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Your insured's home policy shows a bank as mortgagee, with loss payable to it. The insurer cancels for non-payment, sends notice only to your insured, and the house then burns. Which statement is TRUE?
- A The policy could not be cancelled against the bank without notice to the bank. Correct
- B Notice to your insured was enough. The section applies exactly where loss is payable to "a person other than the insured", and it requires notice "to that person", not only to the insured.
- C The bank was owed twice the notice given to your insured. Section 147 (2) sets the notice at "the same as notice of cancellation to the insured under the statutory conditions", not double it.
- D The bank's interest ended when the premium went unpaid. Nothing in section 147 ends the payee's protection on non-payment; the protection is triggered by the insurer cancelling or altering the policy, whatever the reason.
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)
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Which statement about the statutory conditions in a home policy is TRUE?
- A A change the insurer makes to one of them does not bind the insured. Correct
- B Accepting the policy binds the insured to any change printed in it. Acceptance of the policy changes nothing; the subsection says "no variation or omission of or addition to any statutory condition is binding on the insured".
- C A change binds both parties once the insurer files it with the regulator. Section 148 (1) sets no filing route that would make a variation binding on the insured; the conditions are deemed part of every contract in force in Ontario.
- D Any change to one of them voids the whole policy. The consequence in the subsection is that the variation does not bind the insured, not that the contract fails; the statutory condition simply applies in its statutory form.
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)
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After a covered loss, what must your insured do besides giving the insurer written notice right away?
- A Deliver a proof of loss as soon as practicable, sworn by statutory declaration. Correct
- B Phone the broker within 24 hours and confirm the details verbally. A verbal call satisfies neither obligation: clause (a) requires notice "in writing" and clause (b) requires a proof of loss "verified by a statutory declaration".
- C Get two independent repair estimates before the insurer attends the site. Statutory condition 6 requires an inventory and particulars from the insured, not independent repair estimates gathered before the insurer attends.
- D File the proof of loss with the court within 60 days of the loss. The proof of loss is delivered to the insurer, not filed with a court; the sixty day period in statutory condition 12 is the insurer's time to pay after the proof is complete.
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)
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Within what period must an insured start an action against the insurer to recover a claim under a home policy?
- A Within one year after the loss or damage occurs. Correct
- B Within two years after the insurer denies the claim. Wrong on both counts: the condition sets one year, and it runs "next after the loss or damage occurs", not from a denial.
- C Within one year after the insurer denies the claim. The length is right but the starting point is wrong; the condition counts from the loss or damage, not from the insurer's denial.
- D Within two years after the loss or damage occurs. Two years is the general limitation period, but statutory condition 14 sets one year for a claim under this contract and bars a later action absolutely.
Statutory condition 14 bars the action absolutely unless it is commenced within one year next after the loss or damage occurs, so the clock runs from the loss itself and not from any later step in the claim.
Insurance Act, s. 148, Statutory Condition 14 (Action)
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Your insured's home is damaged by a fire a contractor started with a blowtorch, and the insurer pays the claim. What may the insurer do next?
- A Recover from the contractor, suing in your insured's name if it needs to. Correct
- B Wait for your insured to sue, then claim a share of what is recovered. The subsection lets the insurer "bring action in the name of the insured", so it does not have to stand behind an action started by the client.
- C Nothing, once your insured has been paid under the policy. Payment is the very event that triggers subrogation under the subsection, which attaches "upon making a payment or assuming liability therefor".
- D Pursue the contractor only if your insured signs an assignment first. The right arises by statute on payment or on assuming liability for payment, so no signed assignment is required.
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)
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Which statement is TRUE about the contingent coverage on a condominium unit owner's policy?
- A It responds only where the corporation holds no policy at all. Holding a policy is not the test; inadequacy is named as a trigger in its own right.
- B It insures the owner's improvements rather than the unit. The endorsement insures the unit and expressly leaves out the owner's improvements and betterments, which are covered elsewhere.
- C It responds where the corporation's insurance is inadequate. Correct
- D It responds only once the corporation's directors are sued. Nothing in the endorsement makes it conditional on an action against the corporation or its directors.
Contingent coverage has three separate triggers, no insurance, inadequate insurance, and insurance not in effect, so a corporation that is insured on paper but short of the rebuilding cost still opens the endorsement.
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Your insured leaves a bedroom window open and a thunderstorm drives rain in, soaking the carpet. On a named perils form, which statement is TRUE?
- A The windstorm peril responds whenever wind carries the rain in. The clause turns on whether the storm made the opening, not on whether wind carried the rain.
- B The windstorm peril responds only where the storm makes an opening. Correct
- C The windstorm peril responds to any rain that comes with the wind. Coincidental rain damage is named in the exclusion, and it comes back only where a storm created opening exists.
- D Rain damage is never insured by a home policy. Rain entering through a storm created opening is insured under this very peril, so rain damage is not always outside the form.
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.
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Your insured borrows a neighbour's pressure washer, and a fire in his garage destroys it. What decides the neighbour's claim under his home liability coverage?
- A His legal responsibility to the neighbour, which it covers. Legal responsibility is what makes it a liability claim, and the care, custody or control exclusion is what removes it anyway.
- B Tenants legal liability, with the washer in his control. Tenants legal liability is written for premises owned by others and their contents, which is not a tool the client borrowed and took home.
- C The exclusion for property in his care, custody or control. Correct
- D The rule that liability coverage never pays for property damage. Coverage E pays for property damage generally; it is this particular class of property that the exclusion removes.
The liability part excludes damage to property the insured uses, occupies or leases or has in their care, custody or control, and the only way back in is tenants legal liability, which covers premises owned by others and their contents rather than a borrowed machine.
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Which coverage adds water that runs overland into a basement?
- A The comprehensive water endorsement. Correct
- B The sewer back-up endorsement. The wording carries them as different endorsements with different grants, so one does not stand in for the other.
- C The sewer back-up endorsement, for a sudden rapid thaw. Suddenness is a condition inside the grants, not a way of reading overland water into a sewer back-up form.
- D It cannot be insured on a home policy. The comprehensive water endorsement insures exactly this exposure, subject to its own conditions and exclusions.
The two forms are separate purchases, so the sewer back-up form answers backing up within the dwelling and the comprehensive water form is the one that adds water accumulating on usually dry land from an unusual and rapid accumulation or runoff.
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Which statement about water damage and flooding on a standard home or tenant policy is TRUE?
- A Water damage is a basic coverage, and flooding is not normally included. Correct
- B Both water damage and flooding are basic coverages on every home policy. The federal guidance says the opposite, that coverage for flooding is not typically included in a standard policy.
- C Neither is insured unless the client buys a separate water endorsement. The same guidance names water damage as a basic coverage, so a burst pipe does not need an add-on.
- D Flooding is covered as standard, and burst pipes need an endorsement. This reverses the two: the burst pipe is the basic coverage and the flooding is the add-on.
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.
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Which statement is TRUE about overland flood coverage on a home policy?
- A It is part of every standard home policy. Availability varies between insurers and depends on the flood risk they assess, so a high risk property may not qualify.
- B It is not offered on every property. Correct
- C It covers sewer backup. Sewer backup is a separate add-on from overland flooding, which is why the guidance lists them apart.
- D It covers saltwater storm surge. The description turns on freshwater sources, and storm surge and tidal water are handled separately where they are offered at all.
Overland flood coverage answers damage caused by excessive rainfall or snowmelt and by overflowing lakes, rivers and other freshwater sources entering the home, and it is not offered on every property, because the insurer decides eligibility from the flood risk it assesses.
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What are the two parts of a homeowners policy?
- A Building coverage and contents coverage. Building and contents are two heads inside the property half, so this misses the liability half entirely.
- B Named perils coverage and all risks coverage. Named perils and all risks describe the level of coverage chosen, which is a later decision than the two categories.
- C Property coverage and additional living expenses. Additional living expenses is a coverage inside the property half rather than a third category alongside it.
- D Property coverage and 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.
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What does a comprehensive homeowners form cover?
- A The building and its contents for all risks except those excluded. Correct
- B The building and its contents for the listed perils only. Insuring only the listed perils is the basic or named perils level, one tier down.
- C The building for all risks and its contents for listed perils. All risks on the building with named perils on the contents is the broad level.
- D The building and its contents for all risks, flood and earthquake included. Flood and earthquake are named as optional coverages bought separately, so comprehensive does not carry them.
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.
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What does the basic, or named perils, level of home coverage provide?
- A Cover for the building only, with contents insured separately. The level describes how causes of loss are covered, not which property the policy reaches.
- B Cover only for the perils the policy specifically states. Correct
- C Cover for all risks except those specifically excluded. All risks except those specifically excluded is the comprehensive level.
- D Cover for a property that falls short of normal insurance standards. Properties short of normal insurance standards are the no frills level, which is a separate item on the list.
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.
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What is a peril in insurance terms?
- A A chance event, unexpected and accidental from the policyholder's point of view. Correct
- B The damage that property suffers when a loss happens. The damage is the result; the peril is what caused it, which is why a policy lists causes rather than kinds of damage.
- C Any event the policy names, whether or not it could be foreseen. Being named in the policy is how a named perils form works, but the definition of a peril turns on the event being unexpected and accidental.
- D The financial consequence the policyholder bears after a loss. The financial consequence is the loss the policy measures, not the peril that produced it.
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.
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Which items does a condominium corporation's policy leave to the unit owner's own policy?
- A The common property, including hallways, stairs and the roof. Common property such as hallways, stairs and the roof is squarely on the corporation's side of the line.
- B The buildings shown on the condominium plan. The buildings on the condominium plan are the corporation's to insure.
- C The owner's contents, unit improvements, and their liability. Correct
- D The corporation's own furniture and equipment. Condominium assets such as the corporation's furniture and equipment are insured by the corporation.
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.
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Which statement is TRUE about home coverage on a seasonal cottage?
- A Part-time occupancy can limit it to named perils. Correct
- B It always follows the owner's main form. The form offered depends on the risk being underwritten, and a seasonal property is a different risk from a principal residence.
- C It cannot be written unless the cottage is occupied all year round. Seasonal and secondary properties are routinely insured, usually on a narrower basis rather than not at all.
- D It puts the contents on named perils and the building on all risks. The usual restriction runs across the whole policy on a seasonal risk, not just the contents half.
Part-time occupancy is the underwriting reason: a property nobody is watching for weeks at a time carries a different risk, so seasonal and secondary properties are commonly written on a named perils basis with fire, explosion and smoke among the listed perils.
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Your client rents her apartment and asks why she needs tenant insurance when she owns no building. What two things is it bought for?
- A Her possessions and the landlord's building itself. The landlord insures the building; the tenant's liability coverage answers where the tenant is legally responsible for damaging it.
- B Her possessions and her personal liability. Correct
- C Her possessions and the rent she still owes while the unit is repaired. Additional living expense coverage helps with the cost of living elsewhere, which is a coverage inside the policy rather than one of its two halves.
- D Her personal liability and the landlord's own loss of rent. The landlord's loss of rent is the landlord's own insurance, not something a tenant policy is bought for.
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.
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Your client paid $420,000 for her house. Rebuilding it would cost $610,000, and the municipal assessment is $480,000. For what amount should you advise her to insure the building?
- A $420,000, the price she paid for the property. The purchase price includes the land and reflects the market, so it does not measure what rebuilding the structure would cost.
- B $480,000, the municipal assessment of the property. The municipal assessment is a tax figure and can sit well away from the cost of construction.
- C $610,000, the cost to rebuild the house. Correct
- D $503,000, the average of the three figures. Averaging unlike numbers produces a figure that matches none of them, and underinsurance is what leads to a co-insurance reduction.
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.
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Which BEST describes actual cash value on a home policy?
- A Replacement cost less depreciation, weighing condition and life expectancy. Correct
- B A fixed percentage of depreciation for each full year of the item's age. A flat yearly percentage ignores the condition and resale value the wording tells the adjuster to consider.
- C The price the insured originally paid for it, less any rebate or discount. The original price is a historic figure and the clause starts from the cost of replacement instead.
- D What the item would fetch second hand, with nothing else taken into account. Resale value is one of three inputs rather than the whole measure.
Actual cash value is not simple age based depreciation: the wording directs the adjuster to weigh three inputs, which is why two items of the same age can settle at different figures.
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A five-year-old television cost $2,400 new and is destroyed in a covered loss. Contents settle at actual cash value, depreciation is assessed at 60 per cent and the deductible is $500. How much would the insurer pay?
- A $960. The deductible applies to the claim, so stopping at the actual cash value figure overstates the payment.
- B $460. Correct
- C $1,440. That is the amount taken off rather than the amount paid.
- D $1,900. Taking the deductible off the cost when new skips the depreciation step altogether.
Actual cash value is the cost when new less depreciation, so 60 per cent off $2,400 leaves $960, and the deductible then comes off that figure because the insured always bears it.
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Which expression matches the co-insurance formula a claims adjuster applies to a partial loss?
- A The amount of damages divided by the amount of insurance, multiplied by the value of the property. That inverts the ratio and multiplies by the wrong figure, so it does not produce an indemnity at all.
- B The insurance carried divided by the minimum required, applied to the net damages. Correct
- C The minimum amount required divided by the amount of insurance carried, applied to the damages. Turning the fraction upside down would pay a client who is underinsured more than the loss.
- D The co-insurance percentage applied directly to the amount of the damages. The percentage is used to work out the minimum amount required, not applied straight to the damages.
The amount of insurance carried goes above the line and the minimum the clause required goes below it, so the fraction that results is what the damages are multiplied by to give the indemnity.
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Windstorm damages your insured's mortgaged home and the claim is approved. She wants the money paid to her so she can hire her own contractor. Each of the following is accurate EXCEPT which one?
- A The insurer may pay her directly so that she can have the home repaired. Accurate and so not the answer: the page names the homeowner as one of the two the insurer may give the money to, so that the home can be fixed.
- B The insurer may pay her lender, which releases the money once she shows receipts. Accurate and so not the answer: the page names the lender as the other, and says the lender then hands the money over for repairs or replacement once receipts are submitted.
- C She chooses whether the insurer pays her or pays her lender. Correct
- D Her policy will usually make her lender the beneficiary through a loss payee clause. Accurate and so not the answer: the page says a home insurance policy on a mortgaged home will usually include a loss payee clause that makes the mortgage lender the beneficiary.
The Financial Consumer Agency of Canada's home insurance page states that the insurer may give the claim money to the homeowner or to the lender at the insurer's discretion, and that a lender paid this way releases the money for repair or replacement once receipts are produced, so the choice of who is paid rests with the insurer rather than with the homeowner.
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Your insured carries less insurance than the co-insurance clause requires and suffers a total loss. What effect does the clause have on the claim?
- A It cuts the payment in proportion to the shortfall. A cut in proportion to the shortfall is how the clause works on a partial loss; on a total loss the amount of insurance is already the ceiling.
- B It leaves the payment at the amount of insurance. Correct
- C It voids the policy for carrying too little insurance. The fact sheet describes the clause as changing the compensation paid, not as ending the contract.
- D It doubles the deductible that applies to the claim. The fact sheet's formula takes the deductible off the damages as the contract sets it; nothing in the clause multiplies it.
When the whole property is lost, the most the insurer pays is the amount of insurance carried, so the payment is that amount and the clause has nothing more to take away. Its proportional cut works on a partial loss, which is why the fact sheet advises insuring to the full value, or to the replacement cost where the contract settles on that basis.
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