Chapter 10 Flashcards
1-1 What are the advantages of the BOP for insurers?
Packaging several coverages in the BOP reduces adverse selection and, combined with simplified rating, lowers handling costs for insurers. Underwriting and processing policies through an automates system rather than through individual underwriting also resuces costs for insurers and enables the insurer and its products to compare.
1-2 What are the advantages of the BOP for insureds?
Convenience and economy gained from having one policy that meets most of their property and liability insurance needs.
1-3 Why are eligibility rules needed for BOPs?
Because the rating structure of all BOPs contemplates relatively homogenous groups of small to mid-sized insureds. Writing BOP coverage for insureds that do not fall within the group can create a mismatch of premium and exposure.
1-4 Why is it much less complicated to rate property coverage under a BOP compared to equivalent coverages in a CPP?
Because BOP property coverage is rated based on the amounts of coverage provided for building and personal property. BOP property rates include loadings (built-in charges) for business income and any additional coverages that are automatically included. As a result, the rates do not have to be computed separately for each of those coverages.
2-1 Contrast the covered causes of loss under BOP with ISO commercial.
Most insurers offer only two versions of the BOP property coverages – a named perils form, similar to the commercial property broad form, and a special form. In contrast, the ISO commercial property program offers three causes of loss forms – basic, broad, and special.
2-1-b Contrast BOP valuation provisions with those in the ISO commercial.
Standard valuation in BOP is replacement cost, whereas the standard valuation provision in commercial property policies is ACV.
2-2 How does a typical BOP differ from the basic BPP form with regard to property not covered?
In most BOPs, the list of property not covered is considerably shorter than the comparable list of property not covered in the BPP.
2-3 How does the business income and extra expense coverage that is included in a BOP typically differ from the coverage provide with the BIC of a CC with regard to coinsurance requirements and limits of insurance?
BIC under BOP is generally not subject to coinsurance, a monthly limitation, or even a total dollar limits. Under a typical BOP, business income loss and extra expenses are payable for up to twelve consecutive months following the occurrence of the direct physical damage, and some BOPs limit ordinary payroll coverage to ninety days. Some insurers apply a dollar limit in addition to the twelve-month limitations.
2-4 Identify the coverages that would require separate policies or separate coverage partys in the CPP but that are frequently included as part of the BOP or available as options.
employee dishonesty; money and securities, when special-form coverage applies or burglary/robbery when named-perils property coverage applies; forgery; interior/exterior glass; outdoor signs; mechanical breakdown; money orders and counterfeit money; computer coverage; accounts receivable; valuable papers and records.
2-5 Jeff and Chris own a small business on the Florida waterways called J & C’s Tours. Jeff and Chris offer wildlife tours via passenger boats, which they operate. J&C’s tours conducts its operations from an office building and a floating dock that it owns. Assuming that J&C’s tours is eligible for a BOP policy, what advantages would the BOP offer in providing property coverage that the ISO CPP wouldn’t?
Wharves and docks are not excluded by the BOP. BIC is automatically included. If the office or the dock were damaged by a covered peril, J&C’s would incur extra expense to lease other office and dock space. This coverage could be especially important during a busy tourist season.
3-1 Briefly describe the ways in which the BOP liability coveage typically differs from the standard occurrence version of the ISO CGL coverage form with regard to limit amounts.
BOPs typically offer insureds fewer choices regarding limit amounts.
3-1 Briefly describe the ways in which the BOP liability coveage typically differs from the standard occurrence version of the ISO CGL coverage form with regard to the availability of professional liability endorsements.
In many cases, BOPs can be endorsed to cover professional liability exposures of specified insureds, such as pharmacies, barber shops, beauty shops, veterinary clinics, funeral homes, optical and hearing aid stores, and print shops.
3-1 Briefly describe the ways in which the BOP liability coveage typically differs from the standard occurrence version of the ISO CGL coverage form with regard to liability coverage options generally not available in BOPs.
Certain liability coverage options are not part of most BOP programs because the insureds that need them generally do not qualify for BOPs.
3-2 Explain why the availability of hired and nonowned autos liability coverage under the BOP offers an advantage to small insureds weho own no autos.
Eliminates the need to obtains a separate BAP. If small insureds do not own any autos, they often overlook the need for, or cannot obtain, a separate policy covering hired and nonowned autos liability. Yet, almost every business at some time or another uses rented, leased, borrowed, or employee-owned autos.
3-3 How does an insured benefit from the ISO or AAIS BOP endorsement adding employee benefit liability coverage and employment practices liability?
The ISO and AAIS BOP endorsements adding employee benefits liability coverage and employment practices liability coverage are cost-effective options that enable smaller insureds to avoid the higher minimum premiums that usually apply to stand-alone policies.
