105-7 Property, Casualty, and Liability Insurance Flashcards
3 types of coverage in a standard homeowners insurance policy
- Basic coverage
- covers financial loss due to fire, lightning, windstorm, hail, riots or civil commotion, aircraft, vehicles, smoke, vandalism or malicious mischief, explosion, theft, volcanic eruption - Broad coverage
- covers basic coverage perils plus falling objects, ice/snow/sleet, accidental discharge or overflow of water or steam
- sudden and accidental tearing of appliances
- freezing of appliances
- sudden electrical damage - Open perils coverage
- all perils covered except those that are excluded
Perils excluded from most homeowners policies
- earthquake
- flood
- neglect
- war or nuclear hazard
- power failure
- intentional loss
Standard homeowners policy 2 sections
Section 1: protects property and belongings
Section 2: provides liability and medical payments coverage to the homeowner for acts occurring in and off of the insured’s property
Homeowners Section 1 Coverages
Coverage A: Dwelling
Coverage B: Other Structures
Coverage C: Personal Property
-cash is considered personal property
Coverage D: loss of use
-provides reimbursement to an insured homeowner for additional living expenses incurred living elsewhere while the home is being repaired
Coverage E: personal liability
-protects the insured homeowner and all resident family members against personal liability for bodily injury and property damage that may occur on or off of the premises due to negligence
Coverage F: Medical Payments to Others
Fair market value (FMV)
The price at which an exchange will take place between a willing buyer and a willing seller
Replacement cost value
The current cost of replacing property with new materials of like kind and quality
Clients should be recommended they insure their home to match the replacement cost
Actual cash value
The depreciated value of personal property per an internal insurance company table and is not the value of the property after depreciation for income tax purposes
Agreed-value basis
How coverage is written on scheduled items
Basic homeowners (HO) Insurance forms available in the marketplace today
HO-2: broad form (named perils)
HO-3: special form (open perils)
HO-4: contents broad form (for tenants or renters)
HO-5: comprehensive form (open perils)
HO-6: unit owners form (for condominium owners)
HO-8: modified form (for older or historic home)
HO-2: Broad Form
Provides broad coverage for the dwelling and personal property
HO-3: Special Form
Most popular and widely purchased of the basic homeowners policies
Real property is covered on an open-perils basis
Personal property is covered on a named-perils basis
HO-4: Tenants or Renters
Designed for tenants who do not own their dwelling
HO-5: comprehensive form
Similar to the HO-3 except that Coverage C (personal property) for an HO-5 policy is written on an open perils basis
HO-6 Condominium Owners
Provides coverage for the condo owner’s personal belongings and any owned structural part of the building
This type of policy also provides liability protection
HO-8: Modified Form for Special Risks
Provides coverage for those who live in an older home whose replacement cost exceeds its market value
The HO-8 policy uses a functional replacement cost provision for loss
Flood insurance
Provides coverage for physical loss from a flood
The predominant provider is the federal government through the National Flood Insurance Program (NFIP)
Earthquake Insurance
Provides coverage for physical loss due to an earthquake
These policies generally have high deductibles which may be as high as 10% or the face amount to avoid numerous small claims after an earthquake
Inland marine coverage
Insurance on specific items of personal property that are not covered under the homeowners policy is provided under inland marine coverage
Items typically covered: furs, jewelry, silverware
Coverage is on an open perils basis
Insurance on watercraft
An individual boat owner’s policy covers liability, physical damages medical payments, and bodily injuries caused by uninsured boaters
Personal automobile policy
Provides protections against the following 3 major losses:
- Damage to or loss of the jnsured’s vehicle
- Injury to the insured or family members
- Legal liability for personal injuries and damages to property
Part A: liability coverage Part B: Medical payments Part C: uninsured motorists Part D: coverage for property damage to your auto Part E: Duties after an accident or loss Part F: general provisions
Personal Automobile Policy (PAP)
Other-than-collision or comprehensive coverage
Protects the insured from damages incurred where the perils are typically viewed as accidental and out of the insured’s control
Because the expected claim cost is usually lower, the premium for comprehensive coverage is typically lower than that for collision coverage
Personal liability umbrella policy (PLUP)
Structured to provide a layer of liability insurance coverage on top of the individual’s homeowners and automobile insurance policy
When both the umbrella policy and underlying homeowners or automobile policies cover a loss, the PLUP will not pay any claims until the underlying coverage has been exhausted
Commercial package policy (CPP)
The basic commercial a
property and liability insurance policy
Comprehensive, has no gaps in overall coverage
Businessowners policy (BOP)
Another type of commercial property and liability insurance
Malpractice insurance
Generally used where the deficient conduct of the insured may result in bodily harm (e.g. a physician, surgeon, or dentist)
Errors and omissions (E&O Insurance)
Provides protection against the deficient acts of a professional that handles money
Workers’ compensation insurance
Most states require workers’ compensation for the benefit of the employees
Benefits are funded through premiums paid by the employer
Unemployment compensation
Not so much indemnity insurance (to make one whole) as it is in lieu of salary
Unlike workers’ compensation benefits that are nontaxable, unemployment compensation is fully taxable to the recipient
Collision definition under Part D of a personal automobile policy
The upset of your covered auto or its impact with another vehicle or object
Covers damages incurred in an accident involving other vehicles or those sustained when an automobile runs off the road into a tree
