Chapter 13 Concepts Flashcards
An insurance policy is an agreement between two parties:
What does insurance represent?
the insurer and the insured
Insurance represents the transfer of risk from the individual homeowner to the group of policyholders affiliated with the insurance company.
property insurance/casualty insurance
policy protects the insured from losses caused by damage to the insured property and the permitted improvements on that property
liability insurance
policy protects the insured from losses or damage caused to third persons or their property
package insurance
policy protects the insured from both types of losses (property and Liability)
The packaged homeowners’ policy also includes liability coverage for:
(1) personal injuries to others resulting from the insured’s acts of negligence
(2) voluntary medical payments and funeral expenses for accidents sustained by guests or resident employees on the insured’s property
(3) physical damage to the property of others caused by the insured.
HO-3 (special form)
is an all-risk form insurance policy that provides even greater coverage than HO-2 because loss and damage to real property caused by all perils is covered unless excluded from coverage.
HO-3 remains a named peril policy regarding damage or loss to personal property
Because it provides the insured with a greater amount of protection, it is the most commonly used residential policy today. It also meets the minimum coverage required by most mortgage lenders.
HO-5 Comprehensive Form
This homeowners’ policy insures an owner-occupied dwelling, other structures in connection with the dwelling, unscheduled personal property on and away from the premises, and loss of use.
This policy also provides personal liability coverage and medical payments coverage. This is the broadest homeowners’ form, as coverage is on an all-risks basis for the dwelling and other structures, as well as personal property.
HO-6 (unit owners form)
policy is designed for the special needs of condominium owners.
Because condo ownership is limited to air space, (ownership extends inward from interior walls, floors and ceilings), the main areas of real property concern are coverage of personal property and fixtures as well as liability from injuries.
Insurance Definitions (CEE)
What is Condition?
is a limitation on the coverage of a specific insured property. For example, damage to a vehicle will only be covered if the vehicle was inside the garage at the time of the damage
Insurance Definitions (CEE)
What is Endorsement?
is coverage for specific property or perils that are not covered in the original policy and is sometimes called a rider. For example, if the homeowner owns a collection of rare books, an endorsement would probably be needed to fully insure the collection against loss
Insurance Definitions (CEE)
What is Exclusion?
is some item, or loss due to a specific event, that is not covered by the policy. For example, most policies exclude the coverage of loss due to acts of war or terrorism
What does CLUE stand for?
Comprehensive Loss Underwriting Exchange
***Insurance underwriters routinely request a CLUE report when property buyers apply for coverage or request a quote
The report contains the following claim information provided by your insurance company:
your name, date of birth, policy number, date of loss, type of loss, amount the company paid, description of the covered property, and property address for homeowner claims, or specific vehicle information for auto claims
What is an unoccupied property?
means that the property has been left in a state where the property still contains all items and possessions as if the owners were to return at any time.
For a home to be determined as unoccupied, there must be sufficient items left in the house such as cooking utensils, functioning appliances like a microwave oven, toaster, refrigerator, and basic furniture.
If a property is indeed unoccupied, such as the case in a vacation home or a main residence where the owner is away for an extended period of time, normal coverage usually remains in place.
What is a vacant property?
A vacant property is one that is completely empty, that is, the property lacks inhabitants and personal property. Vacancy can also be defined as “substantially empty of personal property necessary to sustain normal occupancy.”
Insurance policies usually contain exclusions for vacant property. Vacant properties have a greater chance of vandalism, undiscovered damage, and theft, and can adversely affect property insurance claims.
In a homeowners policy, vacancy exclusions will remove coverage for vandalism, building glass breakage, water damage, theft or attempted theft if the damage occurs within 30 or 60 days (depending on the policy and state laws) of the home becoming vacant. Coverage for standard perils such as fire and wind usually remain intact.
