1.1 - Defining Property Insurance Flashcards
Property Insurance
First party insurance that indemnifies the owner or user of property for its loss, or the loss of its income-producing ability, when the loss or damage is caused by a covered cause of loss, such as fire or explosion
types of property covered
dwellings and detached buildings such as sheds or garages, personal property; and commercial buildings, stock and equipment
Insurable interest
an interest that the insured must have in the subject matter of the insurance purchased so that if the event insured against occurs, the insured will suffer an economic loss
Indemnity
a contract, expressed or implied, to repay in the event of a loss. the insured neither gains nor loses.
-The Object of the contract is to return the insured as nearly as possible to the financial position they enjoyed immediately prior to a loss
Contract
An agreement or promise between two or more parties that is intended to be legally enforceable and is constituted by the acceptance by one party of an offer made by another party, to do or to abstain from doing a specific act. The offer and acceptance may either be expressed or be inferred through the conduct of the parties.
Must be:
-an agreement
-between legally capable parties
-for a consideration
-demonstrating intent
-to do something that is legal
Principle of uberrimae fidei
Utmost good faith - which requires the insured to act with a high standard of honesty and disclose those facts that a reasonable person ought to know are material
The Insurance Policy
-formalizes the agreement between the buyer and seller of insurance - the insured and the insurer. The policy contains terms, clauses, stipulations, and requirements that form the key elements of the agreement.
-the document that makes tangible the intent of both parties to the contract
-to advance a claim under the policy, an insured must demonstrate that the loss or damage occurred during the policy term
1st Type of Insurance = Personal-lines Insurance (habitational)
-homeowners policies that cover damage to or destruction of the insured’s dwelling, detached private structures (OBs), and peronsal property (contents).
-also incudes tenants (renters) and condominium unit owners
2nd Type of Insurance = Commercial Insurance
-covers such property as buildings, stock, and equipment. Other categories of property may also be covered under a commercial property policy.
Within the 2 types, the classes of property insurance
-Marine Ins - inc. Marine Cargo ins. and Inland Marine Insurance - covers LoD to property in transit at sea or on inland waterways and on land. Includes prop. being shipped by or to an insured, tools and equip., stock and contractor’s equip located away from prem.
-Aviation Insurance - covers airplane
Builders risk Insurance - property while it is in the course of construction - covers material, fixtures and equipment used in the construction or renovation of a building or structure
-Crop Insurance - loss or damage to crops that are being grown, due to crop loss or losses caused by weather events, insects, hail, disease, drought, or frost damage.
Within the classes or property insurance there are specialized forms of coverage
-flood
-Earthquake - loss or damage arising from the peril of Earthquake, which is typically excluded from conventional property policies. Depending on where the insured is located, EQ coverage may be difficult or very expensive to purchase
-Equipment Breakdown Insurance (formally known as boiler and machinery insurance) - covers accidental physical damage to items that are excluded under conventional property policy - boilers, pressurized equip., mechanical equip., machinery, and electronic equip. For homes - appliances, A/C, furnaces and HWT that accidentally breakdown
Elements of the property insurance policy
-the name of the insurer
-the name of the insured
-the name of the person or persons to whom the ins money is payable
-the amount, or method of determining the amount, of premium for the insurance
-the subject matter of insurance
-the indemnity for which the insurer may become liable
-the event on the happening of which liability is to accrue
-the effective date of the insurance
-the expiry date or method by which it is to be fixed
[IIPPSIEEE - is it per pepper so i eat every evening]
> contains provisions outlining what type of prop. is covered by the policy
includes details on causes of loss that the policy will provide coverage for
contains clauses called exclusions that restrict the coverage by excluding either certain types of property of certain causes of loss
a Peril
The event that caused a loss covered by the policy; for example, fire, windstorm
Limit of liability
clauses that limit the insured’s recovery for a loss to a specified part of the value of property insured at the time of loss
-a policy that includes a limitation of liability must be marked to that effect “This policy contains a clause that may limit the amount payable”
Limit of liability - “deductible”
-an agreed specified amount that the insured must pay on a claim before the insured company will cover the rest of the claim. This amount is agreed upon by both the insurer and the insured. An insured’s obligation to pay a deductible is not based on whether the insured is at fault
-to avoid the expenses of handling and processing small losses, and to reduce premium for insured, a deductible is applied to each loss
