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Adjuster License > Business owners policy 5% > Flashcards

Business owners policy 5% Flashcards

1
Q

Business Owner Package:

A

BOP

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2
Q

Business Owner Package covers

A

● Bundles property, liability, and income protection in a single package
● A “homeowner’s policy” for small businesses

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3
Q

BOP Features

A

● 12months business income coverage
● 12months extra expense coverage
● Inflation guard for buildings and structures
● Liability protection for lawsuits from accidents or products
● Slander and copyright protection
● Deductibles on most claims
● RC valuation (ACV endorsement option)
● Open-peril coverage (named-peril endorsement option)

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4
Q

Not typically included in BOP

A

● Coverage for company owned vehicles
● Professional liability coverage
● Malpractice coverage

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5
Q

Insurance-to-Value Provision

A

not technically called “coinsurance,” but works in the
same way:
Policy pays RC if coverage is at least 80% of property’s value

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6
Q

Insurance-to-Value Example

A

● Jack has a $400,000 policy on his $1million store
● A vandal breaks Jack’s $10,000 chandelier
○ Replacement cost x(amount of insurance/80% of property value)=
$10,000x ($400,000/$800,000)=$5,000
○ ACV is $2,000 due to depreciation
● Jack’s insurer will pay the higher of the two amounts: $5,000

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7
Q

Wholesalers and Distributors
BOP qualifications:

A

● Retail sales account for 25% or less of gross income
● 25%or less of floor space is available to general public

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8
Q

Processing and Servicing Businesses BOP qualifications:

A

● Annual sales are under $3 million
● No more than 25%of sales occur off-premises

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9
Q

Limited Cooking and Fast Food Restaurant
BOP qualifications:

A

● 7,500 square feet or fewer
● Max seating:
○ Limited cooking: 75
○ Fast food: 150
● No liquor sales
● Beer and wine sales no more than 25% annual income
● Maintenance of fire extinguishing equipment

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10
Q

Convenience Store
BOP qualifications:

A

● Gasoline sales less than 75% annual income
● No auto repair or car wash
● No propane or kerosene sales

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11
Q

Self Storage Facility
BOP qualifications:

A

● Maximum of two stories (but floor space not limited)
● No storage of pollutants, waste, chemicals, industrial materials

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12
Q

Specialty Contractors
BOP qualifications:

A

● Annual payroll no more than $300,000
● Annual sales no more than $3,000,000
● No heavy construction
● Subcontracted work no more than 10% total sales
● No working on buildings over three stories

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13
Q

Motels
BOP qualifications

A

● Up to three floors
● No bars or cocktail lounges
● Not seasonal
● Not closed more than 30 days per year

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14
Q

Apartment Building and Condominium BOP eligibility:

A

● Occupancy must be residential or office
● Incidental occupancy no more than 25,000 square feet
● Incidental occupancy by contractors not exceeding 7,500 s.f. or 15%

Note: Incidental occupants are businesses or offices

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15
Q

Office Building
BOP qualifications

A

● Less than 100,000 sq. ft.
● No higher than six stories
● Tenants occupy no more than 25,000 sq. ft.
● Contractors occupy no more than 7,500 sq. ft. or 15% of total sq. ft.

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16
Q

Ineligible for a BOP:

A

● Car dealerships, service stations, repair shops
● Parking lots, garages
● Amusement parks
● Bars, nightclubs, and the like
● Banks and similar financial institutions
● Manufacturing, processing, servicing businesses (except those eligible)
● Condominium associations (except residential and office)

Note: No coverage for household personal property with BOP

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17
Q

BOP Section I:

A

Property Coverage

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18
Q

BOP Structure:

A

● Section I- Property
○ Coverage A
○ Coverage B
○ Additional Coverage
○ Extensions to Coverage

● Section II- Liability
○ Coverages

● Section III- Common Policy Conditions

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19
Q

Section 1: Property- Coverage A

A

Buildings and Structures

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20
Q

Section 1: Property- Coverage A Buildings and Structures

A

● Buildings and structures on dec page
● Additions completed or under construction and construction
materials
● Fixtures, equipment, machinery permanently installed
● Building maintenance equipment
● Flooring, floor coverings
● Outdoor fixtures
● Heating, ventilating, refrigerating, cooking, washing equipment
● Owner’s furniture in apartment rented as furnished

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21
Q

Section 1: Property- Coverage B

A

Business Personal Property (BPP)

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22
Q

Section 1: Property- Coverage B Business Personal Property (BPP)

A

● Furniture belonging to the business
● Loosefixtures, machinery, office equipment, stock
● Other personal property owned and used by business
● Property of others in the custody of the insured
● Improvements made at a tenant’s own expense
● Leased business personal property that must be insured
● Business personal property in the open or in a vehicle 100 feet away
● Value of labor, service, materials arranged for others’ personal property

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23
Q

Section 1: Property- Coverage A and B Exclusions

A

● Currency, stock certificates, bullion
● Vehicles and aircraft that must be registered
● Watercraft while in water
● Contraband and property being illegally shipped or traded
● Land, water, lawns, crops

Excluded, unless covered by policy extension:
● Outdoor antennas
● Outdoor signs
● Trees and other plants

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24
Q

BOP Section I Additional Coverage

A

Additional Coverage at no extra charge:
● Inflation guard
● Debris removal
● Preservation of property
● Fire department service
● Business income
● Extra expense
● Pollution cleanup
● Electronic data
● Fire extinguisher recharge
● Fungi, rot, bacteria
● Dependent property
● ICC
● Collapse
● Glass
● Counterfeit money
● Forgery
● Computer interruption

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25
Q

BOP Section II

A

Liability

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26
Q

BOP Section II Liability Coverage in a Business Owners Policy:

A

● Uses the occurrence form: covers damages occurring during policy term, no matter when claim is filed
● Covers liability for bodily injury and property damage from business operations and premises
● Covers product and operations liability
● Has aggregate limits

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27
Q

Uses the occurrence form:

A

covers damages occurring during policy term, no matter when claim is filed

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28
Q

BOP Liability Limits Per occurrence limit:

A

● Typically $300,000, $500,000, $1 million, $2 million
● Applies per occurrence for bodily injury/physical damage
● Applies per person for personal/advertising injury

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29
Q

BOP Liability Limits General aggregate limit:

A

twice the per occurrence limit

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30
Q

BOP Liability Limits

Products - completed operations aggregate limit

A

twice the per occurrence limit

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31
Q

BOP Liability Limits

Damage to premises rented by you:

A

usually starts at $50,000 per occurrence

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32
Q

BOP Liability Limits

Medical payments:

A

usually starts at $5,000 per person

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33
Q

Possible limits to liability claims areas follows:

A

Selected per occurrence liability:$500,000
General aggregate:$1,000,000
Products-completed operations:$1,000,000
Per occurrence (liability and medical expenses): $500,000
Per person (personal and advertising injury):$500,000
Medical payments limit:$5,000
Damages to premises rented by you:$50,000

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34
Q

Supplementary Payments in conjunction with liability include:

A

● Costs for defending and investigating claims against insured
● Cost of bail bonds when accident involves a vehicle for which bodily injury applies
● Bail bonds and release attachment bonds
● Costs taxed against the insured
● Prejudgment interest
● Interest accrued after judgment, before insurer pays

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35
Q

Liability Exclusions

A

● Injury caused by legal, medical, pharmacy services
● Expected or intentional injuries by insured, unless defensive
● Employee injuries
● Automobiles, aircraft, watercraft liability
● Contract, liquor, transportation of mobile equipment liability
● Pollutants, war, terrorist attack
● Property of insured, loaned to insured, or in insured’s care
● Property damage to insured’s work, products, data
● Product recall, work recall

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36
Q

BOP Section III: Common Policy Conditions

A
  1. Cancellation/Non-renewal
  2. Changes to Policy
  3. Concealment, Misrepresentation, Fraud
  4. Examination of Records
  5. Inspections and Surveys
  6. Liberalization
  7. Premium Notices
  8. Premium Audit
  9. Transfer of Right of Recovery
    10.Transfer of Your Rights Under This Policy
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37
Q

BOP Section III: Common Policy Conditions

  1. Cancellation/Non-renewal
A

Sets rights and duties of both insurer and insured if either cancels

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38
Q

BOP Section III: Common Policy Conditions

  1. Changes to Policy
A

Changes must be made by endorsement with the agreement of both parties.

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39
Q

BOP Section III: Common Policy Conditions

  1. Concealment, Misrepresentation, Fraud
A

These void coverage.

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40
Q

BOP Section III: Common Policy Conditions

  1. Examination of Records
A

Insurer has right to inspect business records up to three years after policy expires.

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41
Q

BOP Section III: Common Policy Conditions

  1. Inspections and Surveys
A

Insurer may inspect premises anytime and recommend changes.

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42
Q

BOP Section III: Common Policy Conditions

  1. Liberalization
A

Allows insured to be covered for no increased premium if insurer broadens coverage

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43
Q

BOP Section III: Common Policy Conditions

  1. Premium Notices
A

Insured must pay all premiums and insurer will send notices to insured.

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44
Q

BOP Section III: Common Policy Conditions

  1. Premium Audit
A

Then at end of policy term, insurer audits actual exposure and calculates actual premium

45
Q

BOP Section III: Common Policy Conditions

  1. Transfer of Right of Recovery
A

Subrogation: insured transfers to the insurer the right to collect from third party

46
Q

BOP Section III: Common Policy Conditions

10.Transfer of Your Rights Under This Policy

A

Insured cannot transfer rights to policy benefits to another person. If insured dies ,rights can transfer to insured’s legal representative.

47
Q

A Business Owners Policy’s exclusions are…

A

open-peril coverage means the insurer must prove any
damage was excluded if a claim is denied.
Therefore, BOP exclusions are thorough

48
Q

Named peril endorsement changes the BOP from an open-peril policy

A

to a named-peril policy.

49
Q

Named peril endorsement Covered perils:

A

● Fire and lightning
● Windstorm and hail
● Explosions
● Smoke
● Aircraft or vehicles
● Riot or civil commotion
● Vandalism
● Sprinkler leakage
● Sink hole collapse
● Volcanic action
● Transportation, if by…
○ collision, derailment, or overturn
○ stranding or sinking of vessels
○ collapse of bridges, docks, or piers

Note: This endorsement reduces the premium because it makes the BOP cover fewer perils than it normally would.

50
Q

Protective Safeguards endorsement:

A

● States that protective devices must be operating in order for coverage to apply
● Insured has 48 hours to notify insurer of problems with protective devices

51
Q

Utility Services-Direct Damage endorsement:

A

Covers losses caused by an interruption in utility services if provider is damaged

52
Q

Utility Time Element endorsement:

A

Covers lost business income and extra expenses due to loss of utilities caused by covered damage

53
Q

Hired Auto Liability endorsement

A

● Adds coverage for rented, leased, and borrowed vehicles
● Covers liability for accidents happening while on business

54
Q

Non-owned Auto Liability endorsement

A

Adds coverage for unowned vehicles when used for business, such as a pizza delivery driver who uses his own car

55
Q

BOP

A

Business Owner Package:

56
Q

● Bundles property, liability, and income protection in a single package
● A “homeowner’s policy” for small businesses

A

Business Owner Package covers

57
Q

● 12months business income coverage
● 12months extra expense coverage
● Inflation guard for buildings and structures
● Liability protection for lawsuits from accidents or products
● Slander and copyright protection
● Deductibles on most claims
● RC valuation (ACV endorsement option)
● Open-peril coverage (named-peril endorsement option)

A

BOP Features

58
Q

● Coverage for company owned vehicles
● Professional liability coverage
● Malpractice coverage

A

Not typically included in BOP

59
Q

not technically called “coinsurance,” but works in the
same way:
Policy pays RC if coverage is at least 80% of property’s value

A

Insurance-to-Value Provision

60
Q

● Jack has a $400,000 policy on his $1million store
● A vandal breaks Jack’s $10,000 chandelier
○ Replacement cost x(amount of insurance/80% of property value)=
$10,000x ($400,000/$800,000)=$5,000
○ ACV is $2,000 due to depreciation
● Jack’s insurer will pay the higher of the two amounts: $5,000

A

Insurance-to-Value Example

61
Q

● Retail sales account for 25% or less of gross income
● 25%or less of floor space is available to general public

A

Wholesalers and Distributors
BOP qualifications:

62
Q

● Annual sales are under $3 million
● No more than 25%of sales occur off-premises

A

Processing and Servicing Businesses BOP qualifications:

63
Q

● 7,500 square feet or fewer
● Max seating:
○ Limited cooking: 75
○ Fast food: 150
● No liquor sales
● Beer and wine sales no more than 25% annual income
● Maintenance of fire extinguishing equipment

A

Limited Cooking and Fast Food Restaurant
BOP qualifications:

64
Q

● Gasoline sales less than 75% annual income
● No auto repair or car wash
● No propane or kerosene sales

A

Convenience Store
BOP qualifications:

65
Q

● Maximum of two stories (but floor space not limited)
● No storage of pollutants, waste, chemicals, industrial materials

A

Self Storage Facility
BOP qualifications:

66
Q

● Annual payroll no more than $300,000
● Annual sales no more than $3,000,000
● No heavy construction
● Subcontracted work no more than 10% total sales
● No working on buildings over three stories

A

Specialty Contractors
BOP qualifications:

67
Q

● Up to three floors
● No bars or cocktail lounges
● Not seasonal
● Not closed more than 30 days per year

A

Motels
BOP qualifications

68
Q

● Occupancy must be residential or office
● Incidental occupancy no more than 25,000 square feet
● Incidental occupancy by contractors not exceeding 7,500 s.f. or 15%

Note: Incidental occupants are businesses or offices

A

Apartment Building and Condominium BOP eligibility:

69
Q

● Less than 100,000 sq. ft.
● No higher than six stories
● Tenants occupy no more than 25,000 sq. ft.
● Contractors occupy no more than 7,500 sq. ft. or 15% of total sq. ft.

A

Office Building
BOP qualifications

70
Q

● Car dealerships, service stations, repair shops
● Parking lots, garages
● Amusement parks
● Bars, nightclubs, and the like
● Banks and similar financial institutions
● Manufacturing, processing, servicing businesses (except those eligible)
● Condominium associations (except residential and office)

Note: No coverage for household personal property with BOP

A

Ineligible for a BOP:

71
Q

Property Coverage

A

BOP Section I:

72
Q

● Section I- Property
○ Coverage A
○ Coverage B
○ Additional Coverage
○ Extensions to Coverage

● Section II- Liability
○ Coverages

● Section III- Common Policy Conditions

A

BOP Structure:

73
Q

Buildings and Structures

A

Section 1: Property- Coverage A

74
Q

● Buildings and structures on dec page
● Additions completed or under construction and construction
materials
● Fixtures, equipment, machinery permanently installed
● Building maintenance equipment
● Flooring, floor coverings
● Outdoor fixtures
● Heating, ventilating, refrigerating, cooking, washing equipment
● Owner’s furniture in apartment rented as furnished

A

Section 1: Property- Coverage A Buildings and Structures

75
Q

Business Personal Property (BPP)

A

Section 1: Property- Coverage B

76
Q

● Furniture belonging to the business
● Loosefixtures, machinery, office equipment, stock
● Other personal property owned and used by business
● Property of others in the custody of the insured
● Improvements made at a tenant’s own expense
● Leased business personal property that must be insured
● Business personal property in the open or in a vehicle 100 feet away
● Value of labor, service, materials arranged for others’ personal property

A

Section 1: Property- Coverage B Business Personal Property (BPP)

77
Q

● Currency, stock certificates, bullion
● Vehicles and aircraft that must be registered
● Watercraft while in water
● Contraband and property being illegally shipped or traded
● Land, water, lawns, crops

Excluded, unless covered by policy extension:
● Outdoor antennas
● Outdoor signs
● Trees and other plants

A

Section 1: Property- Coverage A and B Exclusions

78
Q

Additional Coverage at no extra charge:
● Inflation guard
● Debris removal
● Preservation of property
● Fire department service
● Business income
● Extra expense
● Pollution cleanup
● Electronic data
● Fire extinguisher recharge
● Fungi, rot, bacteria
● Dependent property
● ICC
● Collapse
● Glass
● Counterfeit money
● Forgery
● Computer interruption

A

BOP Section I Additional Coverage

79
Q

Liability

A

BOP Section II

80
Q

● Uses the occurrence form: covers damages occurring during policy term, no matter when claim is filed
● Covers liability for bodily injury and property damage from business operations and premises
● Covers product and operations liability
● Has aggregate limits

A

BOP Section II Liability Coverage in a Business Owners Policy:

81
Q

covers damages occurring during policy term, no matter when claim is filed

A

Uses the occurrence form:

82
Q

● Typically $300,000, $500,000, $1 million, $2 million
● Applies per occurrence for bodily injury/physical damage
● Applies per person for personal/advertising injury

A

BOP Liability Limits Per occurrence limit:

83
Q

twice the per occurrence limit

A

BOP Liability Limits General aggregate limit:

84
Q

twice the per occurrence limit

A

BOP Liability Limits

Products - completed operations aggregate limit

85
Q

usually starts at $50,000 per occurrence

A

BOP Liability Limits

Damage to premises rented by you:

86
Q

usually starts at $5,000 per person

A

BOP Liability Limits

Medical payments:

87
Q

Selected per occurrence liability:$500,000
General aggregate:$1,000,000
Products-completed operations:$1,000,000
Per occurrence (liability and medical expenses): $500,000
Per person (personal and advertising injury):$500,000
Medical payments limit:$5,000
Damages to premises rented by you:$50,000

A

Possible limits to liability claims areas follows:

88
Q

● Costs for defending and investigating claims against insured
● Cost of bail bonds when accident involves a vehicle for which bodily injury applies
● Bail bonds and release attachment bonds
● Costs taxed against the insured
● Prejudgment interest
● Interest accrued after judgment, before insurer pays

A

Supplementary Payments in conjunction with liability include:

89
Q

● Injury caused by legal, medical, pharmacy services
● Expected or intentional injuries by insured, unless defensive
● Employee injuries
● Automobiles, aircraft, watercraft liability
● Contract, liquor, transportation of mobile equipment liability
● Pollutants, war, terrorist attack
● Property of insured, loaned to insured, or in insured’s care
● Property damage to insured’s work, products, data
● Product recall, work recall

A

Liability Exclusions

90
Q
  1. Cancellation/Non-renewal
  2. Changes to Policy
  3. Concealment, Misrepresentation, Fraud
  4. Examination of Records
  5. Inspections and Surveys
  6. Liberalization
  7. Premium Notices
  8. Premium Audit
  9. Transfer of Right of Recovery
    10.Transfer of Your Rights Under This Policy
A

BOP Section III: Common Policy Conditions

91
Q

Sets rights and duties of both insurer and insured if either cancels

A

BOP Section III: Common Policy Conditions

  1. Cancellation/Non-renewal
92
Q

Changes must be made by endorsement with the agreement of both parties.

A

BOP Section III: Common Policy Conditions

  1. Changes to Policy
93
Q

These void coverage.

A

BOP Section III: Common Policy Conditions

  1. Concealment, Misrepresentation, Fraud
94
Q

Insurer has right to inspect business records up to three years after policy expires.

A

BOP Section III: Common Policy Conditions

  1. Examination of Records
95
Q

Insurer may inspect premises anytime and recommend changes.

A

BOP Section III: Common Policy Conditions

  1. Inspections and Surveys
96
Q

Allows insured to be covered for no increased premium if insurer broadens coverage

A

BOP Section III: Common Policy Conditions

  1. Liberalization
97
Q

Insured must pay all premiums and insurer will send notices to insured.

A

BOP Section III: Common Policy Conditions

  1. Premium Notices
98
Q

Then at end of policy term, insurer audits actual exposure and calculates actual premium

A

BOP Section III: Common Policy Conditions

  1. Premium Audit
99
Q

Subrogation: insured transfers to the insurer the right to collect from third party

A

BOP Section III: Common Policy Conditions

  1. Transfer of Right of Recovery
100
Q

Insured cannot transfer rights to policy benefits to another person. If insured dies ,rights can transfer to insured’s legal representative.

A

BOP Section III: Common Policy Conditions

10.Transfer of Your Rights Under This Policy

101
Q

open-peril coverage means the insurer must prove any
damage was excluded if a claim is denied.
Therefore, BOP exclusions are thorough

A

A Business Owners Policy’s exclusions are…

102
Q

to a named-peril policy.

A

Named peril endorsement changes the BOP from an open-peril policy

103
Q

● Fire and lightning
● Windstorm and hail
● Explosions
● Smoke
● Aircraft or vehicles
● Riot or civil commotion
● Vandalism
● Sprinkler leakage
● Sink hole collapse
● Volcanic action
● Transportation, if by…
○ collision, derailment, or overturn
○ stranding or sinking of vessels
○ collapse of bridges, docks, or piers

Note: This endorsement reduces the premium because it makes the BOP cover fewer perils than it normally would.

A

Named peril endorsement Covered perils:

104
Q

● States that protective devices must be operating in order for coverage to apply
● Insured has 48 hours to notify insurer of problems with protective devices

A

Protective Safeguards endorsement:

105
Q

Covers losses caused by an interruption in utility services if provider is damaged

A

Utility Services-Direct Damage endorsement:

106
Q

Covers lost business income and extra expenses due to loss of utilities caused by covered damage

A

Utility Time Element endorsement:

107
Q

● Adds coverage for rented, leased, and borrowed vehicles
● Covers liability for accidents happening while on business

A

Hired Auto Liability endorsement

108
Q

Adds coverage for unowned vehicles when used for business, such as a pizza delivery driver who uses his own car

A

Non-owned Auto Liability endorsement

Adjuster License (11 decks)

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