured for 30 days unless the loss or damage is caused by
theft. If coverage is required for a longer period, the insured
must notify the insurer in writing.

(ILScorp, 2020, p. 155-157)

Coverage C – Personal
Property
Point 5: Personal property kept at any other location owned,
rented or leased by the insured is covered only when the
insured is temporarily living there.

Point 6: Uninsured personal property belonging to others is

insured when the loss or damage occurred on a portion of the
premises occupied by the insured. There is, however, no
coverage for personal property owned by roomers, boarders
or tenants who are not related to the insured.
(ILScorp, 2020, p. 155-157)
Personal Property with
Special Limits
Point 1: There are certain personal property items that have
a Special Limit of Insurance. Their purpose is to limit the
amount the insurer is prepared to pay for loss or damage for
certain personal property items. The Special Limit of
Insurance paid by the insurance company may turn out to be
less than the actual value of the lost or damaged item.

(ILScorp, 2020, p. 155-157)

Personal Property with
Special Limits
Point 1: There are certain personal property items that have
a Special Limit of Insurance. Their purpose is to limit the
amount the insurer is prepared to pay for loss or damage for
certain personal property items. The Special Limit of
Insurance paid by the insurance company may turn out to be
less than the actual value of the lost or damaged item.

(ILScorp, 2020, p. 155-157)

Personal Property with
Special Limits
Point 2: The Special Limits of Insurance may vary between
insurers. Brokers need to ensure they are familiar with those
limits on all home insurance policies they sell in their brokerage.

Point 3: People who have personal property items that have

more value than the Special Limit of Insurance provided for them
by the policy should purchase additional insurance for them.
(ILScorp, 2020, p. 155-157)
Personal Property with
Special Limits
Point 4: There are two categories of Special Limits of Insurance,
specifically:
• those that apply to certain personal property items, regardless
of the cause of the loss, and
• those that apply to all losses except those caused by a
Specified Peril.

(ILScorp, 2020, p. 155-157)

Special Limits of Insurance
– Two Categories
Category
2: Special
Category
limits for
1: Special
all losses
Limits on
except
Property
those
regardless
caused by
of cause
a
of loss
specified
peril

(ILScorp, 2020, p. 157-159)

Category 1
 Business property – $2000
 Securities – $2000
 Money, cash, bullion – $200
 Garden Tractor – $500
 Watercraft – $1000
 Computer software – $2500
 Spare auto parts – $1000

(ILScorp, 2020, p. 157-159)

Category 2
 Jewelry, fur, watches, gems – $2000
 Numismatic property (Coin Collections) – $200
 Manuscripts, stamps – $1000
 Collectible Cards – $1000
 Bicycles – $500
(ILScorp, 2020, p. 157-159)
Coverage D – Additional
Living Expense
Point 2: The amount of insurance for Coverage D – Additional
Living Expenses is usually 20% of the limit of insurance
provided for Coverage A – Dwelling Building.

(ILScorp, 2020, p. 161)

Coverage D – Additional
Living Expense
Additional living
expenses are
available to the
insured under the
following three
circumstances:

Dwelling unfit for Access Denied by

Occupancy after Fair Rental Value Order of a Civil
Insured Loss Authority

(ILScorp, 2020, p. 161-164)

Dwelling Unfit for
Occupancy After Insured
Loss
The Coverage: If an insured peril makes the dwelling unfit to
live in, and the insured has to move out while insured damage
is being repaired, the insurance company will cover any
necessary increase in living expenses – including moving
costs – so that the insured’s can main their normal standard
of living.

(ILScorp, 2020, p. 161-164)

Dwelling Unfit for
Occupancy After Insured
Loss
Duration of Payment: Payment of Additional Living
Expenses is limited to the reasonable time required to repair
or rebuild the home of for the insured to settle elsewhere.

(ILScorp, 2020, p. 161-164)

Fair Rental Value

a. If the insured have a tenant who is paying them rent and

that tenant is forced to look for other accommodation
because of insured damage to the home, the insurance
company will reimburse the insured for the Fair Rental Value
lost to them for the reasonable time required for repairs or
rebuilding.

(ILScorp, 2020, p. 161-164)

Fair Rental Value

b. Expenses such as heating or electricity that are included in

the rent paid by the tenant, but which are not continued
during reconstruction will be deducted from the amount
paid for Fair Rental Value.

(ILScorp, 2020, p. 161-164)

Fair Rental Value

c. In the event the insured's tenant had signed a long-term

lease, the insurer's obligation to pay Fair Rental Value
would continue only for the reasonable time it took to have
the home repaired – and not for the duration of the lease.

(ILScorp, 2020, p. 161-164)

Access Denied by Order of
Civil Authority
Payment will be made i) for up to two weeks for Additional
Living Expenses and Fair Rental Value ii) when the insured or
their tenant is denied access to the insured dwelling by a civil
authority because of direct damage to a neighbouring
premises by a peril insured by the insured's own policy.

(ILScorp, 2020, p. 161-164)

Single Limit of Insurance
Single limit insurance combines all the policy
coverages (A, B, C & D) into one single,
inclusive limit of insurance that can be applied
under any section of the policy.
The Single Limit does not look at the individual
limits under the sections, instead it looks at
the total limit of Coverages A through D
combined.

(The Insurance Brokers Association of Canada, 2011, p. 2-15)

Single Limit of Insurance –
Example
Coverage A – $500,000
Coverage B – $50,000
Coverage C – $400,000
Coverage D – $125,000
Single Limit of Insurance – $1,075,000

(The Insurance Brokers Association of Canada, 2011, p. 2-15)

How Coverage Limits are
Calculated
Coverage A’s limit is the cost to rebuild the dwelling.

Coverage B’s limit defaults to 10% of the Coverage A Limit

Coverage C’s limit defaults to anywhere between 70% and
90% of the Coverage A Limit, depending on the insurance
company.
Coverage D’s limit defaults to 20% of the Coverage Limit

(The Insurance Brokers Association of Canada, 2011, p. 2-15)

Insuring Personal Liability

Coverage G –
Coverage F –
Voluntary
Voluntary
Payment for
Medical
Damage to
Payments
Property
Coverage H –
Voluntary
Coverage E –
Compensatio
Personal Person n for
Liability
al Resident
Employees
Liabilit
y
Coverage E – Personal
Liability
Purpose of Coverage
Insurance companies agree to pay all sums, including those
arising from defence, settlement, and supplementary
payments, for compensatory damages that the insured is
legally liable to pay in the event of unintentional bodily injury
or damage to property of others while travelling or while on
the insured's premises.

(Insurance Brokers Association of Alberta, 2016, p. 123-125)

Coverage E – Personal
Liability
Typically, most liability claims arise out of the ownership or
use of the premises, including as a result of its condition. Each
loss event or occurrence would be subject to the limit of
insurance.
(Insurance Brokers Association of Alberta, 2016, p. 123-125)
Coverage E – Personal
Liability
Claims for injuries or death sustained by a residence
employee are also covered.

(Insurance Brokers Association of Alberta, 2016, p. 123-125)

Coverage E – Exclusions

1. Liability you have assumed by contract unless your legal liability

would have applied even if no contract had been in force
2. Damage to property owned by an insured
3. Damage to property used, occupied, leased, or rented by or in
the care, custody, or control of an insured, except for
unintentional property damage to premises owned by others, or
their contents, which you are using, renting, or have in your
custody or control caused by fire, explosion, water damage, or
smoke.
(Insurance Brokers Association of Alberta, 2016, p. 123-125)
Coverage E – Exclusions

4. Damage to personal property or fixtures as a result of work done

on them by you or anyone on your behalf
5. Bodily injury to you or to any person residing in your household
other than a residence employee
6. The personal actions of a named insured who does not reside in
the premises described on the Coverage Summary page

(Insurance Brokers Association of Alberta, 2016, p. 123-125)

Personal vs. Premises
Liability
No matter if someone owns a home, runs a business, or rents
an apartment – they will all have liability exposures in the
form of personal liability and premises liability.
Premises Liability

Premises liability refers to unsafe conditions that may exist on

the premises of someone’s property that cause an injury or
damage.
Personal Liability

Personal Liability refers someone’s actions that may cause

injury to someone or property damage.

It is important to remember that liability is an equally

important coverage to property.
Coverage F – Voluntary
Medical Payments
Purpose of Coverage
The insurance company agrees to reimburse third parties for
medical expenses incurred by them when they have been
unintentionally injured by the insured or if they have been
accidentally injured on the insured’s premises. Coverage is
usually limited to $1,000 or less.
(ILScorp, 2020, p. 167)
Coverage G – Voluntary
Payment Damage to
Property
Purpose of Coverage
The insurance company agrees to voluntarily pay any
property damage claim:
• against the insured for damage that, as caused
unintentionally and for which it is unlikely a court would find
them legally liable,
• caused intentionally by any insured 12 years of age or
under.
(ILScorp, 2020, p. 167)
Coverage H – Voluntary
Compensation Residence
Employees
Purpose of Coverage
The insurer agrees to pay the benefits described under a
separate Schedule of Benefits to or on behalf of, a residence
employee who is injured or dies accidentally while working for
the insured even though the insured is not legally liable for
their injury or death.

(ILScorp, 2020, p. 167)

Coverage Extensions

Debris removal

Property removed to protect from loss

Moving to another home

Fire department charges

(The Insurance Brokers Association of Canada, 2011)

Coverage Extensions

Changes in temperature

Freezer food

Lock replacement

Arson conviction reward

Inflation protection

(The Insurance Brokers Association of Canada, 2011)

(The Insurance Brokers Association of Canada, 2011)
Topic 3:
Common Policy
Forms
Common Forms of Property
Insurance
The Homeowners Policy

The Condo Unit Owners Policy

Tenant’s Policies

Rented Dwellings

Seasonal Dwellings
Homeowners
The Homeowners Policy

The homeowner’s policy protects the individuals who occupy

the dwelling that they own, along with their families. Types of
forms:
1. Homeowners Basic Form (Named Perils form)
2. Homeowners Broad form (Named Perils on Personal
Property/All-risks on Building)
3. Homeowners Comprehensive Form (All-risks form)

(The Insurance Brokers Association of Canada, 2011, p. 2-27 to 2-

30)
Homeowners
Comprehensive Form (IBC
1155)
Broadest form of habitational coverage provided in
the insurance marketplace today.

Biggest advantage:
• All property owned by the insured is covered on an
"all risks" basis.

(The Insurance Brokers Association of Canada, 2011, p. 2-27 to 2-

30)
All Risks NOT “All Risks”

There is no single policy which covers all losses without

exception. All insurance policies are subject to certain policy
conditions and exclusions.

Term “all risks” can leave insureds with the impression that
they are covered for everything. This can have disastrous
consequences.

(The Insurance Brokers Association of Canada, 2011, p. 2-27)

Losses Covered

• Loss or damage caused to both the dwelling and personal

property by smoke from a fireplace.
• Collapse of roof from snow load.
• Impact from a vehicle driven by insured.
• Any other loss not specifically excluded.

(The Insurance Brokers Association of Canada, 2011, p. 2-27 to 2-

30)
Property Not Insured

1. Buildings or structures used in whole or in part for business

or farming purposes.
2. Property at any fairground, exhibition or exposition for the
purpose of exhibition.
3. Any property illegally acquired, kept, stored or transported,
or property subject to forfeiture.
4. Evidence of debt or title.

(The Insurance Brokers Association of Canada, 2011, p. 2-27 to 2-

30)
Loss or Damage Not
Insured
1. Sporting equipment where the loss or damage is due to its
use.
2. Animals, birds, or fish (with exceptions)
3. Property lawfully seized or confiscated
4. Scratching, abrasion, or chipping of personal property or
articles
5. Outdoor radio and TV antenanae

(The Insurance Brokers Association of Canada, 2011, p. 2-27 to 2-

30)
Loss or Damage Not
Insured
1. Sporting equipment where the loss or damage is due to its
use
2. Animals, birds, or fish (with exceptions)
3. Property lawfully seized or confiscated
4. Scratching, abrasion, or chipping of personal property or
articles
5. Outdoor radio and TV antennae

(The Insurance Brokers Association of Canada, 2011, p. 2-27 to 2-

30)
Loss or Damage Not
Insured
6. Wear and tear, deterioration, defect or mechanical
breakdown
7. Cost of making good faulty material or workmanship
8. Setting, expansion, contraction, moving, bulging
9. Occurring after your dwelling has been vacant for more
than 30 consecutive days
[Link] by any nuclear incident

(The Insurance Brokers Association of Canada, 2011, p. 2-27 to 2-

30)
Loss or Damage Not
Insured
[Link] by contamination by radioactive material
[Link], invasion, act of a foreign enemy, hostilities, civil war,
rebellion, revolution, insurrection or military power
[Link] from any international or criminal act by
[Link] personal property undergoing any process or while
being worked on, where the damage to other property is
insured
[Link] damage
(The Insurance Brokers Association of Canada, 2011, p. 2-27 to 2-
30)
Loss or Damage Not
Insured
[Link] by birds, vermin, rodents or insects (except glass)
[Link] from agricultural smudging or industrial operations
[Link], earthquake, landslide, earth movement
[Link] by theft or attempted theft by tenant
[Link] or malicious acts while under construction
[Link] or attempted theft while under construction

(The Insurance Brokers Association of Canada, 2011, p. 2-27 to 2-

30)
Home Based Business
Coverage
• There are over 1.5 million home-based businesses
in Canada which need insurance.

• The homeowners’ forms do not provide adequate

coverage for this exposure.

(The Insurance Brokers Association of Canada, 2011, p. 2-31)

Condo
Owners
Condo Owners
• Condos are covered in a slightly different way than a
private home.
• Owner still has an insurable interest in the dwelling, but
there are multiple instances of separate ownership in a
common building.
• Insurance for the building and detached private structures
will be purchased by the Condo Corporation.
• As a result, you will not see Coverages A or B on the Condo
Unit Owners form.
Condominium (Condo)

“ A system of separate ownership of

individual units in (a) multiple unit
building
(Black’s Law Dictionary as cited in The Insurance
Brokers Association of Canada, 2011, p. 3-5)
Two Condo Unit Owners
Forms
The Condominium Unit Owner’s Basic Form
(Named Perils form)

The Condominium Unit Owner’s

Comprehensive Form (All-Risks Form)

(The Insurance Brokers Association of Canada, 2011, p. 2-27)

Condominium Unit Owner’s
Insurance (IBC 1167)
Special Acts have been enacted in all provinces
dealing with the establishment and regulation of
Condominium Corporations.

(The Insurance Brokers Association of Canada, 2011, p. 3-5)

Condo Unit Owner’s
Insurance
Individuals may own one or more units and will have an
undivided interest in its common elements which include:

• Parking area.
• Landscaping.
• Recreational areas.

(The Insurance Institute of Canada, 2012, p. 2-13)

The Condominium Act

Condo corporation
must purchase
insurance to cover:

The value of the

building (as it was
originally
The value of the
constructed),
common elements.
including the value of
those units owned by
its members;
(The Insurance Brokers Association of Canada, 2011, p. 3-5)­­
Insuring Owner’s Interest

Personal Property
Owners are responsible for insuring the contents of
their units.

(The Insurance Brokers Association of Canada, 2011, p. 3-5 & 3-6)

Insuring Owner’s Interest

Other Essential Coverages

Unit
Improveme Deductible / Unit
nts and Loss Additional
Betterment Assessment Protection
s

(The Insurance Brokers Association of Canada, 2011, p. 3-6)

Bareland Condos

Condominiums are communally owned property – the condo

corporation will purchase a master insurance policy to insure
the building. This is why there is no Coverage A provided
under the condo unit owners form.

There is an exception to this:

THE ‘BARELAND AGREEMENT’

The Bareland Agreement

Under this type of agreement, there is

no communally owned property other than the
land,
and perhaps a few detached facilities like
maintenance sheds.
Tenants
Tenant’s Policy
• Designed for people who do not own the
accommodations that they are living in.
• Many people can make use of the tenant’s policy
including working professionals and students.
• The tenant’s policy does not insure the building – it
focuses more on personal property and liability.
Two Tenant’s Forms

The Basic Tenant’s form (Named Perils

Policy)

The Tenants Comprehensive form (All-

Risks Policy)

(The Insurance Brokers Association of Canada, 2011, p. 2-27)

Tenants Package Forms
(IBC 1161/1163)
Designed for those:

Renting a With use of a

Living in
dwelling (or dwelling as
apartments
portion) renumeration

Owners of a
business
occupying private
living quarter in a
commercial
building
(The Insurance Brokers Association of Canada, 2011, p. 3-3)
Summary of Coverages
Provided
Coverage A – Dwelling Building – Insured by
building owner

Coverage B – Detached Private Structures –

Insured by building owner

Coverage C – Personal Property – Limit as

selected by tenant

Coverage D – Additional Living Expense –

20% of Coverage C – Personal Property

(The Insurance Brokers Association of Canada, 2011, p. 3-4)

Rented,
Seasonal
Rented Dwellings
• Dwellings that are owned by the insured but
occupied by others normally are subject to
restricted coverage.

• Most insurers will not provide this coverage unless

they also provide the insurance for the owner's
principal residence.
(The Insurance Brokers Association of Canada, 2011, p. 3-8)
Seasonal Dwellings
• Premises owned and used by insureds on a
seasonal basis can be insured separately or added
to their habitational policy.

• Coverage is provided on a Named Perils basis.

(The Insurance Brokers Association of Canada, 2011, p. 3-7)

Seasonal Dwellings
– Common Exclusions
• Loss of property due to change of temperature.

• Freezer food.

• Outdoor trees, plants and shrubs.

(The Insurance Brokers Association of Canada, 2011, p. 3-7)

Eligible Coverage Under
Homeowners Basic Form
Principal residence must be insured with same insurer.

Building must be constructed as a year-round residence and occupied at

least one day in a 60-day period throughout the year.

Building not rented to others.

Primary heating must be by thermostatically controlled furnace or electricity.

Building must be accessible by maintained roadway year-round.

(The Insurance Brokers Association of Canada, 2011, p. 3-7)

Topic 4:
Endorsements
What is an Endorsement?

“ An endorsement is an extra sheet(s)

or slip(s) of paper attached to the
policy indicating in writing that the
insurer and the insured have agreed
to a change in the terms of the
insurance contract.
(The Insurance Brokers Association of Canada, 2011, p. 3-11)
Purpose of Endorsements
Provide coverage for excluded property
or perils

Increase limits

Broaden coverages

Decrease the deductible

Remove coverage

(The Insurance Brokers Association of Canada, 2011, p. 3-11)

Common Endorsements
Sewer Back Up
Overland Water
Earthquake
Identity Theft
Claims Free Protection
Bylaws
Personal Articles
Fine Arts
Topic 5:
Settlement
Basis of Settlement
Actual Cash
Value

Replacement
Cost

Guaranteed
Replacement
Cost

Agreed Upon
Value
Actual Cash Value

Using this basis of settlement, an insured will be

compensated for their property in its most recent
condition – that is the depreciated value of the item.
Replacement Cost

This basis of settlement allows the insured to repair

or replace their damaged property with new items of
similar kind and quality.
Guaranteed Replacement
Cost

This is similar to replacement cost, except that if the

loss or damage exceeds the amounts listed in
Coverage A, GRC will still provide coverage.
Agreed Upon Value

The value of property has been agreed upon in

advance by the insured and the insurance company.
In the event of a loss, this agreed upon value is what
will be paid to the insured.
Activity
Problem solving.
Using what we have learned during this unit, take some time
to review the scenarios outlined below, and answer the
questions posed related to those scenarios.
You can work alone or break into small groups.
Take notes and be prepared to share your answers with the
class if called upon to do so.
Scenario 1
You are having a discussion with Ms. Smith. She has
purchased a condo on the 14th floor and has advised you that
she is not the original owner. She has heard some confusing
information, and she wants to make sure that she is fully
covered.
Scenario 1 - Question
1. Explain the Betterment and Improvement Coverage under
the condo owner’s policy to Ms. Smith.
Scenario 2
Jennifer has just bought a homeowners policy. She doesn’t
understand the varying limits under Coverage A through D.
She also doesn’t think she needs to have some of the
coverage because she doesn’t have any ‘detached structures’
on her property.
Scenario 2 - Questions
1. Explain the coverage limits and how they are calculated to
Jennifer.

2. Also explain to her why she isn’t paying any additional

premium for Coverage B ‘detached private structures’.
Sources
ILScorp. (2020). Level 1 licensing: General & adjuster insurance licensing.
Insurance Brokers Association of Alberta. (2016). Insurance licensing preparation – Level 2.
Insurance Brokers Association of Canada, The. (2011). Canadian accredited insurance broker
program (5th ed.).
Insurance Institute of Canada, The. (2013). C12 insurance on property.
Thank you.