Insurance on Property - 2.1

A fire policy is to be issued for the following property, located in Alberta:
- a building occupied as an office
- contents of the office
- merchandise stored in a warehouse several blocks from the office.

Separate amounts of insurance are to apply to each item and the policy is to contain a deductible provision.
a) What should the insured consider in deciding whether to select a deductible on a per item or per occurrence basis?
b) What steps must the insurer take to be sure the deductible is enforceable?

Answer:

a) Deductible on a per item basis means the deductible applies separately to the amount recoverable under each item. Deductible on a per occurrence basis means the deductible is substracted from the total amount of loss or damage arising from a single event. For the insured to get the same coverage with lower premium or to get a better coverage with same premium, it should consider that its first and second item are at the same location, but the third item is at another location. The probability that a single event happens on both locations is low, so that the per item basis normally works better for its situation.

b) The insurer will need to comply with the Statutory Conditions and stamp or print "This policy contains a clause that may limit the amount payable," on the face of the policy, in red ink and/or in a specified size and/or in bold font.