512 - Module 2

Question 1

Actual Cash Value (ACV)

Answer 1

Replacement cost minus depreciation

Question 2

Assessed value

Answer 2

The value that the taxing authority places on the property, on which they base property taxes. Usu. 60-80% of market value, redetermined every 3-5 years.

Question 3

Basic commercial general liability (CGL) policy

Answer 3

Policy for business that protects against non-automobile liability that does not involve injuries to employees. Most include crime overage and some include surety.

Question 4

Basic coverage

Answer 4

Protects against a financial loss of the policyowner’s home due to:
Fire
Lightning
Windstorm
Hail
Riot or civil commotion
Aircraft
Vehicles
Smoke
Vandalism or malicious mischief
Explosion
Theft
Volcanic eruption

Question 5

Broad coverage

Answer 5

Protects against a homeowner’s loss due to the perils named in Basic coverage, PLUS:
Falling objects
Weight of ice, snow or sleet
Accidental discharge or overflow of water or a steam
Sudden and accidental tearing apart, cracking, burning, or bulging of a steam, hot water, air-conditioning, or automatic fire sprinkler system, or of a household appliance
Freezing of a plumbing, heating, air-conditioning, or automatic fire sprinkler system, or of a household appliance
Sudden and accidental damage from an artificially generated electrical current

Question 6

Business owner’s policy (BOP)

Answer 6

Basic policy package that combines property and liability.
Part 1 - Common Policy Conditions
Part 2 - Property Coverage
Part 3 - Causes of Loss and Exclusions
Part 4 - Liability Coverage

Question 7

Catastrophe liability insurance

Answer 7

Same as Personal Liability Umbrella Policy (PLUP), which is increased liability coverage in addition to home owners and auto coverage

Question 8

Coinsurance penalty formula

Answer 8

If 80% total loss coverage is not maintained, a partial loss will be covered at actual cash value (ACV - replacement minus depreciation), or by the following formula, whichever is greater:

  Amt of insurance ---------------------------------  x loss - deductible Amt of insurance required

Question 9

Coinsurance provision

Answer 9

Requires a home to be insured for at least 80% of its replacement cost in order for partial losses to be covered completely.

Question 10

Commercial package policy (CPP)

Answer 10

Package of monoline policies that may be modified, generally for larger companies. Coverage for buildings and contents in addition to liability.

Question 11

Comprehensive damage (other than collision)

Answer 11

Damage from something other than collision, ie. fire, wind, hail, vandalism. Paid when the insured is not at fault.

Question 12

Damage by collision

Answer 12

Damage from the insured hitting something or rolling over. Paid whether or not the insured is at fault.

Question 13

Earthquake insurance

Answer 13

Provides coverage for physical loss due to an earthquake. Deductible may be as high as 10%, to reduce the number of small claims the insurer has to pay out.

Question 14

Endorsements

Answer 14

Additions to a policy for coverage of high value items at a stated or appraised value.

Question 15

Flood insurance

Answer 15

Provides coverage for physical loss due to flood, usu. through the National Flood Insurance Program (NFIP).

Question 16

HO-2 policy

Answer 16

Broad Form (named perils)

Question 17

HO-3 policy

Answer 17

Special Form (open perils)

Question 18

HO-4 policy

Answer 18

Contents Broad Form (for tenants or renters)

Question 19

HO-5 policy

Answer 19

Comprehensive Form (open perils)

Question 20

HO-6 policy

Answer 20

Unit Owners Form (for condo owners)

Question 21

HO-8 policy

Answer 21

Modified Form for Special Risks (older or historic homes)

Question 22

Inflation guard endorsement

Answer 22

Automatically increases the dwelling coverage each year by an amount tied to an index. A periodic review by the property and casualty agent, the insurance company, or a contractor can be used to confirm the replacement value.

Question 23

Law of large numbers

Answer 23

An insurer wants a substantial pool of units over which to spread its risk exposure.

Question 24

Market value

Answer 24

The price that a willing buyer and willing seller, under no compulsion, would exchange property.

Question 25

Monoline forms

Answer 25

Stand-alone policy, such as a comprehensive personal liability (CPL) policy.

Question 26

Open-perils coverage

Answer 26

Increased protection against all perils except those specifically excluded. Common exclusions are:
Earthquakes
Floods
Neglect
War or nuclear hazards
Power failure
Intentional loss

Question 27

Packaged coverage

Answer 27

Combine many types of previously monoline coverages, such as plate glass, boiler and machinery, fire, inland marine, and crime.

Question 28

Partial loss formula

Answer 28

Same as Coinsurance Penalty Formula

amt of insurance
—————————- x loss - deductible
amt of ins required

Question 29

Personal injury liability

Answer 29

Coverage for torts usually excluded in most liability coverage, like libel, slander, and defamation, false arrest, detention, imprisonment, or malicious prosecution, and invasion of privacy.

Question 30

Personal liability umbrella policy (PLUP)

Answer 30

Liability coverage in addition to home owners and auto coverage. Can be limited to $1MM or more. Usually must have minimum coverage amounts on homeowners and auto, and best to have them with the same carrier.

Question 31

Principal

Question 32

Replacement cost

Question 33

Replacement cost value

Answer 33

What it would cost to rebuild the home as is.

Question 34

Social insurance

Answer 34

Coverage mandated by the state and paid for by employers or through payroll deductions. Examples include Workers’ Compensation and Unemployment Insurance.

Question 35

Subrogation

Answer 35

The right to recover payment made for any loss that the insured was not ultimately liable.

Question 36

Underinsured motorist coverage

Answer 36

Makes up the difference when the at-fault driver lacks adequate coverage for damages.

Question 37

Uninsured motorist coverage

Answer 37

Coverage for when the at-fault driver does not have any insurance coverage.