ExamFX : Types of Property Policies Chapter
Terms in this set (93)
Dwelling ('02) Policy
Is used to insure 1-4 unit residential dwellings that are not eligible for coverage under the regular homeowners program because of age, location, value, or other factors.
3 Coverage Forms (Dwelling Program)
1.DP 00 01- Basic
2.DP 00 02-Broad
3.DP 00 03-Special
Is a named peril coverage form and provides the most limited coverage of the 3 forms. Losses under this form will be paid on ACV basis.
Basic Form Insures Against
4. Windstorm or Hail
6.Smoke- Loss or damage
7.Aircraft and vehicles- loss or damage
8.Riot or civil commotion
Can be used to remember extended coverage perils: Windstorm Hail Aircraft/vehicle Riot/civil commotion Volcanic eruption Explosion Smoke
Can be used to remember extended coverage perils: Windstorm, Civil commotion ,Smoke Hail, Aircraft, Vehicle and volcano, Explosion and Riots.
Vandalism and Malicious Mischief (VMM)
Protects property against damage or loss caused by vandals. May be added by Endorsement to the DP-1 Basic Form; included coverage in many other Property forms. There is no coverage if proceeding the loss , the insureds premisies have been vacant for more than 60 consecutive days under (DP '02)
Losses to the dwelling are covered on a replacement cost basis as long as the insured maintains a minimum amount of coverage equal to 80% of the dwelling replacement cost. This form expands the cause of loss insured under the basic form. There are 7 additional perils insured in the broad form-extended coverage perils, vandalism and malicious mischief.
Broad Form Insures Against
All Basic Form Perils +
2.Falling Objects- Loss or Damage
3.Weight of Ice, Snow, Sleet- Loss or Damage
4.Tearing apart, cracking, burning, or bulging
5.Accidental Discharge or Overflow of water or Steam
6.Freezing of Plumbing
7.Electrical ( artificially generated)
This also expands coverage for explosion, vehicles, and vandalism and malicious mischief.
Can be used to remember the broad coverage perils.
*Bursting of heating systems
*Ice, snow, or sleet weight
*Collapse of building or part of building
* Glass breakage
*Objects falling from outside
*Leakage of water or steam damage
*Freezing of plumbing
In addition this also includes:
Lawns,Trees, shrubs, and palnts
Breakage of glass
Is an open peril form. In other words, all perils are insured against except those specifically excluded. This form only covers the dwelling and other structures on an open peril basis. This form covers losses to the building on a replacement cost basis, the same as broad.
The Dwelling Policy has 5 Coverages to select from:
1. Coverage A- Dwelling
2.Coverage B- Other Structures
3.Coverage C-Personal Property
4.Coverage D- Fair Rental Value
5.Coverage E- Additional Living Expenses
Coverage A- Dwelling
Covers structures used for dwelling purposes, including all attached structures and outdoor personal property or equipment used to maintain or service the premises(if not covered elsewhere).
Coverage B- Other Structures
Covers other separate structures at the same location. This coverage would apply to detached garages and other buildings (sheds or fences).
Coverage C- Personal Property
Includes personal property commonly found in homes owned by the insured or other family members.
Coverage D- Fair Rental Value
Applies if property under Coverage A, B, or C becomes damaged or destroyed and unfit for normal use due to damage or destruction.
Coverage E -Additional Living Expenses
Only is available if broad or special form dwelling coverage is written. It pays expenses the insured incurs while the described premises are unfit for use or being repaired.
All 3 Coverage Forms Also inlcude:
1. Removal-will pay for loss or damaged property to be removed
2.Other Structures- Insured may elect to apply up to 10% of dwelling insurance amount to cover other structures on the insured premises.
3. Debris removal expense-provides coverage for reasonable cost to remove debris after a covered loss.
4.Reasonable cost for Repairs-costs incurred by the insured for repairs necessary to protect property from further damage at the time if a covered loss also is covered.
5. Tenants improvements, alterations, and additions
6.Worldwide personal property coverage
7. Rental Value and additional living expense
8. Fire Dept service Charge
*Ordinance or Law
*Earth Movement-Landslide,mudslides, sinkholes
*Water Damage- caused by flood, below surface water, waterborne material
*Power Failure- loss due to this is not covered- such as food spoiling in fridge
*Neglect-If further damage results from neglect
Specific Types of property NOT covered in any DP Forms
*Structures used for Comm.manufacturing, or Farming
*Structures rented to others
*Loss resulting from cancellation of Lease
*Animals, Birds, Fish
*Vehicles sound recording
*Outdoor lawns, shrubs, plants or trees
*Hovercrafts and parts
*Devices used solely for deposit, withdrawal, or transfer of funds
*Accounts , Bank notes, deeds, bills, coins, currency, platinum, script, smart cards, etc
*Paper records and electronic data
*Water or Steam
Is an open peril form. In other words all perils are covered expect those specifically excluded.
All dwelling policy form include the following:
*Insurable interest and limit of insurance
*Concealment or fraud
*Duties after a loss
*Pair or sets
*Suit against the insurer
*Insurers option to repair or replace
*No benefit to bailee
*Cancellation and nonrenewal
The policy only applies to losses that occur during the effective dates.
Insurable Interest and Limit of Insurance
If more than one person has insurable interest in the property, the insurer will not be liable for more than the insured's interest in the loss or damaged property.
Losses will be valued as the least of the following:
*The actual cash value of property at the time of loss
*The policy limit
*The amount necessary to repair or replace the property
*The amount reflecting the insured's interest in the property at the time of loss
Pair or Set
A clause in many property and inland marine policies that provides that the insurer is not obligated to pay for the total value of a set of insured items if only one item has been lost, damaged, or destroyed. The loss settlement would be based on the reasonable and fair proportion that the lost or damaged part bears to the total value set.
Other Insurance and Service Agreement
If the other fire Insurance applies to the same loss, the insurer is liable obnly for the proportion of the loss that the limit of insurance bears to the total fo all insurance.
Suit against the insurer
No suit may be brought against the insurer unless the insureed has fully complied with all policy conditions and the action is started within the 2 years(24 months ) of the date of loss.
Insurer's option to repair or repalce
The insurer has the option to repair or replace any part of damaged property with like property by providing written notice to the insured within 30 days from receiving signed proof of loss.
Losses will be paid within 60 days of receiving proof of loss and coming to an agreement with the insured as to the amount payable.
Cancellation and Nonrenewal
10 Day's advance notice is required if the policy is canceled for nonpayment of premium or for any other reason if within the first 60 days of covergae. After 60 days , or if the insurer plans to nonrenew covergage, at least 30 day's notice of cancellation is required. The insurer can cancel the policy midterm only because of misrepresentation of material fact or if the risk has changed.
If the insurer makes any change that broadens coverage in the policy edition during the policy period or within 60 days before the effective date, these changes will automatically apply, without needing to be endorsed to the policy.
In the event of of an insured's death, the legal representatives of the deceased insured will be considered an insured as respects to covered property.
Losses caused by nuclear hazard will not be considered by fire, explosion, or smoke.
If any property is recovered in which there has already been a loss payment made, the insured has the option of taking the property and returning the mount paid, or giving the property to the insurance company.
Automatic Increase in Insurance
Is an endorsement that may be added to a dwelling policy to increase the amount of insurance by an annual percentage to offset the effects of inflation. This endorsement requires additional premium.
Is similar to the dwelling policy but includes liability coverage.
Coverage Forms ( Homeowners)
1. HO-2 Broad Form
2. HO-3 Special Form
3. HO-4 Contents Broad Form
4. HO-5 Comprehensive Form
5. HO-6 Condominium Unit Owners
6.HO-8 Modified Coverage Form( used in some stated to insure homes that do not qualify for the other forms, usually because it replacement cost is much greater than its market value.
HO-2 through HO-5 (Homeowners)
Are designed to cover dwellings used primarily as private homes. This form provided building coverage on a replacement cost basis if the building is insured for 80% or more of its replacement cost.
HO -2 (Broad Form)
Provides protection for losses from named perils. There are some noticeable limitations that should be pointed out to a client .
HO-3 ( Special Form)
Provides protection for dwelling and other structures on an open peril basis, and personal property is covered only for broad perils. Unlike the under HO-2, Vehicle damage to fences , driveways, or walks is covered even if caused by an insured or resident.
HO-4 (Contents Broad Form )
Also referred to as tenants broad form, insures personal for board perils . Coverage may not be issued to an owner-occupant. This form may be written for a tenant who resides in a rented dwelling, apartment, or mobile home, but does not provide coverage on the dwelling itself.
HO-5 (Comprehensive Form)
Covers both the dwelling and other structures on an open peril basis. It also covers personal property on an open peril basis, with the exception of landlord furnishings in an apartment that is rented ( or held for rental to others). Landlord furnishing is is limited to $2,500 limit and provided on a named peril basis.
HO-6 ( Condominium Unit Owners)
Also expands coverage to include parts of the building, such as alterations and appliances that the insured is required to insure because of the condominium association agreement.
HO-8 (Modified Homeownwers)
Is the most limited coverage. It is intended for use when replacement cost coverage is not practical, so the coverage usually is written for for the market value of the property. It is used to insure houses with replacement cost more than their market value, or those built with irreplaceable materials (for example historic home). Theft is covered for the actual cash value of what was stolen, with limits for certain classes of property.
Bodily harm, sickness, or disease, including required care, loss of services, and death that results from this.
The policy defines the insured as the named insured and residents of the premises who are relatives or other residents that are under age 21 and in the care of the insured.
Includes employees of the insured whose duties are related to the maintenance or use of the home , including doing similar duties elsewhere.
Includes the one-family dwelling in which insured resides and is described in declarations, including other structures and grounds.
Commercial Property Conditions Form
* Concealment, misrepresentation, or fraud coverage. Coverage will be voided.
Control of property-This states that any act or negligence by persons not unmder the direction of the insured will not void coverage
*Ins under 2 or more coverages- If more than one coverage under policy can respond to the same loss, the insurer will pay more than the actual loss.
*Leagal action against insurer
*No benefit to bailee
*Policy period coverage terriorty
*Transfer of rights of recovery against others (subrogation)
Commercial Building and Personal Property Form
Is the main form used to cover buildings, business personal property, and property of others on the insureds premises. This Form can be used to cover direct loss or damage to buildings, business personal property, and/or property of others in the insureds care, custody, or control.
Commercial Building Coverage
Insures the building described, including outdoor fixtures and furniture, items used to service property, permantely installed machinery and equipment, and 100 feet if the premises. There is a $2,500 per sign limitation for loss or damage to outdoor signs.
Business Personal Property Coverage
Covers business personal property located in, or within 100 feet of the building , including improvements and betterments, and leased personal proerty that the insured has a contractual obligation to insure.
Personal Property of Others
Covers personal property that is located at the described premises or within 100 feet of the premises and in the insureds care, custody, or control.
Exclusions : Building & Personal Property
-Accounts, bills, currency, money , or securities
-Bridges, sidewalks, paved surfaces
-Illegal property or contraband
-The cost of excavating
-Personal Proerty while airborne or waterborne
-Piers, Wharves or docks
-Property covered under another coverage form
- Retaining walls not a part of the described building
-Underground pipes or drains
-The costs to research or replace valuable papers or records
-Electronic Data, except as covered under the electronic data additional coverage.
-Vehicles or self-propelled machinery registered for use on the public highway or used principally ways from the described premisies
-Crops, fences, trees, shrubs, and plants
Personal Property Coverage Form
-Preservation of property
-Fire Dept Service Charge
-Pollutant Cleanup and renewal
Basic Form (Comm)
Is a named peril form that covers 11 causes of loss.
4.Windstorm or Hail
6.Aircraft or vehicles
7.Riot or Civil Commotion
Broad Form ( Comm)
Includes all 11 losses from Basic , except that the peril of vandalism includes breakage to glass. And includes 3 more losses
1. Falling Objects
2.Weight of snow, ice, or sleet
3. Water Damage
Basic & Broad Form Exclusions
Ordinance or law
War & Military action
Neglect Utility services
The special exclusions concerning the business income, extra expense, leasehold interest, and legal liability coverage forms.
Special Form (Comm)
Is referred to as an open peril form because it does not list the covered causes of loss. Instead all causes of loss are covered except for thos specifically excluded. These include the following:
-Ordinance or law
-War and Military
-Water damage, including sewer backup
-Smoke , vapor, or gas from agricultural smudging or industrial operations
-Explosion of steam boilers, steam pipes, or steam engines
-Freezing of plumbing
-Artificially generated electrical current
-Rain, snow, ics, or sleet that damages personal property that is open
-Nuclear reaction , or radiation or radioactive contamination
Earthquake Cause of Loss Form
Must be used with one of the other cause of loss forms(Basic,Broad, or Special). It adds 2 perils for coverage:earthquake and volcanic eruption( eruption, explosion, or pouring forth of a volcano). The deductible is a percentage of the loss as shown on the property Dec Page.
Business Income Coverage Form
Covers the consequential loss of business income that occurs when a business must sespend operations becasue of direct loss. Also call time Element Forms.
Means net income that would have been earned or incurred, and continuing normal operating expenses incurred, including payroll.
Extra Expenses Coverage Form
Covers consequential losses. It will reimburse the insured for extra expenses the insured incurs to keep the business operational following a direct loss the business property.
Limits of Loss Payment
There is no coinsurance clause in the extra expenses form. The insured selects 3 percentages that apply to the total limit of insurance. Each precentage represents th efollowing periods ot time:
-1st % -30 days or less
-2nd% -31-60 days
-3rd% more than 60 days
The amount of extra expense will be determined based on all expenses that exceed the normal operating expenses that would have incurred during restoration if no loss had occurred.
Commercial Package Policy (CPP)
Allows the insured to pick and choose the coverages to be included
Are those that apply, to more than one coverage forms, endorsements, and other attachments applicable to a single line insurance.
Businessowners Policy (BOP)
Is a commercial package policy that provides property and liability insurance to certain types of small businesses. ( Pre Packaged Policy)
Automatic Increase- The limit of insurance for the building will automatically be increased annually by the percentage amount shown in the declarations.
Business Personel Property Limit
Seasonal Increase- The limit for business personal property will be automatically increased by 25% for seasonal fluctuations. This increase is applicable only if the insured carries insurance equal to 100% of the average monthly values for the past 12 months.
Hired and Nonowned Auto Liability
Provideds coverage for liability arising out of the use or maintenance of a hired or nonowned auto.
Are the autos the insured leases,hires or borrows, but not from employees or any partners or executive officers.
Are autos not owned,leased, or borrowed by the insured but used in business. (Ex. employees personal ato used for business)
Endorsement adds a policy condition requiring the insured to maintain automatic sprinkler system, fire alarm, etc. as a condition for coverage
Time element Endorsement covers the insured's loss of business income or extra expense in the event of a direct physical loss to a utility service.
Builders Risk Coverage Form
Is used to insure buildings while under construction. It provides coverage similar to that in the building and personal property covergae form. This coverage is most often written on a completed value form may be written on a reporting from basis.
Personal floaters sesdigned to cover movable personal property, wherever it may be located. Can be written on an all risk, open peril, or named peril.
Personal Property Floater
Provides coverage to a personal property on an all-risk basis anywhere in the world, as long as the property is not specifically excluded by the policy.
Personal Articles Floater
Is used ti insure certain types of personal property on a scheduled basis. The types of property that may be covered jewlery,furs, cameras, musical instruments, fine arts, etc. other types may be added.
Personal Effects Floater
Is used to insure personal effects carried or worn by travelers anywhere in the world, but not while the property is at home. It is usually limited to $100 for jewelery, watches and furs.
Accounts Receiveable Coverage Form
is one of the most important and popular of the inland marine coverage forms. Coverage is provided for property that is at a fixed location, rather than mobile property.This form is a filed form that provides protection for losses for accounts due from customers that become uncollectible becasue if a loss to the insured'e accounts receiveable records.
Bailee's Customers Policy
This coverage form covers loss to customers' property without regard to the isnured's leagal liability for the loss. It covers both Bailor & ee's
This coverage is written for insureds in the fur business abd covers merchandise held for sale and customers property that the insured has temporary custody of for cleaning, repair, or storage.
This coverage form covers customers property while it is stored at a warehouse, and it is usually written to apply as excess over other valid and collectible ins of the property owner.
Form is filed form that covers the interest of the owners , as opposed to dealers, of commercial cameras, musical instr., and similar property of others in the insureds care, custody, or control.
Contractors Equipment Floater
Is an unfiled inland marine coverage form that generates more premium industry-wide than any other comm inlnad marine coverage. It is used to insure mobile equipment and contractors equipment owned, rented , or borrowed by contractors.
Is an unfiled form that is often purchased by contractors and covers items such as heating and ir conditioning equipment intended to become a permanent part of the building.
Jewelers Block Coverage Form
Is another filed dealers form that covers the insureds merchandise held for sale, and similar property of others in the insureds care, custody, or control.
Valuable papers and Records Form
The commercial property coverage form includes a small amount if coverage up to 1,000 for the cost of research, replace, or restore lost information.
Nationwide Marine Definition
Statement of the types of property that may be insured on inland marine and ocean marine insurance forms.
National Flood Insurance Program (NFIP)
Was created by the federal government to fill the gap left by the private insurance industry and is administered by the Federal Insurance Administration (FIA)
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