Chapter 10 Other Coverages and Options Flashcards
Objectives:
- ID the losses covered by personal or commercial umbrella policies
- Describe the types of losses covered by Aviation insurance
- Describe the types of Professional Liability insurance
- Recognize the types of Surety Bonds
Identify the types of losses covered by Ocean Marine Insurance - Explain the requirements for the National Flood Insurance Program
- Describe the purpose of surplus lines insurance
Personal Umbrella Liability Policies
A) Personal umbrella liability policies provide access coverage over underlying or primary liability policies. Most personal umbrella policies require the insured to first have a minimum amount of liability coverage from their homeowners policy and personal auto policy, usually at least $300k each. usually has broader coverage and may cover some circumstances not covered by the underlying policies. If an occurrence is covered by the umbrella but not the underlying policy, there will be a self insurance retention amount or deductible that applies to that loss. Umbrella policies are sold in increments of $1 million.
B) Personal umbrella policies may cover liability from occurrences involving recreational type vehicles, off-road vehicles, and vehicles with less than 4 wheels. Optional endorsements may be used to exclude certain recreational vehicles. If there is no underlying coverage in effect, the umbrella insurer will provide defense at the insurer’s expense. The insurance company has the right to settle a claim without the consent of the insured. If the insured does not maintain the required underlying coverage, the umbrella policy will not cover the dollar amount of a loss that was required to be covered by a homeowners or personal auto policy when the umbrella policy was put in place.
Commercial umbrella policies
A) Provides excess protection over:
- General Liability,
- Business Automobile Liability,
- Errors and Omissions,
- Professional Liability and
- Many other type of liability programs.
Surplus Lines
These are usually lines of insurance that are difficult to place or are not commonly available from the private insurers that may have a certificate of authority to sell insurance in your state. The policies generally have to be placed with unauthorized or non admitted insurers
Each state defines the circumstances under which these lines may be written. Most states only allow it to be done if the policy is not available from an unauthorized insurer. It generally cannot be written simply to give the customer a better deal. Even though they are unauthorized, every state maintains a list of companies that have been approved to write these lines even though they may have not bothered to get a certificate of authority to sell insurance in your particular state. The most common types include Ocean Marine, other transportation coverages, and reinsurance.
Fidelity and Surety Bonds
Fidelity Bonds - are usually bought by a company and are generally a guarantee that an employee or other particular person will not commit a dishonest act or an act not in accordance with the expectations of his position.
Surety Bonds – guarantee specific duties or obligations will be fulfilled and if not, the surety will pay the bond amount to whom the promise was made. Surety bonds are written for a set limit (called the penalty). They include Contract Bonds, Judicial Bonds, and a few others.
Principle, Obligor – the person who promises to fulfill an obligation and purchases the bond.
Insured, Obligee – person to whom the promise was made and to whom the bond is payable.
Surety, Grantor – the company that provides the financial backing and will pay the penalty if the obligation is not fulfilled.
Ocean Marine Insurance
Ocean Marine Insurance uses terminology that has not changed much since the late 1700’s. The voyage is called an adventure. A loss occurrence is called a misfortune. Ocean Marine policies were originally designed to cover the perils of the sea. They include fire, explosion, pilferage, contact with other cargo, leakage, unusual wind or wave action, stranding, lightning, collision, sinking and a few perils unique to ocean Marine contracts. Jettison is throwing cargo overboard to prevent further loss of property or life. Barratry is the conducting of illegal acts by the master or crew against the ship or the cargo including hijacking, embezzlement, or abandonment. A partial loss is called an average. Jettison is referred to as a general average loss. When cargo is sacrificed to save other cargo or people, each cargo owner pays his share of the loss according to share of the overall cargo that was on the vessel. For a general average there must be a common danger is imminent that requires voluntarily losing a portion of the cargo to save the rest and there must be a voluntary jettison of some part of the cargo and the attempt must be successful. A particular average loss is a partial loss that only concerns the owners of the cargo that was lost.
Aviation Insurance
A) coverage for aircraft includes physical damage and liability.
B) Physical damage coverage - covers loss or damage to the hull of the aircraft; similar to comprehensive and collision in auto policies. Also called Aircraft Hull coverage, it covers all parts of the aircraft itself except for personal effects of people.
- 2 forms of hull coverage are available: coverage of the aircraft while in the air or on the ground; or on the ground only not in motion under its own power. The second form does not cover crashes or collisions in flight.
It is commonly written with either a fixed or % deductible. The deductible usually applies to all losses except fire, lightning, explosion, vandalism, malicious mischief, transportation or theft.
Liability coverage - can be written to cover bodily injury liability for persons other than passengers only; bodily injury including passengers; property damage liability; and medical payments to cover injuries to passengers regardless of liability.
There are 4 types of ocean Marine policies:
- Hull insurance for physical damage coverage for loss to the ship itself. Hull insurance may include the running down clause that provides some liability coverage for the owner if improper operation damages another ship.
- Cargo insurance covers what the ship is hauling. Cargo policies may include the warehouse to warehouse clause to cover the property from the beginning to the very end of its trip, not just on the ship. The policy may be purchased as a single trip policy or as an open cargo policy, which covers frequent shipper’s for all trips within a certain amount of time, usually a year. The premium is partly determined by the packaging method and partly by type of ship.
