4 - Property Insurance Flashcards
What the standard fire policy covers?
Damage to property caused by fire, lightning and, to a limited extent, explosion.
What is DAMAGE definition recommended by ABI?
Loss or destruction of or damage to the property insured.
For a fire peril covering damage what 3 things are excluded?
- Explosion resulting from fire;
- Earthquake or subterranean (below ground) fire; or
- Spontaneous fermentation (ignition) or heating, or the property undergoing a heating process.
What are OPTIONAL extensions under Fire & special perils insurance?
- Perils of a chemical type (explosion, spontaneous fermentation or heating)
- Social perils (riot, civil commotion, strikes, locked - out workers, malicious persons, etc.)
- Perils of nature (storm, flood, earthquake, subterranean fire, subsidence, ground heave, landslip)
- Miscellaneous perils (escape of water, aircraft, impact)
What are the specific exclusions for Explosion cover?
- Explosion of the insured’s own steam and other pressure vessels that are the subject to inspection
- Fire resulting from explosion (cover within the standard fire section)
- ‘Domestic’ explosion (cover within the standard fire section)
- Pressure waves form sonic bangs
What is covered under aircraft extension?
Damage caused by the CRASHING of an aircraft or other aerial device (e.g. rockets, satellites, etc.)
Under property what is cover for damage caused by riot and civil commotion?
Strikers
Locked - out workers taking part in labour disturbances
Malicious persons acting with connection with any political organisation
How is explosion covered under a fire, lightning and explosion peril
Restricted to explosion of boilers or gas used for domestic purposes only
Restricted to explosion of boilers or gas used for domestic purposes only
Must result in damage
What are the 2 exclusions under riot and civil commotion under property?
- Cessation of work (zaprzestanie pracy)
2. Confiscation, requisition or destruction by order of the government
Under property what is the 2 exclusions for malicious damage
Arising from theft
Any building that is empty or not in use
An excess of at least £250 is always applied
Under property damage what are the 4 exclusions for storm damage
- Caused by the escape o water of any natural or artificial water course
- Resulting from a change in the water table level
- Caused by lightning, frost, subsidence, ground heave or landslip
- To moveable property in open like fences and gates
Under property what is the excess for storm and flood cover
At least £100 and very often £250
Under property damage what is escape of water and what are the two exclusions
EOW from tanks, apparatus or pipes
Exclusions:
1. by damage to sprinkler installation
- to an unoccupied building
What is impact peril in relation to property
Restricted to losses resulting from vehicles or animals owners by third parties
What are the two exclusions for sprinkler leakage under property damage
- Freezing whilst the premises are empty
2. Explosion, earthquake, subterranean fire or heat caused by fire
Under property damage what are the 4 exclusions to subsidence, ground heave and landslip
- Damage to yards, car parks, roads, pavement, gates fences
- Caused by a normal settlement of new structures
- Origination prior to inception of the policy
- Resulting from demolition, repair, ground works
For fire and special perils policy what are the 9 standard market exclusions
- Riot or civil commotion
- War risks
- Radioactive contamination
- Northern Ireland
- Terrorism
- Pollution
- Marine polices
- More specifically insured clauses
- Consequential loss exclusion
What is a recommended wordings for all risks property insurance cover called ‘All Risks’ Policy (Material Damage)
The ABI recommended that the ‘all risks’ policy covers ‘accidental loss or destruction of or damage to the property insured’
Under an all risks policy what are the ABSOLUTE exclusions
War, terrorism, marine, Northern Ireland, nuclear
Under an all risks policy which exclusion can be added with careful underwriting
Corrosion, rust, change in temperature, malicious damage in respect of empty properties
Under an all risks policy which exclusions can be written into a policy
- War, nuclear assemblies, terrorism, Northern Ireland risks, marine risks, etc - absolute exclusions
- Corrosion, rust, temperature, wind or rain damage to movable property in the open and malicious damage cover in respect of empty buildings - can be incl. but only with careful underwriting
- Money, jewellery, computers, goods in transit, theft, subsidence, ground heave and landslip: can be written to the policy
- Motor vehicles, watercraft, aircraft, livestock etc. - can’t be covered as relates to another class of business
Under an all risks policy which exclusions are more appropriate to another class of business and can’t be covered under the ‘All Risks’ policy?
Motor vehicles, watercraft, aircraft, livestock
Under all risks insurance, what does it mean by being insured On a first loss basis
Usually for theft, storm, flood, sprinkler leakage and impact on the basis that total destruction by the perils insured is very unlikely.
The insured request cover up to an amount significantly less than the total value of property insured.
What does the Theft Act 1968 state
A person is guilty of theft if they dishonestly appropriate property belonging to another with the intention or permanently depriving the other of it
What is the standard policy cover wording for Theft
Theft involving entry to or exit from the premises by forcible and violent means
What 3 things are excluded under theft
- If access was gained with a key
- A trick
- Hiding on the premises
Under theft what cover can be imposed when a particularly hazardous risk is involved such as a jewellery shop
Theft following forcible and violent entry
What are the 4 optional extensions to theft insurance?
- Breakage or glass
- Replacement of locks
- Temporary removal
- Index linking
(In simple terms, Index Linking refers to a Property Insurance condition which increases the policy sum insured at each renewal to consider the inflationary impact of changes to building costs, such as materials or labour charges)
What three extensions of cover can be added to a theft policy for an additional premium
Collusion (zmowa - illegal cooperation to cheat others)
Extended or full theft
Robbery and aggravated robbery (napad rabunkowy)
What are the 4 exclusions to theft insurance?
- Collusion
- Fire and explosion
- Cash and bank notes
- Livestock
What cover is theft insurance based on
First loss basis
For theft of shop stock to be covered under a standard theft policy there would only usually need to be
Forcible and violent entry or exit
Under glass insurance what is the standard policy cover
Damage to all fixed glass on an all risks basis
Usually dealt with replacement
What are the 2 optional extensions to glass insurance
- Damage to shopfront contents as a result of broken glazing
- Damage to washbasins and sanitary fittings in hairdressing salons
What is the standard policy boxer for money insurance
All risks basis: loss or destruction of or damage to money
Under money insurance what are the 8 situations covered?
- In transit
- On the insured’s premises
- In a bank night safe
- In a locked safe or strongroom
- On the insured’s premises out of business hours and not in a safe
- In the private residence of an employee
- In the custody or collectors
- In the custody of a professional carrier (security company)
What does it mean by money insurance being on an adjustable basis
It requires a declaration of actual carryings at the end of each period of insurance
Under money insurance what are the 2 typical extensions of cover
Personal accident assault
Credit cards
What are the 4 limitations to money insurance
Loss due to an error or omission in accounting
Loss due to the dishonesty of an employee not discovered within 7 days
Loss outside GB
loss resulting from the safe or strong room being opened by a key
What is the limit of money insurance for money in transit
£5,000
A haystack in a farmers field suddenly bursts into flames. Before the fire brigade has time to reach the field, the fire has spread to a neighbouring haystack on the farm. The flames are also carried by the wind into the farmers barn.
What would be covered by the standard fire policy?
The standard fire policy would cover damage to the neighbouring haystack and the barn, but not damage to the first haystack.
If an excess of £250 applies to a policy how much would the insurer pay in the following circumstances?
A) a claim for £235
B) a claim for £375
A) the insurer would pay nothing as the claim is below the level of the excess
B) the insurer would pay £125 (ie £375 - £250 excess)
Why does escape of water specifically exclude damage that occurs while the premises are empty?
The exclusion reflects the greater risk of freezing in an unheated building in the winter and the aggravation of loss that may occur following delayed discovery in unoccupied premises
For theft of shop stock to be covered under a standard theft policy, there would on usually need to be? A) forcible and violent entry or exit B) forcible and violent entry and exit C) forcible or violent entry or exit D) forcible or violent entry and exit
A
Remember the theft act 1968 which gave a wider definition of theft than that which insurers were prepared to cover.
Theft insurance: why is money not included in a theft insurance policy?
In the case of theft insurance, most losses are subject to the restricted wording for forcible and/or violent entry/exit. If this were the case with money insurance, much of the risk involved in cash handling and transit would be removed, leaving mainly the ‘outside business hours’ element cover. Therefore, by its very restriction, a theft policy would serve a limited purpose only.
Assume that a money policy has a limit of £500 in respect of money left out of the safe on the insureds premises overnight? How much would the insurers pay for each of the following losses?
A) £300
B) £600
C)£750
The amounts payable are:
A) £300
B) £500 policy limit not subject to average
C) £500 policy limit not subject to average
What does the definition of money under a standard money policy NOT include? A) bank and currency notes B) lottery tickets C) luncheon vouchers D) postage stamps E) postal orders
B ) lottery tickets
What are the three perils covered by the standard fire policy?
Fire
Lightening
Restricted explosion
What, in one sentence, is the cover generally provided under a stand money policy?
Money insurance is on an ‘all risks’ basis, covering loss from any cause, whether it is in transit or on premises, subject to agreed limits.
What are two optional extensions to a standard money policy?
Credit cards
Personal accident assault risk
A welder overheats some machinery that she is working on and it catches fire. The fire quickly spreads to the surrounding premises, causing significant damage.
What, if anything would you expect the fire damage peril to cover?
A) Nothing because the damage was caused by an excluded peril
B) The subsequent fire damage to the surrounding premises
C) The damage to the machinery being worked on and the subsequent damage to the surrounding premises
B)
Loss or damage resulting from most types of fire is covered, but not:
explosion resulting from fire;
earthquake or subterranean (below ground) fire; or
spontaneous fermentation (ignition) or heating, or the property undergoing a heating process.
Therefore, in this instance, the damage to the machinery will be excluded, but the subsequent damage will be covered.
Pisa Pizza’s fire policy has been extended to include the full range of special perils. The factory production line includes several large pressurised containers for boiling the synthetic cheese it uses for its pizzas. If one of these were to explode, would any resulting damage be covered under Pisa’s fire and special perils policy?
A) Yes
B) No
B) NO
This risk is specifically excluded under the explosion peril in the fire and special perils policy.
The insured’s own steam and other pressure vessels would be subject to inspection requirements by statutory regulations and are insurable under an engineering policy.
Sam buys a new waterfront warehouse which he insures under a fire and special perils policy, including subsidence cover. Six months later several small internal cracks appear due to settlement of the building, and a large external crack due to erosion of the land by the adjacent river. Will Sam be able to claim for: A) The internal damage only B) The external damage only C) Both sets of damage D) Neither set of damage
D) Neither set of damage
The subsidence peril excludes the normal settlement of new structures and movement due to coastal or river erosion.
Foam Plastics are unable to operate their business for six months after a nearby river overflows its banks and floods their factory.
They claim under their fire and special perils policy in respect of the loss of profits that results during the period of interruption.
What is the correct response to this claim?
A) It will be covered if the storm peril has been extended to include flood damage
B) It is not covered because the flood peril excludes damage caused by overflowing rivers
C) It is not covered because the claim is for consequential loss
C) It is not covered because the claim is for consequential loss
The claim is for consequential losses which are subject to a general policy exclusion. This loss could be covered under a separate business interruption insurance.
A thief hides in a large clothes store until it is closed for business and then steals various items from the stock. He makes his escape by forcing an emergency exit door, which triggers the alarm.
How would you expect the subsequent theft claim from the store owners to be treated?
A) It will be declined claiming the theft was shoplifting
B) It will be declined claiming no forcible entry was involved
C) It will be accepted
C) It will be accepted
Imagine yourself as the owner of a large furniture warehouse. The total value of your stock is more than £1m, but it is highly unlikely that thieves could steal more than £200,000 worth of furniture in a single raid on the premises.
Would you insure the stock for?
A) £200,000
B) £1m
A) £200,000
If you insured for £1m in this instance, you would be paying for cover that is unlikely to be required.
The alternative is known as insuring on a first loss basis
First loss basis
This means that the policyholder chooses a sum insured which represents the maximum amount they consider could be lost in a single incident, recognising that the thief will be selective in what they steal. The insured then benefits from a small premium discount.
Paul insures his company’s retail stock on a first loss basis with a sum insured of £200,000. He declares that the full value at risk is £400,000.
£40,000 worth of stock is stolen and the loss adjuster reports that the full value of the stock is £800,000.
If the policy is subject to average, how much should Paul receive in settlement of his claim? A) £10,000 B) £20,000 C) £30,000 D) £40,000
B) £20,000
The declared full value of the stock is only 50% of its actual value and Paul’s claim should therefore be reduced by 50% (i.e. to £20,000).
XYZ Ltd has a commercial money policy with a limit for money on the premises during business hours of £5,000.
A robbery at the premises leads to a claim for £2,000 of stolen cash and on investigation the insurer finds that the amount of money normally on the premises during working hours is £10,000.
How much would you expect the insurer to pay towards the claim?
A) £400
B) £1,000
C) £2,000
C) £2,000
The condition of average that we introduced earlier does not apply to money insurance because the cover is based on policy limits rather than sums insured.
The premium is not based solely on these limits, but also considers the total amount of money being carried. As such the policies are often issued on an adjustable basis, requiring a declaration of actual carryings at the end of each period of insurance.
