3/A - Preface: The Standard Fire Policy Flashcards
Introduction
Standard Fire Policy:
- First standardized property insurance form
- Foundation for all property insurance coverage
History
- First used in 1918 in New York
- Provided homeowner and commercial property protection
- ACV valuation
- Named peril policy
- Only covered fire and lightning
“165 Line” Policy
The original Standard Fire Policy dedicated 165 lines to explain new insurance concepts still used today in property insurance contracts, such as:
- Concealment and misrepresentation
- Property and perils excluded from coverage
- Insurance cancellation due to an increase in hazards
- Obligations to a mortgagee
- Requirements of the insured in the event of a loss
- Subrogation
- Appraisal
Line of Coverage, Monoline
Line of Coverage
A particular risk or group of risks covered by an insurance policy
Monoline Policy
An insurance policy that covers only one risk or type of risk
Four Sections
Standard Fire Policy: the foundation for property coverage
Property owners often have a package policy that builds on this basic coverage
4 Parts of the Standard Fire Policy:
- Declarations Page
- Insuring Agreement
- Conditions
- Exclusions
Declarations Page
Gives an overview of the whole policy, and states:
- Named insured
- Location of the insured property
- Policy period
- Policy premium
- Coverage types
- Coverage limits
- Any applicable endorsements
Insuring Agreement
- Insuring Agreement: states exactly what the policy covers and what the insurer will pay or provide in exchange for the insured’s premiums
Conditions
Describes certain issues that can restrict or suspend coverage, including:
- A list of duties, rules of conduct, and obligations for the policyholder & for the insurer
- Proof of loss
- Preservation of property
- Cancellation
- Assignment
- Subrogation
- Other insurance
- Vacancy
Requirements in Case Loss Occurs
- Notify insurer of the loss immediately
- Protect the property from further damage
- Organize personal property, separating damaged from undamaged
- Make checklist of damaged and undamaged property with details about ACV
- Submit to examination under oath
- Show the insurance company (upon request):
a. remains of damaged property
b. accounts, bills, invoices - Submit proof of loss form within the specified time period
Periods of Limitations Tolled
- State statutes often pause (toll) limitation periods from date claimant files a proof of loss to date claim is paid or denied
- This protects claimant’s right to sue the insurer, even if insurer denies claim after period of limitation expires
Exclusions
- Exclusions: states which perils are NOT covered under the policy, such as:
- Extreme perils that cause catastrophic damage to multiple policyholders at a time
- Intentional losses
- Risks that are impossible to quantify
- Risks brought on by a policyholder’s negligent actions
Common Exclusions
- Earthquakes and earth movements, such as landslides or mudflows
- Floods and water damage, such as water seeping through the foundation of a home
- War and/or acts of terrorism
- Nuclear hazards
- Governmental actions (such as drug forfeiture) or court seizure
- Intentional losses such as arson
- Mutiny or military action
- Ordinance or law (such as when building code upgrades force a homeowner to remodel)
Endorsements
Written documents attached to a policy that add or change coverage for specific perils or insured items
- Can be added when a policy is purchased
- Can be added anytime during the term of the policy
- Also called “riders,” “addendums,” or “attachments”
Conclusion
Modern property insurance policies are based on the Standard Fire policy
- Optional endorsements are added to broaden or individualize coverage
- The Standard Fire Policy is a “springboard” for all comprehensive residential and commercial property policies
