4.3 - Reading a Property Policy Flashcards
Relevance of Policy Sections
3 Main sections of a policy - what does each of the parties need to know?
- Coverage Summary
a. the named insured, whether a person or people or a business entity, is listed on the coverage summary page (or dec page) of the policy
b. the coverage summary provides all details of who and what is insured. This info is provided by the broker or agent based on info provided by the insured
c. the underwriter review this information to determine whether to insured the risk according to the insurer’s UW guidelines. The claims people review the same information as a starting place to determine whether a loss is covered under the policy - Policy Wording
a. it is a broker’s or agent’s job to review the policy wording with the insured so the insured understands what is covered and what is not. Broker needs to understand the wordings so they can help the insured determine the adequacy of the insurance coverage. UW needs to know the wording to assist the Broker or Agent if they are uncertain about coverage or exclusions. Claims people need to know the wording to determine the scope of coverage - Endorsements
a. a broker or agent needs to know what endorsements are available for the insured and what endorsements will best enhance the policy for the insured. UW needs to understand endorsements to help the Broker determine what best meets the insured’s needs. Claims people need to know what endorsements are included in the policy and what coverage is provided by each endorsement
b. in some situations, coverage may be restricted by an endorsement
Brokers and Agents
Broker or Agent’s job is to determine the needs of the risk to be insured, determine whether the risk to be insured meets the insurer’s guidelines, and help the insured to complete an application and provide all relevant information so the insurer can decide whether to insure the risk or not
Roles of Brokers and Agents
- Obtain all relevant information about the risk from the insured to determine whether the insurer is able to insure the risk
>Decision - the risk is insurable - Assess the risk and determine what coverage the insured will require
>Decision - the risk fits under a homeowners policy - Complete the application, eliciting all material information from the client and further confirming that the risk fits the insurer’s guidelines. If the Broker or Agent has binding authority, the risk will be bound
>Decision - Forward the application to the underwriter - With the insured’s help, answer any questions the underwriter may have about the insured or the risk
>Decision - Bind coverage (assuming the Broker or Agent has binding authority) - Help the insured is a loss is reported
>Decision - Notify the claims department of the loss
Underwriters and their roles
An Underwriter reviews the application, checks it against the insurer’s UW guidelines, and accepts or rejects the risk or accepts the risk with modifications
- Receive the application from the Broker or Agent
>Decision - review the application to determine whether it meets the insurer’s underwriting guidelines - Obtain any further information necessary to make a sound underwriting decision
>Decision - Determine that the coverage requested is appropriate for the insured and insurer - Determine whether an endorsement or further coverage is required
>Decision - Help the Broker or agent with any coverage that needs to be added - Notify the Broker or agent of the acceptance or rejection of the application or of any modifications necessary
>Decision - Accept or reject the application or modify the application to enable the risk to fit within the insurer’s guidelines - There is a loss under the policy
>Decision - Help the broker or agent and the claims department with any questions that may arise. Review the risk in conjunction with any new information supplied by the claims department
Claims Personnel
-only review the application and policy wording if a loss is reported. Their job is to determine whether to pay the loss that has been reported or to deny it. A secondary job is to advise the underwriter if an investigation or the loss reveals material information the underwriter is not aware of
Steps for Claims Personnel to follow when deciding whether to pay a loss
- Does the loss fall within the policy period
- Does the loss fall within the insuring agreement
- Do any exclusions apply
- Do any endorsements apply
- Have all policy conditions been met
- Is there a deductible to be applied
- How much should be paid
- Is there any other reason not to pay the claim
- Pay the claim
- Notify the underwriter of any information material to the risk that the insurer may be unaware of
Premises meaning
In the IBC Homeowner form, premises means the land contained within the lot lines on which the dwelling is situated
And vs Or
-When a clause uses the word “and” in its statement, all conditions preceding and following the word “and” must apply
-In a clause or statement that uses the word “or”, any of the conditions apply to the clause
What is covered under property
-the property covered under dwelling building itself, permanently installed outdoor equipment, an outdoor swimming pool and attached equipment, and construction materials on or adjacent to the premises, along with a limited amount for outdoor trees, plants, and shrubs
-the property covered under personal property includes not only the contents of the dwelling and other personal property owned, worn or used by the insured while on the premises, but also personal property temporarily removed from the premises and personal property of a student insured by the policy who is temporarily living away from home. Conversely, the special limits restrict coverage for such items as jewellery
Named-Perils Policies
-in a named-perils policy, the coverage provided under some of the named perils may be limited in some ways. For example, vandalism and malicious acts are insured against, but not if they occur while the building is under construction or vacant. In reading a named-perils policy, each peril must be reviewed to determine whether the coverage it provides is subject to limitations
-sometimes a clause can be confusing because of words that qualify or modify its main purpose. Qualifiers or modifiers such as “except” must be read very carefully in interpreting a clause
All-Risks Policies
-some of the exclusions that limit coverage in the IBC all-risks habitational forms are qualified by exceptions to those exclusions in the form of specified perils, which are listed later in the policy. Thus the exclusion applied to all losses except a loss that is caused by one of the specified perils
Steps to reading a policy
- Review the definitions clause, which explains how certain terms will be used throughout the policy. Without understanding the definitions, it can be difficult to kno what coverage is provided
- Review the property that is covered abd property that is not covered. In the homeowners forms, the basic coverages are for the dwelling building, detached private structures, personal property and additional living expenses. With each of these coverages, there are extensions and limitations
- Review the perils that are and are not insured against
- Review the basis of claim settlement, duties after a loss, and the statutory conditions
These steps will help organize an approach to reading a property policy, but there are no tricks or shortcuts. It can be dangerous to try to understand the policy by substituting other words for the words that are actually used; an approximation of the meaning is not the same as a precise understanding of it. A property policy must be read in the same way it was written: carefully and precisely
