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Insurance Adjusting > 3/B - Dwelling > Flashcards

3/B - Dwelling Flashcards

1
Q

Dwelling Policy Eligibility

A

Who can get a Dwelling Policy?

  • Persons not eligible for homeowners insurance
  • Corporations not eligible for homeowners insurance
  • Persons or corporations who do not need HO options
  • Property only, not liability (unless an endorsement is added)
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2
Q

Eligible Structures

A

What types of property can it cover?

  • Single-family homes
  • 1-4 unit dwellings (duplexes, four-plexes, etc.)
  • Dwellings with no more than 5 occupants
  • Mobile homes, if permanently installed
  • Incidental business risks, if insurer allows
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3
Q

Dwelling Forms

A

Dwelling coverage varies depending on the form

Three forms:

  1. DP-1 “Basic Form”
  2. DP-2 “Broad Form”
  3. DP-3 “Special Form”
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4
Q

DP-1 Basic Form

A
  • Named-peril coverage
  • Covers only fire, lightning, internal explosion

Popular endorsements:

  • Vandalism and Malicious Mischief (VMM):
    a. Intentional injury or destruction of covered property
    b. Does not include: pilferage, theft, burglary, larceny
  • Extended Coverage:
    1. Windstorm
    2. Civil Commotion
    3. Smoke
    4. Hail
    5. Aircraft
    6. Vehicles
    7. Volcanic eruption
    8. External explosion
    9. Riot
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5
Q

DP-2 “Broad Form”

A

Similar to DP-1, the DP-2 is a named peril policy, but instead of covering just the 9 Extended Form perils, it includes all of the Broad Form perils.

Covers:

  • Fire
  • Lightning
  • Explosion
  • W.C. SHAVER
  • Vandalism and Malicious Mischief
  • Damage by burglars
  • Breakage of glass
  • Falling objects
  • Weight of ice, snow, or sleet
  • Collapse of buildings
  • Sudden and accidental tearing apart
  • Accidental discharge or overflow of water or steam
  • Freezing
  • Artificially generated electrical currents
  • Volcano
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6
Q

DP-3 “Special Form” Coverage

A

Open-peril coverage to structures:
- If a peril is not excluded, it is covered

Named-peril coverage to personal property
- Includes all the perils that the DP-2 “Broad Form” covers

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7
Q

DP-3 Exclusions

A

Exclusions to DP-3 coverage:

  • General Exclusions listed in the policy
  • Settling, cracking, shrinking, bulging of patios, foundations, etc.
  • Damage from birds, insects, vermin, domestic animals
  • Wind or hail damage to antennas, lawns, or trees
  • Ice or snow damage to awnings, fences, outdoor structures, foundations
  • Theft of anything not part of structure
  • Pollutant damage
  • Gradual or expected loss from wear & tear, marring, or deterioration
  • Mechanical breakdown
  • Inherent vice: a characteristic of an item that causes it to damage or destroy itself
    a. different than “wear & tear,” which is deterioration caused by an external source
  • Smoke from agricultural or industrial operations
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8
Q

Dwelling Policy Sections

A
  • Coverage A
  • Coverage B
  • Coverage C
  • Coverage D
  • Coverage E
  • Additional Coverages
  • Exclusions
  • Conditions
  • Endorsements, if any
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9
Q

Coverage A

A

Coverage A-Dwelling:

  • Principal dwelling
  • Attached structures: garages, apartments, etc.
  • Service machinery: furnace, A/C compressor, etc.
  • Building materials on or next to the dwelling (if they will become part of the dwelling eventually)

Not Included under Coverage A:

  • Construction tools
  • Damage to the land itself
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10
Q

Coverage B

A

Coverage B-Other Structures:

  • Appurtenant Physical Structures (APS): structures that are not attached to dwelling
    a. Detached garage, guest house, shed, gazebo, fence, mailbox, lamp post

Limit: 10% of Coverage A limit (per claim)

  • Under DP-1, the 10% is included as part of Coverage A limit
  • In DP-2 and DP-3, the 10% is added to the Coverage A limit
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11
Q

Coverage B Exclusions

A

Excluded from Coverage B:

  • Buildings used for business or farming (unless used only for storing equipment)
  • Buildings rented to someone who is not a tenant of principal dwelling (unless rented as private garage only)
  • Gravestones, plots, mausoleums
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12
Q

Coverage C - Personal Property

A

Any personal property located on the insured premises.

Coverage for property off-premises:

  • Limit: 10% of Coverage C limit
  • Not additional insurance
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13
Q

Coverage C Exclusions

A

Typical Coverage C Exclusions:

  • Animals
  • Vehicles
  • Aircraft, hovercraft
  • Boats
  • Paper and electronic data
  • Credit and debit cards
  • Money
  • Grave markers
  • Water or steam
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14
Q

Direct vs. Indirect Loss

A

Coverage A, B, & C direct losses.
- Direct loss: loss to tangible property, such as to building or personal property

Coverage D, E cover indirect losses.
- Indirect loss: economic loss that results from a direct loss

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15
Q

Coverage D

A

Coverage D - Fair Rental Value (FRV):

  • Pays for rental income lost due to damage by an insured peril, such as fire.
  • Accounts for net loss, not for discontinued utilities
  • Applies for the shortest time it takes repairs to be completed
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16
Q

Coverage E

A

Coverage E: Additional Living Expense (ALE):

  • For the increase in the insured’s living expenses when a covered peril makes the dwelling uninhabitable
  • Maintains insured’s normal standard of living
  • Does NOT include any normal, ongoing expenses the insured would be paying anyway (mortgage, etc.)
  • Automatically included in DP-2 and DP-3
  • Not included in DP-1 unless added by endorsement
17
Q

Limits to Coverages D & E

A

Time-based Limits

  • Apply to Coverage D (FRV) and Coverage E (ALE)
  • Policy covers these expenses for the shortest time required for the insured to:
    a. repair or replace the property, or
    b. settle elsewhere

Note: limit may be different for ALE in the DP-1

18
Q

Civil Authority Coverage

A
  • Applies when a civil authority prohibits access to dwelling because of damages at a nearby property
  • Damages must have been caused by a covered peril
  • Provides FRV and ALE for up to 2 weeks
19
Q

Additional Coverages and Conditions

A

Additional Coverages
Some are included as part of the policy limit:
- Debris Removal
- Reasonable Repairs

Others are paid on top of any policy limit:

  • Ordinance or Law
  • Fire Department Service Charge
  • Trees, Shrubs, Plants
20
Q

Debris Removal

A

Pays to clean up debris that is:

  • Made up of covered property
  • Damaged by a covered peril

Limit: the limit for the type of property involved

  • Debris from dwelling: Coverage A limit
  • Debris from other structures: Coverage B limit
  • Debris from personal property: Coverage C limit

Additional insurance: Debris Removal can pay an additional 5% of its applicable limit over and above the policy limit, when needed

21
Q

Reasonable Repairs

A
  • Pays for materials and labor to prevent further damage to covered property after a loss
  • Insured is required to protect damaged property
  • Coverage is included within Coverage A limit
22
Q

Ordinance or Law

A
  • Pays for increased repair costs due to laws or building codes
  • Available only on DP-2 and DP-3
  • Provides additional 10% on top of Coverage A

Excluded:

  • Any change that decreases value of property
  • Any change that requires monitoring or testing
  • Remediation of pollutants
  • Confiscation, seizure, demolition, condemnation of property by government
23
Q

Fire Department Service Charge

A
  • Applies when the fire department charges to respond to covered peril
  • Limit: $500
  • Pays in addition to Coverage A limit
24
Q

Trees, Shrubs, Other Plants

A
  • Covers plant damage caused by covered perils, except wind and hail
  • Limit: 5% of Coverage A
  • Individual limit: $500 for any one tree, shrub, or plant
  • Pays in addition to Coverage A limit
25
Q

Property Removal

A
  • Provides coverage for items that the insured removes from danger if a covered peril is imminent
  • Property remains covered under the original peril for:
    a. up to 5 days under DP-1
    b. up to 30 days under DP-2 and DP-3
  • No matter what damages the property during this time, it will still be covered under the peril that the insured was trying to protect it from
26
Q

Conditions

A

Dwelling Policy Conditions

  • Insurable Interest
  • Duties of Insured Party
  • Other Insurance
  • Mortgagee Clause
  • Liberalization Clause
  • Recoverable Depreciation and Claims Settlement basis
  • Suit against the Insurer
  • Abandonment
  • Intentional Acts
27
Q

Liberalization and Claim Settlement

A

Liberalization
Applies to changes made during or up to 60 days before the policy period.

Valuation

  • DP-1 policies settle Coverages A and B at ACV.
  • DP-2 and DP-3: settle coverages A and B at replacement cost if property is insured to at least 80% of value (Loss Settlement provision is just like HO policy)
28
Q

Personal Liability Endorsement

A
  • Almost identical to Section II - Liability in a HO policy
  • Coverage L - Personal Liability
    a. Covers bodily injury and property damage to 3rd party
    b. Pays for legal defense
    c. Minimum limit = $100,000
  • Coverage M - Medical Payment to Others
    a. No-fault coverage
    b. Pays for necessary, reasonable medical expenses for 3rd party injured on insured’s premises
    c. Minimum limit = $1,000
  • No coverage for loss assessment
29
Q

Other Popular DP Endorsements

A

Theft:

  • Limited covers theft from premises
  • Broad covers property anywhere

Automatic increase: raises coverage annually 4, 6, or 8%

Dwelling Under Construction: covers structure while being built

30
Q

General Exclusions

A

Perils excluded from coverage:

  • Water back-up from sewers or drains
  • Water and water-borne materials or pollutants
  • Off-premises power failure (but power failure on the property is covered)
  • War and Nuclear Hazard
  • Flood
  • Earthquake, landslide, sinkhole, or any earth movement
  • Neglect and intentional acts

Insurance Adjusting (46 decks)

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