Chapter 16: Introduction to Property and Liability Insurance

Question 1

Real Property

Answer 1

Real property, a term closely related to the more familiar term real estate, is defined as land and anything that is growing on it, or affixed to it, and the bundle of rights inherent in the ownership. It includes such items as crops, mineral rights, air rights, buildings, items that are permanently attached to buildings, fences, in-ground swimming pools, driveways, and retaining walls.

Question 2

Personal Property

Answer 2

Personal property is defined to include anything that is subject to ownership other than real property. This includes such items as clothes, furniture, dishes, artwork, musical instruments, money, securities, airline tickets, office equipment, business inventory, vehicles,
and boats.

Question 3

Mortgage Clause

Answer 3

A provision in property insurance policies that protects a lenders insurable interest in personal property. If a covered loss occurs, the lender receives payments to the extent of its insurable interest, even if a policy owners claim is denied.

Question 4

Loss payable clause

Answer 4

A loss payable clause is added to a policy as an endorsement and is used for autos and other types of personal property that have been financed. A loss payable clause gives the lender more limited rights than those found in the mortgage clause. For example, under
the clause that is used for autos, the lender will still be paid if the policy owner is denied coverage but only if coverage was denied because of certain fraudulent acts or omissions.

Question 5

Actual Cash Value

Answer 5

most property insurance policies do not include
a specific definition of actual cash value. As a result, there are varying court interpretations, statutes, and regulations concerning its precise meaning. Generally, it is defined as replacement cost minus physical depreciation.

Question 6

Replacement cost

Answer 6

The cost to repair or replace damaged or destroyed property with new property of like kind and quality, with no deduction for depreciation.

Question 7

Agreed Value

Answer 7

A method of valuing property in which value is determined before loss