512 - Module 2 Flashcards
Actual Cash Value (ACV)
Replacement cost minus depreciation
Assessed value
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.
Basic commercial general liability (CGL) policy
Policy for business that protects against non-automobile liability that does not involve injuries to employees. Most include crime overage and some include surety.
Basic coverage
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
Broad coverage
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
Business owner’s policy (BOP)
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
Catastrophe liability insurance
Same as Personal Liability Umbrella Policy (PLUP), which is increased liability coverage in addition to home owners and auto coverage
Coinsurance penalty formula
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
Coinsurance provision
Requires a home to be insured for at least 80% of its replacement cost in order for partial losses to be covered completely.
Commercial package policy (CPP)
Package of monoline policies that may be modified, generally for larger companies. Coverage for buildings and contents in addition to liability.
Comprehensive damage (other than collision)
Damage from something other than collision, ie. fire, wind, hail, vandalism. Paid when the insured is not at fault.
Damage by collision
Damage from the insured hitting something or rolling over. Paid whether or not the insured is at fault.
Earthquake insurance
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.
Endorsements
Additions to a policy for coverage of high value items at a stated or appraised value.
Flood insurance
Provides coverage for physical loss due to flood, usu. through the National Flood Insurance Program (NFIP).
HO-2 policy
Broad Form (named perils)
HO-3 policy
Special Form (open perils)
HO-4 policy
Contents Broad Form (for tenants or renters)
HO-5 policy
Comprehensive Form (open perils)
HO-6 policy
Unit Owners Form (for condo owners)
HO-8 policy
Modified Form for Special Risks (older or historic homes)
Inflation guard endorsement
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.
Law of large numbers
An insurer wants a substantial pool of units over which to spread its risk exposure.
Market value
The price that a willing buyer and willing seller, under no compulsion, would exchange property.
Monoline forms
Stand-alone policy, such as a comprehensive personal liability (CPL) policy.
Open-perils coverage
Increased protection against all perils except those specifically excluded. Common exclusions are:
Earthquakes
Floods
Neglect
War or nuclear hazards
Power failure
Intentional loss
Packaged coverage
Combine many types of previously monoline coverages, such as plate glass, boiler and machinery, fire, inland marine, and crime.
Partial loss formula
Same as Coinsurance Penalty Formula
amt of insurance
—————————- x loss - deductible
amt of ins required
Personal injury liability
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.
Personal liability umbrella policy (PLUP)
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.
Principal
Replacement cost
Replacement cost value
What it would cost to rebuild the home as is.
Social insurance
Coverage mandated by the state and paid for by employers or through payroll deductions. Examples include Workers’ Compensation and Unemployment Insurance.
Subrogation
The right to recover payment made for any loss that the insured was not ultimately liable.
Underinsured motorist coverage
Makes up the difference when the at-fault driver lacks adequate coverage for damages.
Uninsured motorist coverage
Coverage for when the at-fault driver does not have any insurance coverage.
